Wagner’s law works well in explaining the levels of public employees across
countries but not always so well within them. For example, Alesina et al. (2001) find that
the number of public employees in the poorer regions (the South) in Italy is significantly
larger than that in richer regions (the North). Therefore, we suspect that there would
appear to be some factors other than economic development influencing the level of
public employment within a country. Now, we turn our focus on the rent-seeking
hypothesis, as suggested by Gelb et al. (1991). They develop a theoretical model to argue
that governments in developing countries should, and do, provide valuable goods and
services which generate a derived demand for factors of production. However, the public
sector differs from the private sector in the extent to which the public sector is subject to
political pressures for employment. Rent seeking and rent creating behavior can give rise
to a wasteful diversion of resources into the public sector over and above the derived
demand for resources. Robinson and Verdier (2002) explain why public sector
employment is politically attractive, even that it might be socially highly inefficient. They
argue that this is because public sector employment is a good commitment device
between politicians and voters. From their theoretical model, they find that inefficient
redistribution and clientelism become a relatively attractive political strategy in situations
with high inequality and low productivity. Neither of these two studies provides empirical