Fiscal Austerity and Public Servant Quality
In this paper we use a simple model to analyze the forces which 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 which maximizes a social welfare function $U(s,Y)$ which 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 which seek to constrain the public sector may or may not improve economic efficiency.
|Date of creation:||12 May 1997|
|Date of revision:||09 Jun 1997|
|Note:||Type of Document - Postcript prepared on Win95 Scientific Workplace; to print on PostScript; pages: 15; figures: included.|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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