Public Ownership and Income Redistribution

Michael Lundholm () and Hans Wijkander ()
Additional contact information
Hans Wijkander: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden, http://www.ne.su.se

No 2003:2, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: The large differences among advanced OECD countries in the shares of workers that are employed by the government can probably only to a small part be explained by factors that are in the center of modern organization theory explanations for public vs. private ownership. This paper explores a new hypothesis for explaining the share of government employment. It is based on asymmetric information about individual worker productivity between the taxman, and workers and their employers. Hence, government employment opens up policy options, not available with only private production. The hypothesis is that government employment is an efficient element of redistribution policy. The mechanism is that the government can, through its employment policy, increase the relative scarcity in the private sector of the workers the government wants to redistribute in favor of. That increases their wages and lowers the need for redistribution through the tax- and transfer systems, which mitigates distortions. One can therefore expect large government employment in countries where the tolerance of inequality is low.

Keywords: Structure and Scope of Government; Optimal non-linear income taxation; public production; production efficiency (search for similar items in EconPapers)
JEL-codes: H11 H21 H23 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2002-09-11
New Economics Papers: this item is included in nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www2.ne.su.se/paper/wp03_02.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:sunrpe:2003_0002

Access Statistics for this paper

More papers in Research Papers in Economics from Stockholm University, Department of Economics Department of Economics, Stockholm, S-106 91 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Anne Jensen ( this e-mail address is bad, please contact ).