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Does Government Employment "Crowd-Out" Private Employment?: Evidence from Sweden

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  • Jim Malley
  • Thomas Moutos

Abstract

It is argued that increases in government spending that take the form of increases in government employment can have a negative impact on private-sector employment by increasing real wages. In fact, once the supply reducing effects of higher taxes needed to finance the increase in government employment are taken into account, the fall in private employment can be so large as to cause decreases in aggregate employment. The authors demonstrate this with quarterly Swedish data for the period 1964-90. Copyright 1996 by The editors of the Scandinavian Journal of Economics.
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Suggested Citation

  • Jim Malley & Thomas Moutos, 1992. "Does Government Employment "Crowd-Out" Private Employment?: Evidence from Sweden," Working Papers Series 92/16, University of Stirling, Division of Economics.
  • Handle: RePEc:stl:stlewp:92/16
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    References listed on IDEAS

    as
    1. Simpson, David & Walker, James, 1987. "Extending cost-benefit analysis for energy investment choices," Energy Policy, Elsevier, vol. 15(3), pages 217-227, June.
    2. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 29-45.
    3. R. C. D'Arge & K. C. Kogiku, 1973. "Economic Growth and the Environment," Review of Economic Studies, Oxford University Press, vol. 40(1), pages 61-77.
    4. Solow, Robert M, 1986. " On the Intergenerational Allocation of Natural Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 141-149.
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    Cited by:

    1. Arzu Yavuz, 2011. "Productivity and Wage Differentials between Private and Public Sector in the Developing Countries (Gelismekte Olan Ülkelerde Özel ve Kamu Sektöründeki Verimlilik ve Ücret Farklilasmasi)," Working Papers 1103, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    2. Vasilev, Aleksandar, 2013. "Fiscal policy in a Real-Business-Cycle model with labor-intensive government services and endogenous public sector wages and hours," EconStor Preprints 142338, ZBW - German National Library of Economics.
    3. Javier J. Pérez & Marie Aouriri & Maria M. Campos & Dmitrij Celov & Domenico Depalo & Evangelia Papapetrou & Jurga Pesliakaite & Roberto Ramos Magdaleno & Marta Rodríguez-Vives, 2016. "The fiscal and macroeconomic effects of government wages and employment reform," Occasional Papers 1607, Banco de España;Occasional Papers Homepage.
    4. Ardagna, Silvia, 2007. "Fiscal policy in unionized labor markets," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1498-1534, May.
    5. Caponi, Vincenzo, 2017. "Public employment policies and regional unemployment differences," Regional Science and Urban Economics, Elsevier, vol. 63(C), pages 1-12.
    6. Jim Malley & Thomas Moutos, "undated". "Government Employment and Unemployment: With One Hand Giveth, the Other Taketh," ICMM Discussion Papers 47, Department of Economics University of Strathclyde.
    7. Gonzalo Fernández-de-Córdoba & Javier Pérez & José Torres, 2012. "Public and private sector wages interactions in a general equilibrium model," Public Choice, Springer, vol. 150(1), pages 309-326, January.
    8. Vincenzo Caponi, 2017. "The effects of public sector employment on the economy," IZA World of Labor, Institute for the Study of Labor (IZA), pages 332-332, January.
    9. Javier J. Perez & Ana Lamo & Enrique Moral-Benito, 2015. "Does Slack Influence Public and Private Labor Market," EcoMod2015 8792, EcoMod.
    10. Chen, Jie & Nong, Huifu, 2016. "The heterogeneity of market supply effects of public housing provision: Empirical evidence from China," Journal of Housing Economics, Elsevier, vol. 33(C), pages 115-127.
    11. Pedro Gomes & Zoe Kuehn, 2017. "Human capital and the size distribution of firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 164-179, October.
    12. Ana Lamo & Enrique Moral-Benito & Javier J. Pérez, 2016. "Does slack influence public and private labour market interactions?," Working Papers 1605, Banco de España;Working Papers Homepage.
    13. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, vol. 92(3), pages 571-589, June.
    14. Alberto Behar & Junghwan Mok, 2013. "Does Public-Sector Employment Fully Crowd Out Private-Sector Employment?," IMF Working Papers 13/146, International Monetary Fund.
    15. Ardagna, Silvia, 2007. "Fiscal Policy in Unionized Labor Markets," Scholarly Articles 2580048, Harvard University Department of Economics.
    16. M Ncube, 2001. "The Crowding Out Effect In A Developing Country'S Labour Market," South African Journal of Economics, Economic Society of South Africa, vol. 69(3), pages 474-500, September.
    17. Vasilev, Aleksandar, 2013. "Essays on Real Business Cycle Modeling and the Public Sector," EconStor Theses, ZBW - German National Library of Economics, number 130522.
    18. Horst Feldmann, 2006. "Government Size and Unemployment: Evidence from Industrial Countries," Public Choice, Springer, vol. 127(3), pages 443-459, June.

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