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The impact of public employment: evidence from Bonn

Becker, Sascha O., Heblich, Stephan and Sturm, Daniel (2018) The impact of public employment: evidence from Bonn. SERC Discussion Papers (SERCDP228). Spatial Economics Research Centre, London School of Economics and Political Science, London, UK.

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Abstract

This paper evaluates the impact of public employment on private sector activity using the relocation of the German federal government from Berlin to Bonn in the wake of the Second World War as a source of exogenous variation. To guide our empirical analysis, we develop a simple economic geography model in which public sector employment in a city can crowd out private employment through higher wages and house prices, but also generates potential productivity and amenity spillovers. We find that relative to a control group of cities, Bonn experiences a substantial increase in public employment. However, this results in only modest increases in private sector employment with each additional public sector job destroying around 0.2 jobs in industries and creating just over one additional job in other parts of the private sector. We show how this finding can be explained by our model and provide several pieces of evidence for the mechanisms emphasised by the model

Item Type: Monograph (Discussion Paper)
Official URL: http://www.spatialeconomics.ac.uk/
Additional Information: © 2018 The Authors
Divisions: Spatial Economics Research Centre
Centre for Economic Performance
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
JEL classification: F - International Economics > F1 - Trade > F15 - Economic Integration
J - Labor and Demographic Economics > J4 - Particular Labor Markets > J45 - Public Sector Labor Markets
N - Economic History > N4 - Government, War, Law, and Regulation > N44 - Europe: 1913-
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade
Sets: Research centres and groups > Spatial Economics Research Centre
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 30 Jan 2018 11:31
Last Modified: 05 Apr 2019 23:04
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/86576

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