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The Impact of Public Employment: Evidence from Bonn

Author

Listed:
  • Sascha Becker
  • Stephan Heblich

  • Daniel Sturm

Abstract

This paper evaluates the impact of relocations of public employment across cities on private sector activity. To identify the effect of changes in public employment on the private sector, we exploit the relocation of the German Federal Government from Berlin to Bonn in the wake of the Second Word War as a source of exogenous variation. In line with the predictions of a standard economic geography model we find that an increase in public employment puts downward pressure on private sector employment. We provide evidence that this negative impact is driven by changes in wages and rents which are consistent with the mechanisms of the model.

Suggested Citation

  • Sascha Becker & Stephan Heblich & Daniel Sturm, 2013. "The Impact of Public Employment: Evidence from Bonn," ERSA conference papers ersa13p731, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa13p731
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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • 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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