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The impact of public employment : evidence from Bonn

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Becker, Sascha O., Heblich, Stephan and Sturm, Daniel M. (2018) The impact of public employment : evidence from Bonn. Working Paper. Coventry: University of Warwick. Department of Economics. Warwick economics research papers series (WERPS) (1146). (Unpublished)

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Abstract

This paper evaluates the impact of public employment on private sector activity using the relocation of the German federal government from Berlin to Bonn in the wake of the Second World War as a source of exogenous variation. To guide our empirical analysis, we develop a simple economic geography model in which public sector employment in a city can crowd out private employment through higher wages and house prices, but also generates potential productivity and
amenity spillovers. We find that relative to a control group of cities, Bonn experiences a substantial increase in public employment. However, this results in only modest increases in private sector employment with each additional public sector job destroying around 0.2 jobs in industries and creating just over one additional job in other parts of the private sector. We show how this finding can be explained by our model and provide several pieces of evidence for the mechanisms emphasised by the model.

Item Type: Working or Discussion Paper (Working Paper)
Subjects: H Social Sciences > HJ Public Finance
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Crowding out (Economics), Economic geography, Public service employment -- Germany, Bonn (Germany) -- Economic conditions -- History
Series Name: Warwick economics research papers series (WERPS)
Publisher: University of Warwick. Department of Economics
Place of Publication: Coventry
ISSN: 0083-7350
Official Date: January 2018
Dates:
DateEvent
January 2018Published
Number: 1146
Number of Pages: 44
Institution: University of Warwick
Status: Not Peer Reviewed
Publication Status: Unpublished
Access rights to Published version: Open Access
Description:

This paper also appears as CAGE Discussion Paper No: 354

RIOXX Funder/Project Grant:
Project/Grant IDRIOXX Funder NameFunder ID
263733FP7 Ideas: European Research Councilhttp://dx.doi.org/10.13039/100011199

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