Does Public-Sector Employment Fully Crowd Out Private-Sector Employment?

Author/Editor: Alberto Behar ; Junghwan Mok
Publication Date: June 12, 2013
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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: We quantify the extent to which public-sector employment crowds out private-sector employment using specially assembled datasets for a large cross-section of developing and advanced countries, and discuss the implications for countries in the Middle East, North Africa, Caucasus and Central Asia. These countries simultaneously display high unemployment rates, low private-sector employment rates and high proportions of government-sector employment. Regressions of either private-sector employment rates or unemployment rates on two measures of public-sector employment point to full crowding out. This means that high rates of public employment, which incur substantial fiscal costs, have a large negative impact on private employment rates and do not reduce overall unemployment rates.
Series: Working Paper No. 13/146
Subject(s): Employment | Middle East | Central Asia | North Africa | Public sector | Private sector | Developing countries | Developed countries

Publication Date: June 12, 2013
ISBN/ISSN: 9781484329412/1018-5941 Format: Paper
Stock No: WPIEA2013146 Pages: 38
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