The Determinants of French Municipal Labor Demand

Touria Jaaidane, Sophie Larribeau () and Matthieu Leprince ()

No 2003, CEPREMAP Working Papers (Docweb) from CEPREMAP

Abstract: While in many countries municipalities are central employers, studies of the determinants of their labor demand are surprisingly scarce. Exploiting an original panel dataset of municipalities of more than 1,000 inhabitants in France over the 2002-2008 period, we first show that wages, grants, median income and tax capacity explain the labor demand, with the wage being by far the main driving force. The data exhibit a political cycle effect: mayors increase municipal employment in pre-electoral periods. Second, inter-municipal cooperation (hereafter IMC) is also a key factor, as revealed by the positive impact of the inter-municipal employment level on municipal employment (IMC direct effect). Third, we find that IMC leads mayors to increase municipal employment when unemployment is higher (IMC indirect effect). Moreover, Right-wing mayors tend to reduce municipal employment when unemployment is higher (partisan effect). Finally, controlling for the magnitude of the inter-municipal employment, it turns out that the IMC indirect effect holds only for municipalities in large employment cooperation bodies and that the partisan effect dominates the IMC indirect effect for Right-wing municipalities.

Keywords: Municipal labor demand; Inter-municipal cooperation; Median voter model; Instrumental variables; Panel data (search for similar items in EconPapers)
Pages: 40 pages
Date: 2020-05
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