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What Drives Public Employment in Developing Countries?

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  • Dani Rodrik

Abstract

An excessive level of employment is a frequent complaint made about public‐sector governance in developing economies. The explanation typically offered is that governments use public‐sector employment as a tool for generating and redistributing rents. This article suggests an alternative hypothesis: relatively safe government jobs represent partial insurance againstundiversifiable external risk faced by the domestic economy. I show that countries that are greatly exposed to external risk have higher levels of government employment and have experienced faster rates of growth of government consumption. The basic finding on this (partial) correlation is robust against the hypotheses typically offered.

Suggested Citation

  • Dani Rodrik, 2000. "What Drives Public Employment in Developing Countries?," Review of Development Economics, Wiley Blackwell, vol. 4(3), pages 229-243, October.
    • Handle: RePEc:bla:rdevec:v:4:y:2000:i:3:p:229-243
    DOI: 10.1111/1467-9361.00091
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    Cited by:

    1. Yassin, Shaimaa & Langot, François, 2018. "Informality, public employment and employment protection in developing countries," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 326-348.
    2. Stephanie J. Rickard & Teri L. Caraway, 2019. "International demands for austerity: Examining the impact of the IMF on the public sector," The Review of International Organizations, Springer, vol. 14(1), pages 35-57, March.
    3. Jin, Olivia & Pyle, William, 2023. "Labor market hardships and preferences for public sector employment and employers: Evidence from Russia," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 577-591.
    4. Arzu Yavuz, 2011. "Productivity and Wage Differentials between Private and Public Sector in the Developing Countries (Gelismekte Olan �lkelerde �zel ve Kamu Sekt�r�ndeki Verimlilik ve �cret Farklilasmasi)," Working Papers 1103, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    5. Sebastian G. Kessing & Chiara Strozzi, 2017. "The regional distribution of public employment: theory and evidence," Regional Studies, Taylor & Francis Journals, vol. 51(7), pages 1100-1114, July.
    6. Antonis Adam & Thomas Moutos, 2023. "Do Public Sector Employment Reductions Promote Informality?," CESifo Working Paper Series 10614, CESifo.
    7. Caleb Stroup & Ben Zissimos, 2017. "Pampered Bureaucracy, Political Stability and Trade Integration," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 425-450, August.
    8. Shahen, Mostafa E. & Kotani, Koji & Kakinaka, Makoto & Managi, Shunsuke, 2020. "Wage and labor mobility between public, formal private and informal private sectors in a developing country," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 101-113.
    9. Jorge Martinez-Vazquez & Ming-Hung Yao, 2009. "Fiscal Decentralization and Public Sector Employment," Public Finance Review, , vol. 37(5), pages 539-571, September.
    10. Caleb Stroup & Ben Zissimos, 2010. "Pampered Bureaucracy and Trade Liberalization," Vanderbilt University Department of Economics Working Papers 1004, Vanderbilt University Department of Economics.
    11. Vlachos, Jonas, 2005. "Does Labour Market Risk Increase the Size of the Public Sector? Evidence from Swedish Municipalities," CEPR Discussion Papers 5091, C.E.P.R. Discussion Papers.
    12. Gözgör, Giray & Bilgin, Mehmet Huseyin & Zimmermann, Klaus F., 2019. "Public employment decline in developing countries in the 21st century: The role of globalization," Economics Letters, Elsevier, vol. 184(C).
    13. Kai A. Konrad & Sebastian G. Kessing, 2008. "Time Consistency and Bureaucratic Budget Competition," Economic Journal, Royal Economic Society, vol. 118(525), pages 1-15, January.
    14. Gonzalo Fernández-de-Córdoba & Javier Pérez & José Torres, 2012. "Public and private sector wages interactions in a general equilibrium model," Public Choice, Springer, vol. 150(1), pages 309-326, January.
    15. Lasse Aaskoven, 2016. "Fiscal Transparency, Elections and Public Employment: Evidence from the OECD," Economics and Politics, Wiley Blackwell, vol. 28(3), pages 317-341, November.
    16. Gabriela Grotkowska & Leszek Wincenciak & Tomasz Gajderowicz, 2017. "Evolution of the Public-Sector Wage Premium in Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 5-31.
    17. Rickard, Stephanie J. & Caraway, Teri L., 2019. "International demands for austerity: examining the impact of the IMF on the public sector," LSE Research Online Documents on Economics 86636, London School of Economics and Political Science, LSE Library.
    18. Danzer, Natalia, 2019. "Job satisfaction and self-selection into the public or private sector: Evidence from a natural experiment," Labour Economics, Elsevier, vol. 57(C), pages 46-62.
    19. Pierre-Richard Agénor, 2005. "The Analytics of Segmented Labor Markets," Economics Discussion Paper Series 0529, Economics, The University of Manchester.
    20. Bettoni, Luis G. & Santos, Marcelo R., 2022. "Public sector employment and aggregate fluctuations," Journal of Macroeconomics, Elsevier, vol. 72(C).
    21. Magda Kandil & Ida Mirzaie, 2006. "Consumption and macroeconomic policies: Theory and evidence from developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 469-491.
    22. Rebecca Simson, 2020. "The Rise and Fall of the Bureaucratic Bourgeoisie: Public Sector Employees and Economic Privilege in Postcolonial Kenya and Tanzania," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(5), pages 607-635, July.
    23. Martin Rama, 2002. "Mondialisation, inégalités et politiques de l'emploi," Revue d’économie du développement, De Boeck Université, vol. 10(1), pages 43-83.
    24. Rim Oueghlissi & Ahmed Derbali, 2024. "Democracy, Corruption and Unemployment: Empirical Evidence from Developing Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 7475-7496, June.

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