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Public Sector Efficiency and Fiscal Austerity

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Abstract

This paper uses a simple model to analyze the forces that determine the size of the public sector and the quality of workers employed in that sector. Workers are heterogeneous, and the public sector chooses an employment strategy that maximizes a social welfare function U(s, Y) that depends on the share of the labor force employed in public service s and private sector output Y. The government is fully informed about worker productivity. By examining the welfare properties of the possible outcomes, we are able to illuminate situations in which policies that seek to constrain the public sector may or may not improve economic efficiency.

Suggested Citation

  • International Monetary Fund, 1998. "Public Sector Efficiency and Fiscal Austerity," IMF Working Papers 98/56, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:98/56
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    Cited by:

    1. Matei, Ani & Savulescu, Carmen, 2009. "The Impact of Reducing the Administrative Costs on the Efficiency in the Public Sector," MPRA Paper 19018, University Library of Munich, Germany, revised 15 Nov 2009.
    2. Imran Ali (Corresponding Author) & Jawaria Fatima Ali & Dr Syed Hassan Raza, 2011. "Determinants of Public Sector Employee’s Performance in Pakistan," Far East Journal of Psychology and Business, Far East Research Centre, vol. 5(3), pages 23-29, November.
    3. Muhamamd Mudasar Ghafoor, 2012. "Role of Demographic Characteristics on Job Satisfaction," Far East Journal of Psychology and Business, Far East Research Centre, vol. 6(3), pages 30-45, January.
    4. Nadeem Ul Haque, 2007. "Why Civil Service Reforms Do Not Work," Labor Economics Working Papers 22192, East Asian Bureau of Economic Research.
    5. Nadeem Ul Haque, 2007. "Why Civil Service Reforms Do Not Work," PIDE-Working Papers 2007:24, Pakistan Institute of Development Economics.
    6. Matei, Ani & Savulescu, Carmen, 2009. "Enhancing the efficiency of local government in the context of reducing the administrative expenditures," MPRA Paper 17640, University Library of Munich, Germany.

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