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Redistribution Through Public Employment; The Case of Italy

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  • Stephan Danninger
  • Alberto Alesina
  • Massimo V. Rostagno

Abstract

This paper examines the regional distribution of public employment in Italy and documents two sets of facts. The first is the use of public employment as a subsidy from the North to the less wealthy South. We calculate that about half of the wage bill in the South of Italy can be identified as a subsidy, with both the size of public employment and wage levels used as a redistributive device. The second set of facts concerns the negative effects of subsidized public employment on individuals’ attitudes toward job search, education, and “risk-taking” activities. We conclude that heavy reliance on public employment distorts incentives and discourages the development of market activities in the South.

Suggested Citation

  • Stephan Danninger & Alberto Alesina & Massimo V. Rostagno, 1999. "Redistribution Through Public Employment; The Case of Italy," IMF Working Papers 99/177, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/177
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    References listed on IDEAS

    as
    1. Alesina, Alberto & Baqir, Reza & Easterly, William, 2000. "Redistributive Public Employment," Journal of Urban Economics, Elsevier, vol. 48(2), pages 219-241, September.
    2. Erzo Luttmer, "undated". "Network Effects and Welfare Cultures," University of Chicago - Population Research Center 98-13, Chicago - Population Research Center.
    3. Borjas, George J., 1986. "The earnings of state government employees in the United States," Journal of Urban Economics, Elsevier, vol. 19(2), pages 156-173, March.
    4. Marianne Bertrand & Erzo F. P. Luttmer & Sendhil Mullainathan, 2000. "Network Effects and Welfare Cultures," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 1019-1055.
    5. 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.
    6. Richard B. Freeman & Casey Ichniowski, 1988. "When Public Sector Workers Unionize," NBER Books, National Bureau of Economic Research, Inc, number free88-1, April.
    7. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-1235, December.
    8. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
    9. Randall W. Eberts & Timothy J. Gronberg, 1992. "Wagner's hypothesis: a local perspective," Working Paper 9202, Federal Reserve Bank of Cleveland.
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    More about this item

    Keywords

    Italy; Public sector; Public Employment; Redistribution of Income; Public Policy and Economic Behavior of Agents; employment; unemployment; work experience; job search;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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