Stimulating Local Public Employment: Do General Grants Work?

Heléne Lundqvist (), Matz Dahlberg () and Eva Mörk ()
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Heléne Lundqvist: Uppsala Center for Fiscal Studies, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

No 2010:9, Working Paper Series, Center for Fiscal Studies from Uppsala University, Department of Economics

Abstract: The effectiveness of public funds in increasing public employment has long been a question on public and labor economists’ minds. In most federal countries local governments employ large fractions of the working population, meaning that a tool for stimulating local public employment can substantially affect the overall unemployment level. This paper asks whether general grants to lower-level governments have the potential of doing so. Applying the regression kink design to the Swedish grant system, we are able to estimate causal effects of intergovernmental grants on personnel in different local government sectors. Our robust conclusion is that personnel in the central administration increased substantially after a marginal increase in grants, but that such an effect was lacking both for total personnel and personnel in child care, schools, elderly care, social welfare and in technical services. We suggest several potential reasons for these results, such as heterogeneous treatment effects and bureaucratic influence in the local decision-making process.

Keywords: Fiscal federalism; intergovernmental grants; public employment; regression kink design; instrumental variables (search for similar items in EconPapers)
JEL-codes: C33 H11 H70 J45 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab, nep-pbe and nep-ure
Date: 2010-09-02
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Related works:
Working Paper: Stimulating Local Public Employment: Do General Grants Work? (2010)
Working Paper: Stimulating Local Public Employment: Do General Grants Work? (2010)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:uufswp:2010_009

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