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What Drives Public Employment?

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Dani Rodrik

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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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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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Handle: RePEc:nbr:nberwo:6141

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Find related papers by JEL classification:
H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bourguignon, François & Lambert, Sylvie & Suwa Eisenmann, Akiko, 1996. "Distribution of Export Price Risk in a Developing Country," CEPR Discussion Papers 1482, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Jeffrey A. Frankel & David Romer, 1996. "Trade and Growth: An Empirical Investigation," NBER Working Papers 5476, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Rama,Martin G., 1997. "Efficient public sector downsizing," Policy Research Working Paper Series 1840, The World Bank. [Downloadable!]
  4. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rama,Martin G., 1997. "Efficient public sector downsizing," Policy Research Working Paper Series 1840, The World Bank. [Downloadable!]
  2. Kim, Jaewon, 2006. "The Determinants of Labor Market Institutions: A Panel Data Study," Research Papers in Economics 2006:10, Stockholm University, Department of Economics, revised 06 Dec 2006. [Downloadable!]
  3. Martin Rama, 2002. "Globalization and Workers in Developing Countries," Economics Study Area Working Papers 41, East-West Center, Economics Study Area. [Downloadable!]
  4. Céline Choulet, 2004. "Public employment and labour market performance : centralization wage setting effects," Cahiers de la Maison des Sciences Economiques v04036, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  5. 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 110, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV. [Downloadable!]
  6. Johannes Hörner & L. Rachel Ngai & Claudia Olivetti, 2004. "Public Enterprises and Labor Market Performance," CEP Discussion Papers dp0610, Centre for Economic Performance, LSE. [Downloadable!]
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