Private & Public Sector Businesses
- It is useful to classify firms into categories so that we can make comparisons between them. Firms can be classified according to:
- Whether they operate in the public or private sector
- Their type of legal ownership (sole trader, private limited company etc)
- The sector in which they operate (primary, secondary etc)
- Whether they are for-profit or non-profit
Public or Private Sector
- Public sector firms are owned and controlled by the Government and usually funded through taxation
- Private sector firms are owned and controlled by other firms and private individuals (entrepreneurs and shareholders) and are usually funded by owner's capital, borrowing and retained profits
- Privatisation occurs when government-owned firms are sold to the private sector
- Many government owned firms have been partially privatised
- The government retains a share in them so they can influence decision-making and receive a share of the profits e.g. the shares of Singapore Airlines are 55% government owned & 45% privately owned
- The government retains a share in them so they can influence decision-making and receive a share of the profits e.g. the shares of Singapore Airlines are 55% government owned & 45% privately owned
Characteristics of Private and Public Sector Firms
Public Sector Firms |
Private Sector Firms |
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- In recent decades Governments around the world have tended to move away from the centralised provision of services
- In Cuba small private sector businesses are now encouraged, although a large proportion of workers remain employed directly by the government
- Political change in Venezuela has led to a rare example of an increase in the involvement of the state in the economy