The effect of public sector employment on local labour markets

Faggio, G. & Overman, H. (2014). The effect of public sector employment on local labour markets. Journal of Urban Economics, 79, pp. 91-107. doi: 10.1016/j.jue.2013.05.002

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Abstract

This paper considers the impact of public sector employment on local labour markets. Using English data at the Local Authority level for 2003-2007 we find that public sector employment has no identifiable effect on total private sector employment. However, public sector employment does affect the sectoral composition of the private sector. Specifically, each additional public sector job creates 0.5 jobs in the non-tradable sector (construction and services) while crowding out 0.4 jobs in the tradable sector (manufacturing). When using data for a longer time period (1999-2007) we find no multiplier effect for non-tradables, stronger crowding out for tradables and, consistent with this, crowding out for total private sector employment.

Item Type: Article
Uncontrolled Keywords: Local labour markets; Public and private sector employment; Wages
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Social Sciences > Department of Economics
URI: http://openaccess.city.ac.uk/id/eprint/16534

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