Economics at your fingertips  

Local labor market effects of public employment

Jordi Jofre-Monseny, José Silva () and Javier Vázquez-Grenno
Authors registered in the RePEc Author Service: Javier Vázquez Grenno ()

Regional Science and Urban Economics, 2020, vol. 82, issue C

Abstract: This paper quantifies the impact of public employment on local labor markets in the long-run. We adopt two quantitative approaches and apply them to the case of Spanish cities. In the first, we develop a 3-sector (public, tradable and non-tradable) search and matching model embedded within a spatial equilibrium model. We characterize the steady state of the model, which we calibrate to match the labor market characteristics of the average Spanish city. The model is then used to simulate the local labor market effects of expanding public sector employment. In the second empirical approach, we use regression analysis to estimate the effects of public sector job expansions on decadal changes (1980–1990 and 1990–2001) in the employment and population of Spanish cities. This analysis exploits the dramatic expansion of public employment that followed the advent of democracy in the period 1980 to 2001. The instrumental variables' approach that we adopt uses the capital status of cities to instrument for changes in public sector employment. The two empirical approaches indicate that public sector jobs crowd-in private employment. This job increase concentrates in the non-tradable sector as the higher local wage bill increases local demand for the non-tradable good. However, these new jobs do not translate into a substantial reduction in the local unemployment rate as better labor market conditions increase the city's labor force due to migration.

Keywords: Public employment; Search; Local multipliers; Unemployment (search for similar items in EconPapers)
JEL-codes: J45 J64 H70 R12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Local labor market effects of public employment (2016) Downloads
Working Paper: Local labor market effects of public employment (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.regsciurbeco.2018.11.001

Access Statistics for this article

Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou

More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

Page updated 2021-04-05
Handle: RePEc:eee:regeco:v:82:y:2020:i:c:s0166046218300140