What Drives Public Employment?

Rodrik, Dani

What Drives Public Employment?

No 6141, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Excessive levels of government employment is one of the most frequent complaints made about public-sector governance in developing economies. The explanation typically offered is that governments have used public-sector employment as a tool for generating and redistributing rents. This paper suggests an alternative hypothesis for government employment practices: relatively safe government jobs represent partial insurance against undiversifiable external risk faced by the domestic economy. By providing a larger number of secure' jobs in the public sector, a government can counteract the income and consumption risk faced by the households in the economy. I show that countries that are greatly exposed to external risk have higher levels of government employment and have experienced faster rates of growth of government consumption. The basic finding on the (partial) correlation between government employment and exposure to external risk is robust against the alternative hypothesis that government employment has been driven by considerations of rent-seeking and rent distribution.

JEL-codes: F40 H50 (search for similar items in EconPapers)
Date: 1997-08
Note: ITI PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Published as Rodrik, Dani. "What Drives Public Employment In Developing Countries?," Review of Development Economics, 2000, v4(3,Oct), 229-243.

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