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Explaining the Size of the Public Sector

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  • Katsimi, Margarita

Abstract

This paper aims at providing an explanation for the size of the public sector based on the idea of 'social insurance'. The main assumption made is that the public sector is less efficient but also less volatile than the private sector. The 'demand-driven' level of the public sector that is derived as the one that maximizes the utility of the representative employed consumer depends positively on the variance of private output. An increase in the size of the public sector has a positive effect on expected employment and a negative effect on expected consumption. The size of the public sector set by the government which maximizes the probability of being reelected will be higher than the 'demand-driven' level if voters' preferences for employment is higher than the consumption loss associated with public employment. Copyright 1998 by Kluwer Academic Publishers

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  • Katsimi, Margarita, 1998. "Explaining the Size of the Public Sector," Public Choice, Springer, vol. 96(1-2), pages 117-144, July.
    • Handle: RePEc:kap:pubcho:v:96:y:1998:i:1-2:p:117-44
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    Cited by:

    1. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    2. Marta Curto-Grau, 2017. "Voters’ responsiveness to public employment policies," Public Choice, Springer, vol. 170(1), pages 143-169, January.
    3. Günther G. Schulze & Heinrich W. Ursprung, 1999. "Globalisation of the Economy and the Nation State," The World Economy, Wiley Blackwell, vol. 22(3), pages 295-352, May.
    4. Lei, Qiu & Huang, Weiyun & Zhao, Fang & Sarwar, Saima & Chaudhary, Muhammad Gulzaib, 2023. "The importance of public sector size and resources volatility in carbon emissions: Empirical evidence from OECD countries," Resources Policy, Elsevier, vol. 85(PA).
    5. Kristof Witte & Wim Moesen, 2010. "Sizing the government," Public Choice, Springer, vol. 145(1), pages 39-55, October.
    6. Economides, George & Moutos, Thomas, 2017. "Minimum wages in the presence of in-kind redistribution," CEPIE Working Papers 08/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    7. Bunte, Jonas B. & Kim, Alisha A., 2017. "Citizens’ Preferences and the Portfolio of Public Goods: Evidence from Nigeria," World Development, Elsevier, vol. 92(C), pages 28-39.
    8. Afonso, António & Furceri, Davide, 2010. "Government size, composition, volatility and economic growth," European Journal of Political Economy, Elsevier, vol. 26(4), pages 517-532, December.
    9. Katsimi, Margarita, 1999. "Elections and the size of the public sector," European Journal of Political Economy, Elsevier, vol. 15(3), pages 441-462, September.
    10. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    11. Sohag, Kazi & Husain, Shaiara & Soytas, Ugur, 2024. "Environmental policy stringency and ecological footprint linkage: Mitigation measures of renewable energy and innovation," Energy Economics, Elsevier, vol. 136(C).
    12. 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.
    13. Naveed H. Naqvi, 2002. "Crowding-in or Crowding-out? Modelling the Relationship between Public and Private Fixed Capital Formation Using Co-integration Analysis: The Case of Pakistan 1964-2000," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 41(3), pages 255-276.
    14. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    15. Francesca Gastaldi & Paolo Liberati, 2011. "Economic integration and government size: a review of the empirical literature," Financial Theory and Practice, Institute of Public Finance, vol. 35(3), pages 327-384.
    16. Roberta da Silva Vieira, 2009. "O Tamanho do Setor Público no Contexto do Federalismo: Um Modelo Aplicado aos Municípios Brasileiros," Discussion Papers 1415, Instituto de Pesquisa Econômica Aplicada - IPEA.
    17. Facchini, Francois, 2014. "The determinants of public spending: a survey in a methodological perspective," MPRA Paper 53006, University Library of Munich, Germany.

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