Public Ownership and Income Redistribution
AbstractThe large differences among advanced OECD countries in the shares of workers that are employed by the government can probably only to a small part be explained by factors that are in the center of modern organization theory explanations for public vs. private ownership. This paper explores a new hypothesis for explaining the share of government employment. It is based on asymmetric information about individual worker productivity between the taxman, and workers and their employers. Hence, government employment opens up policy options, not available with only private production. The hypothesis is that government employment is an efficient element of redistribution policy. The mechanism is that the government can, through its employment policy, increase the relative scarcity in the private sector of the workers the government wants to redistribute in favor of. That increases their wages and lowers the need for redistribution through the tax- and transfer systems, which mitigates distortions. One can therefore expect large government employment in countries where the tolerance of inequality is low.
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Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2003:2.
Length: 21 pages
Date of creation: 11 Sep 2002
Date of revision:
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Structure and Scope of Government; Optimal non-linear income taxation; public production; production efficiency;
Find related papers by JEL classification:
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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