Relationship between Private and Public Sector Economies

Category: Public Sector, Tax, Welfare
Last Updated: 11 Feb 2021
Pages: 5 Views: 580

Public sector affects the private sector in such a way that the government can impede to the abusing powers of the private sector or provide guidance to the private sector to gain stability depending on the condition which both sector is situated. The welfare of the consumers and the entire society is the priority of the government; therefore, government policies can either support the private sector or the other way around.

Public sector arises if the private sector abuses their market power in the economy. Like for instance, companies that have patent rights over a certain type of medicine or drug have the tendency to over price their products thereby creating much burden on the consumers especially those that are considered poor and less privilege. If this scenario happens, then, this is the right time when the government can step in and restrict the said concerned company through certain market barriers like government policies such as price ceiling/floor price to restrict the increase of prices in the market.

Furthermore, the government could also produce generic drugs in the market, with same medical effect but of cheaper price for the poor and less privilege people. With this, the government is able to fulfill their role as the provider of basic needs of every citizen such as medical accessibility plus restricting the private company from overcharging the consumers for their products. It is now therefore clear that public sector only rises whenever the private sector cannot produce a certain product efficiently or the private sector already abuses their power and causes much burden on the consumers in the market.

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On the other hand, private sector rises whenever the government inefficiently produces a certain type of good or services or has the possibility that government officials only abuses their power while holding a government-owned company (, 2008). One great example into this would be the production of electricity in the domestic market. Most countries give this industry to the private sector since the government only acquires tremendous amount of financial losses contributing to the budget deficit of the government. In this regard, the government already gives way for the private sector to step in. for as long as the private sector can reasonable operates in the market, then, there is no room for the government to intervene giving way for the rise of public sector.

The private sector also provides income to the government and this is the most reason why government allows private sector to dominate the production of goods and services in the market (, 2006). On the other hand, private sector gets benefits from the public sector in the form of government subsidies and other helpful policies like lower tax rate from operating the market. At the end of the day, public and private sector have a mutual relationship with one another since both of them benefits from simultaneously existing in the economy.

Public sector basically encompasses all the goods and services that are provided by the government (Cox, 2005). Like what is mentioned above earlier, the provision of generic drugs or medicine is already considered as one of the public sector since it is being provided by the government and this is one of the main component of the public sector- goods and services under this sector is being provided by the government. Another example of this would be the national defense, social security and the urban planning administration.

On the other hand, private sector is primarily being comprised by goods and services that are made in the purpose of making profit in the market. Companies in this sector are profit driven and only motivated to produce goods and services in the market not because of charity and social service rather to make earnings. This what makes the private sector different from the public sector - their purpose for providing a given product or service in the domestic market (Sasagawa, 2008).

In the end, despite of the difference on the intentions of the private and public sector, they still able to work effectively by providing harmony in the market towards the attainment of impressive economic growth for the country.

Political policies for the public sector would be very much different for that of the private sector since these two sectors have different reason from existing in the market. Most of the policies concerning the public sector concentrate on the influence of the government over the management of the production of goods and services under this sector (, 2008). In other words, the government has the entire power to interfere in the operation of a company/organization operating under the public sector like the wage rate of the workers in the public sector. Most of the times, policies in this sectors concentrates on the minimization of cost of providing services and/or goods to the public since public sector’s companies get their budget from the government. In other words, the government, as much as possible, controls the management of the public sectors in order to see that they provide the highest possible quality of product and services in the market and at the same time minimizing the cost of their provision of goods and services as much as possible.

On the other hand, political policies for the private sector focuses mainly on the restrictions that the government will impose the private entities especially if the latter already abuses their market power. Furthermore, the government could also implement political policies such as high tax for private entities in order for the government to generate more revenue. Import/export quota are also some of the government policies that directly affects the level of operation and production of a given private company in the market. Nevertheless, there are some policies that both sectors can be addressed like the policy on the increasing the minimum wage rate of the workers in the labor market. Only the policies concerning the factors of production are the only time wherein both sectors will be affected by one political policy like the increasing of wage rate of workers in the labor market.


  1. (2006). Private Sector Development. Retrieved May 2, 2008, from
  2. (2008). The Growing Role of Private Sector. Retrieved May 2, 2008, from
  3. Cox, M. (2005). The Public Sector Components that Promote Sustainable Development and Construction. Retrieved May 2, 2008, from
  4. Sasagawa, T. (2008). The Relationship between the Public and Private Sectors in 20th Century in Japan. Retrieved May 2, 2008, from
  5. (2008). Governance of the Public-Private-Civic Sector Relationships. Retrieved May 2, 2008, from

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Relationship between Private and Public Sector Economies. (2017, Jan 23). Retrieved from

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