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Excessive Public Employment and Rent-Seeking Traps

Jaimovich, E and Rud, JP (2014) Excessive Public Employment and Rent-Seeking Traps Journal of Development Economics, 106. pp. 144-155.

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Abstract

We propose a model where the size of the public sector and aggregate output are interrelated through the occupational choice of agents who differ in their skill level and degree of public-mindedness. When the public sector attracts bureaucrats with low degree of public service motivation, they will use their position to rent seek by employing an excessive number of unskilled workers. This leads to an equilibrium with relatively high unskilled wages, which lowers profits and deters entrepreneurship. Conversely, an equilibrium with a lean public sector and greater private economic activity arises when public service motivated agents populate the state bureaucracy. These agents exert high effort and employ a limited number of unskilled workers. Our model also shows that a bloated public sector with high wages may be supported by the unskilled agents.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
AuthorsEmailORCID
Jaimovich, EUNSPECIFIEDUNSPECIFIED
Rud, JPUNSPECIFIEDUNSPECIFIED
Date : 1 January 2014
Identification Number : 10.1016/j.jdeveco.2013.09.007
Contributors :
ContributionNameEmailORCID
EditorJournal of Development Economics, UNSPECIFIEDUNSPECIFIED
Additional Information : © 2014. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Depositing User : Symplectic Elements
Date Deposited : 18 Nov 2015 19:12
Last Modified : 01 Jan 2016 02:08
URI: http://epubs.surrey.ac.uk/id/eprint/809085

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