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The effects of public sector employment on the economy

Author

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  • Vincenzo Caponi

    (CREST-ENSAI, France, and IfW and IZA, Germany)

Abstract

Public sector jobs are created because governments opt to provide goods and services produced directly by public employees. Governments, however, may also choose to regulate the size of the public sector in order to stabilize targeted national employment levels. However, economic research suggests that these effects are uncertain and critically depend on how public wages are determined. Rigid public sector wages lead to perverse effects on private employment, while flexible public wages lead to a stabilizing effect. Public employment also has important productivity and redistributive effects.

Suggested Citation

  • Vincenzo Caponi, 2017. "The effects of public sector employment on the economy," IZA World of Labor, Institute of Labor Economics (IZA), pages 332-332, January.
    • Handle: RePEc:iza:izawol:journl:y:2017:n:332
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    References listed on IDEAS

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    1. Carlo Dell'Aringa & Claudio Lucifora & Federica Origo, 2007. "Public Sector Pay And Regional Competitiveness. A First Look At Regional Public–Private Wage Differentials In Italy," Manchester School, University of Manchester, vol. 75(4), pages 445-478, July.
    2. 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.
    3. Claudio Lucifora & Dominique Meurs, 2006. "The Public Sector Pay Gap In France, Great Britain And Italy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(1), pages 43-59, March.
    4. Malley, Jim & Moutos, Thomas, 1996. " Does Government Employment "Crowd-Out" Private Employment? Evidence from Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 289-302, June.
    5. Caponi, Vincenzo, 2017. "Public employment policies and regional unemployment differences," Regional Science and Urban Economics, Elsevier, vol. 63(C), pages 1-12.
    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 1-2.
    7. Pedro Gomes, 2015. "Optimal Public Sector Wages," Economic Journal, Royal Economic Society, vol. 125(587), pages 1425-1451, September.
    8. Boeing-Reicher, Claire A. & Caponi, Vincenzo, 2016. "Public Wages, Public Employment, and Business Cycle Volatility: Evidence from U.S. Metro Areas," IZA Discussion Papers 9965, Institute of Labor Economics (IZA).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

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    2. Jaaidane, Touria & Larribeau, Sophie & Leprince, Matthieu, 2020. "The Determinants of French Municipal Labor Demand," CEPREMAP Working Papers (Docweb) 2003, CEPREMAP.
    3. Tamara Premrov & Leonard Geyer & Nicolas Prinz, 2022. "Arbeit für alle? Kosten und Verteilungswirkung einer Jobgarantie für Langzeitbeschäftigungslose in Österreich," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 48(1), pages 59-82.
    4. Juhro, Solikin M. & Syarifuddin, Ferry & Sakti, Ali, 2022. "Inclusive Welfare: On The Role of Islamic Public-Social Finance and Monetary Economics," MPRA Paper 113788, University Library of Munich, Germany.
    5. Dale-Olsen, Harald & Schone, Pal, 2020. "Can Placement of Governmental Sector Jobs Spur Private Sector Employment and Performance?," IZA Discussion Papers 13993, Institute of Labor Economics (IZA).
    6. Galanakis, Yannis, 2020. "Female Human Capital Mismatch: An extension for the British public sector," GLO Discussion Paper Series 669, Global Labor Organization (GLO).
    7. Jaaidane, Touria & Larribeau, Sophie & Leprince, Matthieu, 2020. "The Determinants of French Municipal Labor Demand," CEPREMAP Working Papers (Docweb) 2003, CEPREMAP.
    8. Drejerska, Nina, 2023. "Agriculture as a Sector of Professional Activity of Rural Inhabitants in the Mazowieckie Region," Roczniki (Annals), Polish Association of Agricultural Economists and Agribusiness - Stowarzyszenie Ekonomistow Rolnictwa e Agrobiznesu (SERiA), vol. 2023(1).

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    More about this item

    Keywords

    public sector employment; public sector wages; unemployment;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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