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http://hdl.handle.net/10419/20711
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| Title: | | Why Is the Public Sector More Labor-Intensive? : A Distortionary Tax Argument  |
| 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)
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