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

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  • Potrafke, Niklas

Abstract

I examine the extent to which public sector outsourcing relates to public employment in Organisation for Economic Co-operation and Development 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

  • Potrafke, Niklas, 2019. "Does Public Sector Outsourcing Decrease Public Employment? Empirical Evidence from OECD Countries," Munich Reprints in Economics 78246, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:78246
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    Cited by:

    1. Mar Delgado-Téllez & José Federico Geli & Enrique Moral-Benito & Javier J. Pérez, 2022. "Outsourcing and public expenditure: an aggregate perspective with regional data," Regional Studies, Taylor & Francis Journals, vol. 56(8), pages 1347-1358, August.
    2. repec:hpe:journl:y:2025:v:253:i:2:p:3-26 is not listed on IDEAS
    3. Fredrik Andersson & Henrik Jordahl & Jens Josephson, 2019. "Outsourcing Public Services: Contractibility, Cost, and Quality," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 349-372.

    More about this item

    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 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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