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Does Public Sector Outsourcing Decrease Public Employment? Empirical Evidence from OECD Countries

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  • Niklas Potrafke

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Abstract

I examine the extent to which public sector outsourcing relates to public employment in OECD countries. I use new panel data on public sector outsourcing. The sample includes 26 countries over the period 2009-2015. Contrary to common expectations, the results do not suggest that public sector outsourcing expenditure was negatively related to public employment in the full sample. The relation between public sector outsourcing and public employment, however, does vary across countries. If anything, the growth in public sector outsourcing in period t-1 was positively correlated with the growth in public employment in period t. When public sector outsourcing gives rise to regrouping public employees but not reducing public employment, outsourcing may even increase inefficiencies in the public sector.

Suggested Citation

  • Niklas Potrafke, 2018. "Does Public Sector Outsourcing Decrease Public Employment? Empirical Evidence from OECD Countries," CESifo Working Paper Series 7322, CESifo.
  • Handle: RePEc:ces:ceswps:_7322
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    Cited by:

    1. Fredrik Andersson & Henrik Jordahl & Jens Josephson, 2019. "Outsourcing Public Services: Contractibility, Cost, and Quality," CESifo Economic Studies, CESifo, vol. 65(4), pages 349-372.
    2. Mar Delgado-Téllez & Enrique Moral-Benito & Javier J. Pérez, 2019. "Outsourcing and public expenditure: an aggregate perspective with regional data," Working Papers 1939, Banco de España;Working Papers Homepage.

    More about this item

    Keywords

    public employment; public sector outsourcing; OECD countries; economic policy-making; panel data;

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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