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Productivity Growth and Public Sector Employment

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  • Kong Weng Ho
  • Hian Teck Hoon

Abstract

Our model endogenizes the share of public sector employment in a neoclassical growth model. Under the assumptions that public sector production is labor intensive and the elasticity of substitution between capital and labor is less than one, the public share of employment is shown to decline with a rise in capital per effective worker. Our theory predicts that periods of high productivity growth are associated with a rising trend of the public share of employment. This prediction conforms well with U.S. experience from 1950–1995.

Suggested Citation

  • Kong Weng Ho & Hian Teck Hoon, 1998. "Productivity Growth and Public Sector Employment," The American Economist, Sage Publications, vol. 42(2), pages 73-79, October.
    • Handle: RePEc:sae:amerec:v:42:y:1998:i:2:p:73-79
    DOI: 10.1177/056943459804200207
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    References listed on IDEAS

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    5. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1.
    6. Kong Weng Ho & Hian Teck Hoon, 1997. "Equilibrium Unemployment and Endogenous Public Sector Employment," Metroeconomica, Wiley Blackwell, vol. 48(2), pages 138-160, June.
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