1.1 Economics of the public sector
In this course, we will study a number of issues regarding the roles and functioning of a particular sector of the economy, the public sector. All national economies have a public sector, and in virtually all cases (this is certainly true for all developed economies like that of Canada) it is large and varied.
The public sector is made up of many different institutions (governments themselves, direct agencies of these governments, largely independent yet publicly administered institutions like universities and hospitals, private entities that have contracted with governments, etc.) and its activities can involve virtually any aspect of the overall economy:
• The production and provision of goods and services e.g. Defense and security services; education; health care, etc.
• Redistribution of income and wealth among households and individuals e.g. Low income assistance programs; public insurance schemes like employment insurance and intergenerational pensions; need-based tuition assistance; progressive taxation.
• Establishment and management of the incentives faced by households, individuals and firms
e.g. Some examples: Taxes and subsides to/for particular activities; taxes on alcohol and cigarettes, subsidies for buying electric cars.
• Regulation of private economic activity e.g. Establishment of safety standards; licensing and certification; recordkeeping and disclosure requirements.
and many more. It is difficult to think of an area of the economy of Canada (and of any other developed country) which is free of public sector involvement. As of the end of November, 2019, more than 3.9 million people in Canada were employe directly in the public sector, accounting for 20.4% of total employment. Note that this does not count self-employed individuals and employees of private sector firms that are contracted to public sector work.