The Regional Distribution of Public Employment: Theory and Evidence
Sebastian G. Kessing
Wissenschaftszentrum Berlin fuer Sozialforschung (WZB) - Market Processes and Governance; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Università Degli Studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 6449
We analyze the optimal regional pattern of public employment in an information-constrained second-best redistribution policy showing that regionally differentiated public employment can serve as an expenditure side tagging device, bypassing or relaxing the equity-efficiency trade-off. The optimal pattern exhibits higher levels of public employment in low productivity regions and is more pronounced the higher is the degree of regional inequality within the country. Empirically, using a panel of European regions from 1995-2007, we find evidence that public employment is systematically higher in low productivity regions. The latter effect is stronger in countries with higher levels of regional inequality.
Number of Pages in PDF File: 25
Keywords: public employment, redistribution, regional inequality, European regions
JEL Classification: H11, J45, R12working papers series
Date posted: April 14, 2012
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