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What Drives Public Employment?

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  • Dani Rodrik

Abstract

Excessive levels of government employment is one of the most frequent complaints made about public-sector governance in developing economies. The explanation typically offered is that governments have used public-sector employment as a tool for generating and redistributing rents. This paper suggests an alternative hypothesis for government employment practices: relatively safe government jobs represent partial insurance against undiversifiable external risk faced by the domestic economy. By providing a larger number of secure' jobs in the public sector, a government can counteract the income and consumption risk faced by the households in the 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 the (partial) correlation between government employment and exposure to external risk is robust against the alternative hypothesis that government employment has been driven by considerations of rent-seeking and rent distribution.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6141.

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Date of creation: Aug 1997
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Publication status: published as Rodrik, Dani. "What Drives Public Employment In Developing Countries?," Review of Development Economics, 2000, v4(3,Oct), 229-243.
Handle: RePEc:nbr:nberwo:6141

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  1. Jeffrey A. Frankel & David Romer, 1996. "Trade and Growth: An Empirical Investigation," NBER Working Papers 5476, National Bureau of Economic Research, Inc.
  2. Bourguignon, François & Lambert, Sylvie & Suwa Eisenmann, Akiko, 1996. "Distribution of Export Price Risk in a Developing Country," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1482, C.E.P.R. Discussion Papers.
  3. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  4. Rama,Martin G., 1997. "Efficient public sector downsizing," Policy Research Working Paper Series 1840, The World Bank.
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Cited by:
  1. Céline Choulet, 2004. "Public employment and labour market performance : centralization wage setting effects," Cahiers de la Maison des Sciences Economiques, Université Panthéon-Sorbonne (Paris 1) v04036, Université Panthéon-Sorbonne (Paris 1).
  2. Johannes Hörner & L. Rachel Ngai & Claudia Olivetti, 2004. "Public Enterprises and Labor Market Performance," CEP Discussion Papers dp0610, Centre for Economic Performance, LSE.
  3. Rama,Martin G., 1997. "Efficient public sector downsizing," Policy Research Working Paper Series 1840, The World Bank.
  4. Yves Abessolo, 2005. "Une analyse théorique de l’interaction entre l’emploi public et les performances du marché du travail dans les pays en développement," Documents de travail, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV 110, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
  5. Kim, Jaewon, 2006. "The Determinants of Labor Market Institutions: A Panel Data Study," Research Papers in Economics, Stockholm University, Department of Economics 2006:10, Stockholm University, Department of Economics, revised 06 Dec 2006.
  6. Michael, Bryane & Popov, Maja, 2011. "The Size and Structure of Government," MPRA Paper 53283, University Library of Munich, Germany.
  7. Ambra Poggi, 2012. "Public jobs and capabilities: the case of the Italian waste sector," LABORatorio R. Revelli Working Papers Series 127, LABORatorio R. Revelli, Centre for Employment Studies.

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