IMF Working Papers

Fiscal Policy Implications for Labor Market Outcomes in Middle-Income Countries

By Ara Stepanyan, Lamin Y Leigh

January 23, 2015

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Ara Stepanyan, and Lamin Y Leigh. Fiscal Policy Implications for Labor Market Outcomes in Middle-Income Countries, (USA: International Monetary Fund, 2015) accessed November 8, 2024
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

Many governments have initiated public employment programs or expanded the existing ones in response to high unemployment. However, in many middle-income countries, a relatively large government coexists with persistently high unemployment. This paper explores the question of whether public employment gives rise to distortions in the labor market in the medium to long-run. Our findings do not provide any evidence that public employment reduces unemployment rate. The analysis in this paper shows that large public employment does significantly affect labor market outcomes in middle-income countries and leads to job destruction in the private sector. The extent of the impact is largely influenced by the degree of substitutability between public and private production and the size of the rents in the public sector.

Subject: Economic sectors, Employment, Labor, Labor markets, Public employment, Public sector, Unemployment

Keywords: Africa, Crowding-out effect, Employment, Employment opportunity, Labor market, Labor markets, Private employment, Private sector, Private-sector job, Public and private employment, Public employment, Public employment, Public sector, Representative private-sector firm, Unemployment, Unemployment rate, Wage premium, WP

Publication Details

  • Pages:

    24

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2015/017

  • Stock No:

    WPIEA2015017

  • ISBN:

    9781484326800

  • ISSN:

    1018-5941

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