Role of the Government

Some economic decisions are made at a local level rather than a national level.

Role of the Government

1. Government as a producer:

1. Provides public goods
2. Merit goods
3. Welfare services(unemployment benefits, pensions, child benefits, etc.)
4. Public services(police stations, fire stations, waste management, etc.)
5. Infrastructure(roads, telecommunication, electricity)

The government,

• May produce goods and services that it thinks are essential, and it may establish a natural monopoly.
• May run strategic industries(those that are important to the country’s economy and safety)
• May partner with private sector firms (known as the formation of BOT model)

2. Government as an employer:

The government employs workers to operate state-owned enterprises. This,

1. Reduces Unemployment: the government can employ more workers from parts of the society where private sector firms may not. This would mean a higher percentage of the working population is contributing to the economy of the nation. 
2. Control prices: The government can limit wage rises and the prices charged by the enterprises hence affecting the market price. 
3. Set examples for employment practices: the government, for example, can provide good quality training, preventing discrimination which can increase the incentive for high-quality worker management by other firms. 

3. Government at an international level

The government,

• Can allow free trade or impose restrictions: for example, the government may permit free trade for essential products such as medicine whereas impose taxes on demerit goods
• Can establish policies towards foreign multinational companies: for instance, some governments make it easy for MNCs for them to set up while others reject them. 

Promote international trade: governments are usually members of trade blocs that promote trade between countries for mutual benefit.