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Municipal Labour Demand - Sweden 1988 - 1995

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Author Info

  • Bergström, Pål

    (Trade and Capital Markets)

  • Dahlberg, Matz

    ()
    (Department of Economics)

  • Johansson, Eva

    ()
    (Department of Economics)

Abstract

In this paper we investigate the determinants of municipal labour demand in Sweden 1988-1995. Utilising a major grant reform in 1993, through which a switch from mainly targeted to mainly general central government grants occurred, we are able to identify which type of grants that have the largest effects on municipal employment. We find a larger municipal employment elasticity with respect to grants before the reform, implying that the more freedom given to the municipalities, the less they seem inclined to spend on municipal employment. We further find (i) a short run wage elasticity of approximately -0.5 and a long run ditto of approximately -0.9, (ii) a quite sluggish adjustment process: only 60% of the desired change in municipal employment is implemented in the first year, (iii) that the demographic structure is an important determinant of municipal employment, and (iv) that the behavioural pattern is different in "socialist" municipalities.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1998:24.

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Length: 28 pages
Date of creation: 15 Nov 1998
Date of revision:
Publication status: Published in Labour Economics, 2004, pages 315-334.
Handle: RePEc:hhs:uunewp:1998_024

Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Related research

Keywords: Municipal labour demand; Panel data; Median voter model; Sluggishness;

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References

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  1. Bailey, Stephen J & Connolly, Stephen, 1998. " The Flypaper Effect: Identifying Areas for Further Research," Public Choice, Springer, vol. 95(3-4), pages 335-61, June.
  2. Edin, Per-Anders & Fredriksson, Peter, 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Working Paper Series 2000:19, Uppsala University, Department of Economics.
  3. Douglas Holtz-Eakin & Harvey S. Rosen, 1991. "Municipal Labor Demand in the Presence of Uncertainty: An Econometric Approach," NBER Working Papers 3516, National Bureau of Economic Research, Inc.
  4. Jerry A. Hausman, 1980. "The effect of wages, taxes, and fixed costs on women's labor force participation," NBER Chapters, in: Econometric Studies in Public Finance, pages 161-194 National Bureau of Economic Research, Inc.
  5. Blomquist, N. Soren, 1983. "The effect of income taxation on the labor supply of married men in Sweden," Journal of Public Economics, Elsevier, vol. 22(2), pages 169-197, November.
  6. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  7. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  8. Aronsson, Thomas & Wikstrom, Magnus, 1996. "Local public expenditure in Sweden a model where the median voter is not necessarily decisive," European Economic Review, Elsevier, vol. 40(9), pages 1705-1716, December.
  9. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  10. Bergstrom, P., 1997. "On Bootstrap Standard Errors in Dynamic Panel Data Models ," Papers 1997-23, Uppsala - Working Paper Series.
  11. Dahlberg, Matz & Johansson, Eva, 1997. "An Examination of the Dynamic Behavior of Local Governments Using GMM Bootstrapping Methods," Working Paper Series 1997:11, Uppsala University, Department of Economics.
  12. Ehrenberg, Ronald G, 1973. "The Demand for State and Local Government Employees," American Economic Review, American Economic Association, vol. 63(3), pages 366-79, June.
  13. Ehrenberg, Ronald G. & Schwarz, Joshua L., 1987. "Public-sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 22, pages 1219-1260 Elsevier.
  14. Borge, Lars-Erik & Rattso, Jorn & Sorensen, Rune, 1995. " Local Government Service Production: The Politics of Allocative Sluggishness," Public Choice, Springer, vol. 82(1-2), pages 135-57, January.
  15. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
  16. Courant, Paul N & Gramlich, Edward M & Rubinfeld, Daniel L, 1979. "Public Employee Market Power and the Level of Government Spending," American Economic Review, American Economic Association, vol. 69(5), pages 806-17, December.
  17. Matz Dahlberg & Eva Johansson, 1998. "The revenues-expenditures nexus: panel data evidence from Swedish municipalities," Applied Economics, Taylor & Francis Journals, vol. 30(10), pages 1379-1386.
  18. Borge, Lars-Erik & Rattso, Jorn, 1995. "Demographic shift, relative costs and the allocation of local public consumption in Norway," Regional Science and Urban Economics, Elsevier, vol. 25(6), pages 705-726, December.
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Citations

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Cited by:
  1. Åsa Ahlin & Eva Johansson, 2001. "Individual Demand for Local Public Schooling: Evidence from Swedish Survey Data," International Tax and Public Finance, Springer, vol. 8(4), pages 331-351, August.
  2. Ahlin, A. & Johansson, E., 2000. "Demand for Local Public Schooling: Another Brick in the Wall," Papers 2000:12, Uppsala - Working Paper Series.
  3. Bergstrom, Pal & Dahlberg, Matz & Mork, Eva, 2004. "The effects of grants and wages on municipal labour demand," Labour Economics, Elsevier, vol. 11(3), pages 315-334, June.

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