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The consequences of public employment: evidence from Italian municipalities

Author

Listed:
  • Marta Auricchio

    () (Bank of Italy)

  • Emanuele Ciani

    () (Bank of Italy)

  • Alberto Dalmazzo

    () (University of Siena)

  • Guido de Blasio

    () (Bank of Italy)

Abstract

We investigate the consequences of public employment on local economies. We start by presenting a spatial-equilibrium framework, to highlight that the housing market is an important channel through which a variation in public employment affects private employment. We then provide empirical evidence from Italian municipalities, focusing on the strong contraction in the public sector workforce that occurred between the last two Censuses (2001-2011). We use an IV identification strategy that exploits the fact that variations in local public employment were strongly influenced by central government decisions, with little reference to the economic conditions of the municipalities. Our results suggest that exogenous contractions in public employment lead to an increase of private jobs, and that competition in the housing market seems to be a relevant explanation for this finding.

Suggested Citation

  • Marta Auricchio & Emanuele Ciani & Alberto Dalmazzo & Guido de Blasio, 2017. "The consequences of public employment: evidence from Italian municipalities," Temi di discussione (Economic working papers) 1125, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_1125_17
    as

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    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2017/2017-1125/en_tema_1125.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    local labor markets; public employment;

    JEL classification:

    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - 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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