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Public employment and labour market performance

  • Yann Algan
  • Pierre Cahuc
  • André Zylberberg

This paper deals with the consequence of public employment on labor market performances in 17 OECD countries over the period 1960-2000. It is argued that public employment had an important crowding out e¤ect on the private sector and increased the unemployment rate over this period. More precisely, empirical evidence suggests that the creation of one public job destroyed about 1.5 private job, sightly decreased participation to the labor market and eventually increased the number of unemployed workers by 0:3: Theoretical considerations and empirical evidence also suggest that the crowding out effect of public jobs on private jobs is more important in countries in which public production ishighly substitutable to private activities and in which the public sector provides high rents.

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Article provided by CEPR & CES & MSH in its journal Economic Policy.

Volume (Year): 17 (2002)
Issue (Month): 34 (04)
Pages: 7-66

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Handle: RePEc:bla:ecpoli:v:17:y:2002:i:34:p:7-66
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  1. Belot, Michèle & van Ours, Jan C, 2000. "Does the Recent Success of some OECD Countries in Lowering their Unemployment Rates lie in the Clever Design of their Labour Market Reforms?," CEPR Discussion Papers 2492, C.E.P.R. Discussion Papers.
  2. Ching-to Albert Ma & Andrew M. Weiss, 1990. "A Signaling Theory of Unemployment," NBER Working Papers 3565, National Bureau of Economic Research, Inc.
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  6. Albert Alesina & Stephan Danninger & Massimo Rostagno, 2001. "Redistribution Through Public Employment: The Case of Italy," IMF Staff Papers, Palgrave Macmillan, vol. 48(3), pages 2.
  7. Jim Malley & Thomas Moutos, . "Government Employment and Unemployment: With One Hand Giveth, the Other Taketh," ICMM Discussion Papers 47, Department of Economics University of Strathclyde.
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  9. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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  11. Holmlund, Bertil, 1997. "Macroeconomic Implications of Cash Limits in the Public Sector," Economica, London School of Economics and Political Science, vol. 64(253), pages 49-62, February.
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  13. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  14. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
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  17. Richard Layard & Stephen Nickell, 1992. "Unemployment in the OECD Countries," CEP Discussion Papers dp0081, Centre for Economic Performance, LSE.
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