Local Employment Multiplier: Evidence from Relocations of Public Entities in South Korea

Wookun Kim (), Changsu Ko () and Hwanoong Lee ()
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Wookun Kim: Southern Methodist University
Changsu Ko: Korea Institute of Public Finance
Hwanoong Lee: Korea Institute of Public Finance

No 2311, Departmental Working Papers from Southern Methodist University, Department of Economics

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.

JEL-codes: J45 J61 R11 R23 R58 (search for similar items in EconPapers)
Date: 2023-12
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