Cross-Country Evidence on Public Sector Retrenchment

This article reports the results from a survey of public sector employment retrenchment episodes across a wide variety of developing and transition economies. The information collected and analyzed is primarily from internal World Bank documents and in-depth interviews with World Bank staff having operational information about experiences in specific countries. Using the information collected on 41 retrenchment programs across 37 countries, the article analyzes the relationships between the factors leading to retrenchment, the scope and nature of retrenchment, and the methods used to accomplish the retrenchment. The discussion of methods includes an analysis of the mix of involuntary and voluntary employment reduction programs, the compensation schemes offered, and the extent of targeting of specific types of workers. Although relevant quantitative information is limited, the article also attempts to evaluate the outcome of the programs on several dimensions. The most striking findings relate to analysis of the factors leading a significant fraction of programs to rehire workers separated from the public sector (thereby defeating the programs' objective). In addition, the article relates program characteristics to calculated summary financial payback indicators and to the nature of the labor market adjustment. Copyright 1999 by Oxford University Press.