Employment Effects and Fiscal Spillovers of a Public Sector Employment Program

Eva Mörk (), Lillit Ottosson () and Ulrika Vikman ()
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Eva Mörk: Department of Economics, Uppsala University; CESifo; IEB; IZA; UCFS, UCLS; Urban Lab
Lillit Ottosson: Swedish Institute for Social Research, Stockholm, University; UCLS; UIL; Institute for Evaluation of Labour Market and Education Policy (IFAU)
Ulrika Vikman: Institute for Evaluation of Labour Market and Education Policy (IFAU); UCLS; UCFS

No 10/2026, SOFI Working Papers in Labour Economics from Stockholm University, Swedish Institute for Social Research

Abstract: We evaluate a temporary public sector employment program targeted at individuals with a weak labor market attachment. To account for dynamic selection into the program, we apply the dynamic inverse probability weighting approach. We show that the program is successful in terms of increasing employment and reducing social assistance. The positive employment effects are driven by individuals placed at regular workplaces. For participants with temporary employments at a non-regular workplace, we instead find negative employment effects. The decrease in social assistance is partially countered by an increase in the share receiving unemployment insurance benefits, indicating that municipalities are able to shift costs from the local to the central budget. We further find that cost-effectiveness, as measured by the marginal value of public funds, varies depending on which level of government is considered.

Keywords: Public sector employment programs; Social assistance; Cost-shifting; Marginal value of public funds; Dynamic assignment (search for similar items in EconPapers)
JEL-codes: H75 I38 J45 (search for similar items in EconPapers)
Pages: 91 pages
Date: 2026-07-27
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