TY  - JOUR
AU  - Rodrik,Dani
TI  - What Drives Public Employment?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6141
PY  - 1997
Y2  - August 1997
UR  - http://www.nber.org/papers/w6141
L1  - http://www.nber.org/papers/w6141.pdf
N1  - Author contact info:
Dani Rodrik
John F. Kennedy School of Government
Harvard University
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-9454
Fax: 617/496-5747
E-Mail: dani_rodrik@harvard.edu
AB  - Excessive levels of government employment is one of the most frequent complaints made about public-sector governance in developing economies.  The explanation typically offered is that governments have used public-sector employment as a tool for generating and redistributing rents.  This paper suggests an alternative hypothesis for government employment practices: relatively safe government jobs represent partial insurance against undiversifiable external risk faced by the domestic economy.  By providing a larger number of  secure' jobs in the public sector, a government can counteract the income and consumption risk faced by the households in the economy.  I show that countries that are greatly exposed to external risk have higher levels of government employment and have experienced faster rates of growth of government consumption.  The basic finding on the (partial) correlation between government employment and exposure to external risk is robust against the alternative hypothesis that government employment has been driven by considerations of rent-seeking and rent distribution.
ER  -