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private sector

Contributor(s): Ivy Wigmore

The private sector is the part of a country's economic system that is run by individuals and companies, rather than the government. Most private sector organizations are run with the intention of making profit. 

The segment of the economy under control of the government is known as the public sector. Charities and non-profit organizations are sometimes considered to make up a third segment, known as the volunteer sector. However, such organizations are more commonly considered part of the private sector. 

The private sector is larger in free enterprise economies, such as the United States, in which the government imposes relatively few restrictions on businesses. In countries with more government control, such as China, the public sector makes up the larger part of the economy. 

In many countries, there is considerable overlap between public and private sector industries. Examples of enterprises that are often run cooperatively include waste management, water management, health care and security services.

An industry or business may start out in one sector and move to the other. The act of turning a publicly-run enterprise over to private citizens is known as privatization. The opposite movement, from private to public, is known by various names, including nationalization or municipalization, depending on the level of government involved. 

This was last updated in August 2013

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