Public Sector Efficiency and Fiscal Austerity

April 1, 1998

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Public Sector Efficiency and Fiscal Austerity, (USA: International Monetary Fund, 1998) accessed December 26, 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

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

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1998/056
Stock No:

WPIEA0561998
ISBN:

9781451968514
ISSN:

1018-5941

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