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Does Public-Sector Employment Fully Crowd Out Private-Sector Employment?

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  • Alberto Behar
  • Junghwan Mok

Abstract

We quantify the extent to which public-sector employment crowds out private-sector employment using specially assembled datasets for a large cross-section of developing and advanced countries. Regressions of either private-sector employment rates or unemployment rates on two measures of public-sector employment point to full crowding out. This means that high rates of public employment, which incur substantial fiscal costs, have a large negative impact on private employment rates and do not reduce overall unemployment rates.

Suggested Citation

  • Alberto Behar & Junghwan Mok, 2013. "Does Public-Sector Employment Fully Crowd Out Private-Sector Employment?," CSAE Working Paper Series 2013-20, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2013-20
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    References listed on IDEAS

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    Cited by:

    1. World Bank, 2016. "Public Employment and Governance in Middle East and North Africa," World Bank Publications - Reports 25181, The World Bank Group.
    2. Eric Rougier & François Combarnous & Yves-André Fauré, 2022. "Political turnover, public employment, and local economic development: New empirical evidence on the impact of local political dynasties in the Brazilian “Nordeste”," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(4), pages 2069-2097, August.
    3. International Monetary Fund, 2015. "Saudi Arabia: Selected Issues," IMF Staff Country Reports 2015/286, International Monetary Fund.
    4. Bettoni, Luis G. & Santos, Marcelo R., 2022. "Public sector employment and aggregate fluctuations," Journal of Macroeconomics, Elsevier, vol. 72(C).
    5. Pedro Gomes & Zoe Kuehn, 2017. "Human capital and the size distribution of firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 164-179, October.
    6. Oliver Falck & Siegfried Schönherr, 2016. "An Economic Reform Agenda for Croatia: a comprehensive economic reform package prepared for the Croatian Statehood Foundation," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 70.
    7. Jelena Nikolic & Ivica Rubil & Iva Tomic, 2014. "Changes in Public and Private Sector Pay Structures in Two Emerging Market Economies during the Crisis," Working Papers 1403, The Institute of Economics, Zagreb.
    8. Bruno Coquet, 2016. "Secteur Public : l'assurance chômage qui n'existe pas," SciencePo Working papers Main hal-03469971, HAL.
    9. Javier J. Perez & Ana Lamo & Enrique Moral-Benito, 2015. "Does Slack Influence Public and Private Labor Market," EcoMod2015 8792, EcoMod.
    10. International Monetary Fund, 2015. "Kuwait: Selected Issues," IMF Staff Country Reports 2015/328, International Monetary Fund.
    11. Ana Lamo & Enrique Moral-Benito & Javier J. Pérez, 2016. "Does slack influence public and private labour market interactions?," Working Papers 1605, Banco de España.
    12. Köppl-Turyna, Monika & Lorenz, Hanno, 2016. "Demand-side economics in times of high debt: The case of the European Union," Working Papers 02, Agenda Austria.
    13. repec:hal:spmain:info:hdl:2441/7ag1gjr51l8d58gfr2jt2i00t4 is not listed on IDEAS
    14. Altan Aldan, 2021. "The multiplier effect of public employment on formal employment in the private sector: Evidence from Turkey," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 1016-1031, May.
    15. Pedro Gomes & Zoe Kuehn, 2017. "Human capital and the size distribution of firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 164-179, October.
    16. Alberto Behar & Armand Fouejieu, 2018. "External adjustment in oil exporters: The role of fiscal policy and the exchange rate," The World Economy, Wiley Blackwell, vol. 41(3), pages 926-957, March.
    17. Naeem Akram, 2022. "Public-Private Wage Differentials: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 27(2), pages 39-64, July-Dec.
    18. repec:spo:wpmain:info:hdl:2441/7ag1gjr51l8d58gfr2jt2i00t4 is not listed on IDEAS
    19. Dai, Tiantian & He, Chao & Jiang, Shenyi, 2023. "Talent in the public sector: The role of migration and housing policies," Economic Modelling, Elsevier, vol. 129(C).
    20. Diogo Baerlocher, 2022. "Public employment and economic growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 211-236, February.
    21. Ara Stepanyan & Mr. Lamin Y Leigh, 2015. "Fiscal Policy Implications for Labor Market Outcomes in Middle-Income Countries," IMF Working Papers 2015/017, International Monetary Fund.
    22. Temitope J. Laniran & Damilola Adeleke, 2024. "Does natural resource hinder, taxation capacity and accountability? A case of selected oil abundant developing countries," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 26(2), pages 499-520, August.
    23. Durand-Lasserve, Olivier, 2022. "Nationalization of the private sector labor force, quotas, matching and public jobs, an illustration with Saudi Arabia," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 98-117.
    24. Reda Cherif & Fuad Hasanov, 2014. "Soaring of the Gulf Falcons: Diversification in the GCC Oil Exporters in Seven Propositions," IMF Working Papers 2014/177, International Monetary Fund.
    25. Mr. Alberto Behar, 2015. "Comparing the Employment-Output Elasticities of Expatriates and Nationals in the Gulf Cooperation Council," IMF Working Papers 2015/191, International Monetary Fund.

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    More about this item

    Keywords

    Employment; Crowding out;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other

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