EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/20711
  
Title:Why Is the Public Sector More Labor-Intensive? : A Distortionary Tax Argument PDF Logo
Authors:Poutvaara, Panu
Wagener, Andreas
Issue Date:2004
Series/Report no.:IZA Discussion paper series 1413
Abstract:Government-run entities are often more labor-intensive than private companies, even with identical production technologies. This need not imply slack in the public sector, but may be a rational response to its wage tax advantage over private firms. A tax-favored treatment of public production precludes production efficiency. It reduces welfare when labor supply is constant. With an elastic labor supply, a wage tax advantage of the public sector may improve welfare if it allows for a higher net wage. This would counteract the distortion of labor supply arising from wage taxation. Full privatization is never optimal if the labor supply elasticity is positive but small.
Subjects:public sector
labor intensity
taxation
JEL:L33
H21
D24
J45
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
dp1413.pdf297.4 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/20711

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.