@TechReport{iza:izadps:dp1413,
            	author={Poutvaara, Panu and Wagener, Andreas},
            	title={Why Is the Public Sector More Labor-Intensive? A Distortionary Tax Argument},
            	year={2004},
	month={Nov},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={1413},
            	url={https://www.iza.org/publications/dp1413},
	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.},
	keywords={taxation;public sector;labor intensity},
            }