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The effect of public sector employment on local labour markets

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  • Faggio, Giulia
  • Overman, Henry

Abstract

This paper considers the impact of public sector employment on local labour markets. Using English data at the Local Authority level for 2003–2007 we find that public sector employment has no identifiable effect on total private sector employment. However, public sector employment does affect the sectoral composition of the private sector. Specifically, each additional public sector job creates 0.5 jobs in the non-tradable sector (construction and services) while crowding out 0.4 jobs in the tradable sector (manufacturing). When using data for a longer time period (1999–2007) we find no multiplier effect for non-tradables, stronger crowding out for tradables and, consistent with this, crowding out for total private sector employment.

Suggested Citation

  • Faggio, Giulia & Overman, Henry, 2014. "The effect of public sector employment on local labour markets," Journal of Urban Economics, Elsevier, vol. 79(C), pages 91-107.
  • Handle: RePEc:eee:juecon:v:79:y:2014:i:c:p:91-107
    DOI: 10.1016/j.jue.2013.05.002
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    More about this item

    Keywords

    Local labour markets; Public and private sector employment; Wages;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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