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Fiscal Policy Implications for Labor Market Outcomes in Middle-Income Countries
Author: Ara Stepanyan and Mr. Lamin Y Leigh
Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 017
Language:
English
Publication Date:
23 Jan 2015
DOI:
https://doi.org/10.5089/9781484326800.001
ISBN:
9781484326800
ISSN:
1018-5941
Pages:
24
Keywords:
WP; private sector; labor market; public and private employment; unemployment rate; wage premium; public employment; employment opportunity; private-sector job; private employment; representative private-sector firm; crowding-out effect; Public employment; Unemployment; Employment; Labor markets; Public sector; Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Many governments have initiated public employment programs or expanded the existing ones in response to high unemployment. However, in many middle-income countries, a relatively large government coexists with persistently high unemployment. This paper explores the question of whether public employment gives rise to distortions in the labor market in the medium to long-run. Our findings do not provide any evidence that public employment reduces unemployment rate. The analysis in this paper shows that large public employment does significantly affect labor market outcomes in middle-income countries and leads to job destruction in the private sector. The extent of the impact is largely influenced by the degree of substitutability between public and private production and the size of the rents in the public sector.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund