The private sector is the part of the
economy
An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...
, sometimes referred to as the citizen sector, which is owned by private groups, usually as a means of establishment for
profit or
non profit
A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
, rather than being owned by the
government
A government is the system or group of people governing an organized community, generally a state.
In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is ...
.
Employment
The private sector employs most of the workforce in some countries. In private sector, activities are guided by the motive to earn money.
A 2013 study by the
International Finance Corporation
The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset-management services to encourage private-sector development in less developed countries. The IFC is a member of ...
(part of the
World Bank Group
The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and best-known development bank in the world and an observer at the United Nations Development Gr ...
) identified that 90 percent of jobs in developing countries are in the private sector.
Diversification
In free enterprise countries, such as the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
, the private sector is wider, and the state places fewer constraints on firms. In countries with more government authority, such as
China, the public sector makes up most of the economy.
Regulation
States legally regulate the private sector.
Businesses operating within a country must comply with the laws in that country. In some cases, usually involving
multinational corporation
A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...
s that can pick and choose their suppliers and locations based on their perception of the regulatory environment, local state regulations have resulted in uneven practices within one company. For example, workers in one country may benefit from strong
labour unions, while workers in another country have very weak laws supporting labour unions, even though they work for the same employer. In some cases, industries and individual businesses choose to self-regulate by applying higher standards for dealing with their workers, customers, or the environment than the minimum that is legally required of them.
There can be negative effects from the private sector. In the early 1980s, the Corrections Corporation of America pioneered the idea of running
prison
A prison, also known as a jail, gaol (dated, standard English, Australian, and historically in Canada), penitentiary (American English and Canadian English), detention center (or detention centre outside the US), correction center, corre ...
s for a profit. Today, corporate-run prisons hold eight percent of America's inmates. Since it is from the private sector, their main priority isn't rehabilitation, but profit. This has resulted in many human rights violations across the United States.
[Bauer, Shane. "Private prisons are shrouded in secrecy. I took a job as a guard to get inside-then things got crazy."Mother Jones. N.p., 06 June 2017. Web. 10 June 2017.
]
See also
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Company law
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Free enterprise
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Private enterprise
*
Private law
*
Public economics
Public economics ''(or economics of the public sector)'' is the study of government policy through the lens of economic efficiency and equity. Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve s ...
*
Public sector
The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, inf ...
*
Three-sector model
The three-sector model in economics divides economies into three sectors of activity: extraction of raw materials ( primary), manufacturing ( secondary), and service industries which exist to facilitate the transport, distribution and sa ...
References
{{Reflist
Economic sectors
Capitalism