Stimulus crowd-out: government spending and jobs.

AuthorSuderman, Peter
PositionCitings - Brief article

WHAT HAPPENS to private-sector employment when public-sector employment goes up? A new working paper from researchers at the International Monetary Fund (IMF) suggests that public-sector gains around the globe become private-sector losses. IMF analysts Alberto Behar and Junghwan Mok looked at data for 194 developing and advanced countries from 1988 to 2011 and found "robust evidence that public employment crowds out private employment."

Over all, the researchers find, one private job is lost for every public job gained. "A public job typically comes at the cost of a private sector job," they write, "and therefore does not reduce overall unemployment." The authors note that previous studies limited to advanced economies found similar "full crowding out."

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