Local employment multiplier: Evidence from relocation of public-sector entities in South Korea

Hwanoong Lee, Changsu Ko and Wookun Kim

Labour Economics, 2024, vol. 88, issue C

Abstract: We exploit a series of public-sector entity relocations in South Korea as an exogenous source of variation in public sector employment to estimate the local employment multiplier. We find that the introduction of one public sector employment position increases private sector employment by one unit, primarily driven by the service sector. Consistent with existing literature, we document that the effect of public employment on private employment is highly localized. In addition to changes in private employment, we also discover that the relocations led to a positive net influx of residents into the treated neighborhoods; this effect is also localized. Lastly, by estimating the local employment multiplier for each relocation site, we document the heterogeneity of the local employment multiplier and provide suggestive evidence that this heterogeneity is shaped by the local economic environment’s capacity to accommodate additional general equilibrium responses.

Keywords: Employment multiplier; Public employment; Spatial spillover; Migration; Heterogeneity (search for similar items in EconPapers)
JEL-codes: H31 J45 J61 R11 R23 R58 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:88:y:2024:i:c:s0927537124000113

DOI: 10.1016/j.labeco.2024.102515

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