The Hidden Costs of Government Shutdowns
53 Pages Posted: 14 Nov 2021 Last revised: 29 Nov 2021
Date Written: November 29, 2021
Government bureaus with higher percentages of furloughed employees during the 2013 government shutdown experienced more employee turnover for two years after the shutdown. This lost workforce was not replenished after employee exits stabilize, at least not within four years after the shutdown. We find that younger employees are more likely to quit, while more experienced employees who receive higher pay are more likely to retire. Affected bureaus react by outsourcing more of their activities. Moreover, their accounting processing and patent creation capabilities decrease, which is consistent with the shutdown eliminating valuable human capital and decreasing government productivity.
Keywords: government shutdowns, furloughs, government productivity
JEL Classification: J21, J24, J45, J63
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