Why is the public sector more labor-intensive?

Arbeitspapier

A relatively high labor-intensity in government-run entities need not imply slack in their organization. Rather, it is a rational reaction to various forms of wage tax advantage that the public sector has over private firms. Even though an unequal tax treatment of public and private sectors precludes production efficiency, it may improve welfare by mitigating the labor supply distortion. With inelastic labor supply, privatizing a previously government-run sector improves welfare, while with elastic labor supply a full outsourcing of government activities can never be optimal if it goes along with a decrease in net wages.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1259

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out
• Subject: public sector ; labor intensity ; taxation ; Öffentlicher Sektor ; Arbeitsintensität ; Lohnsteuer ; Steuerbelastung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Poutvaara, Panu ; Wagener, Andreas
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/18897
• Last update: 10.03.2025, 11:44 AM CET