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Public Sector Efficiency and Fiscal Austerity



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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    References listed on IDEAS

    1. Auriol, Emmanuelle & Warlters, Michael, 2012. "The marginal cost of public funds and tax reform in Africa," Journal of Development Economics, Elsevier, vol. 97(1), pages 58-72.
    2. David Kloeden, 2011. "Revenue Administration Reforms in anglophone Africa Since the Early 1990's," IMF Working Papers 11/162, International Monetary Fund.
    3. Fay, Marianne & Yepes, Tito, 2003. "Investing in infrastructure : what is needed from 2000 to 2010?," Policy Research Working Paper Series 3102, The World Bank.
    4. Andrew Berg & Rafael A Portillo & Edward F Buffie & Catherine A Pattillo & Luis-Felipe Zanna, 2012. "Public Investment, Growth, and Debt Sustainability; Putting together the Pieces," IMF Working Papers 12/144, International Monetary Fund.
    5. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    6. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 645-661.
    7. Rioja, Felix K., 2003. "Filling potholes: macroeconomic effects of maintenance versus new investments in public infrastructure," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2281-2304, September.
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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," PIDE-Working Papers 2007:24, Pakistan Institute of Development Economics.
    5. Nadeem Ul Haque, 2007. "Why Civil Service Reforms Do Not Work," Labor Economics Working Papers 22192, East Asian Bureau of Economic Research.
    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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