The Public Sector, sometimes referred to as the state sector is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.

Examples of public sector activity range from delivering social security, administering urban planning and organizing national defenses.

The organization of the public sector (public ownership) can take several forms, including:

• Direct administration funded through taxation; the delivering organization generally has no specific requirement to meet commercial success criteria, and production decisions are determined by government.
• Publicly owned corporations (in some contexts, especially manufacturing, "state-owned enterprises"); which differ from direct administration in that they have greater commercial freedoms and are expected to operate according to commercial criteria, and production decisions are not generally taken by government (although goals may be set for them by government).
• Partial outsourcing (of the scale many businesses do, e.g. for IT services), is considered a public sector model.

A borderline form is

• Complete outsourcing or contracting out, with a privately owned corporation delivering the entire service on behalf of government. This may be considered a mixture of private sector operations with public ownership of assets, although in some forms the private sector's control and/or risk is so great that the service may no longer be considered part of the public sector. (See the United Kingdom's Private Finance Initiative.)

In spite of their name, public companies are not part of the public sector; they are a particular kind of private sector company that can offer their shares for sale to the general public.

Role of the public sector

The role and scope of the public sector and state sector are often the biggest distinction regarding the economic positions of socialist, liberal and libertarian political philosophy. In general, socialists favor a large state sector consisting of state projects and enterprises, at least in the commanding heights or fundamental sectors of the economy (although some socialists favor a large cooperative sector instead). Social democrats tend to favor a medium-sized public sector that is limited to the provision of universal programs and public services. Economic libertarians and minarchists favor a small public sector with the state being relegated to protecting property rights, creating and enforcing laws and settling disputes, a "night watchman state".