Public Sector Efficiency and Fiscal Austerity
April 1, 1998
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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.
Subject: Economic sectors, Labor, Labor force, Labor markets, Public employment, Public sector, Public sector wages
Keywords: Governance, Labor force, labor markets, output level, output net, private sector, private sector output, Public employment, public sector, Public sector wages, worker productivity, WP
Pages:
24
Volume:
1998
DOI:
Issue:
056
Series:
Working Paper No. 1998/056
Stock No:
WPIEA0561998
ISBN:
9781451968514
ISSN:
1018-5941
