Public Sector Efficiency and Fiscal Austerity

Publication Date:

April 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper uses a simple model to analyze the forces that determine the size of the public sector and the quality of workers employed in that sector. Workers are heterogeneous, and the public sector chooses an employment strategy that maximizes a social welfare function U(s, Y) that depends on the share of the labor force employed in public service s and private sector output Y. The government is fully informed about worker productivity. By examining the welfare properties of the possible outcomes, we are able to illuminate situations in which policies that seek to constrain the public sector may or may not improve economic efficiency.

Series:

Working Paper No. 1998/056

Subject:

Economic sectors Labor Labor force Labor markets Public employment Public sector Public sector wages

English

Publication Date:

April 1, 1998

ISBN/ISSN:

9781451968514/1018-5941

Stock No:

WPIEA0561998

Pages:

24

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