public sector

public sector, portion of the economy composed of all levels of government and government-controlled enterprises. It does not include private companies, voluntary organizations, and households.

The general definition of the public sector includes government ownership or control rather than mere function and thereby includes, for example, the exercise of public authority or the implementation of public policy. When pictured as concentric circles, the core public service in central and subnational government agencies defines the inner circle of the public sector. In this case, the distinction of the public sector from the private sector is relatively straightforward—it is evident in terms of employment relationships and the right of exercising public power. The next circle includes a number of different quasi-governmental agencies that are, however, placed outside the direct line of accountability within government. Examples range from social security funds to regional development agencies. The outer circle is populated by state-owned enterprises, usually defined by the government’s ownership or its owning the majority of shares. From the 1980s, a number of developed countries witnessed extensive privatizations of state-owned enterprises, whether in parts or in full (examples range from airlines to the telecom sector), although public ownership continues to be a widespread feature—for example, in the field of local public transport.

The term public sector is also used for analytical purposes, in particular, as a contrast to the private sector and third, or voluntary, sector. That allows for the mapping of the scope of state activities within the wider economy (also allowing for comparison across space and time). Furthermore, it highlights distinctive patterns and operating procedures within the public sector.

Scholars are increasingly confronted with the difficulty of defining the public sector. Privatization, delegation of public power (for example, in prisons), the joint public-private provision of services, usually regarded as “public,” as well as institutional rearrangements have made the identification of the public sector difficult, especially for purposes of comparative analysis. For some, therefore, the notion of the public sector has lost all conceptual strength, given those problems of defining clear boundaries.