The Consequences of Public Employment: Evidence from Italian Municipalities

74 Pages Posted: 22 Sep 2017

See all articles by Marta Auricchio

Marta Auricchio

Bank of Italy

Emanuele Ciani

Bank of Italy

Alberto Dalmazzo

University of Siena - Department of Economics

Guido de Blasio

Bank of Italy

Date Written: July 19, 2017

Abstract

We investigate the consequences of public employment on local economies. We start by presenting a spatial-equilibrium framework, to highlight that the housing market is an important channel through which a variation in public employment affects private employment. We then provide empirical evidence from Italian municipalities, focusing on the strong contraction in the public sector workforce that occurred between the last two Censuses (2001-2011). We use an IV identification strategy that exploits the fact that variations in local public employment were strongly influenced by central government decisions, with little reference to the economic conditions of the municipalities. Our results suggest that exogenous contractions in public employment lead to an increase of private jobs, and that competition in the housing market seems to be a relevant explanation for this finding.

Keywords: Local Labor Markets, Public Employment

JEL Classification: J45, J60, R12

Suggested Citation

Auricchio, Marta and Ciani, Emanuele and Dalmazzo, Alberto and de Blasio, Guido, The Consequences of Public Employment: Evidence from Italian Municipalities (July 19, 2017). Bank of Italy Temi di Discussione (Working Paper) No. 1125, Available at SSRN: https://ssrn.com/abstract=3040640 or http://dx.doi.org/10.2139/ssrn.3040640

Marta Auricchio

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Emanuele Ciani (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alberto Dalmazzo

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy
+39 0577 232 697 (Phone)

Guido De Blasio

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

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