Public Sector Employment and Local Multipliers

This paper assesses the spillover effects of public sector employment on private sector employment at the level of local labor markets in Germany between 2003 and 2007. I find that public sector employment has sizable crowding out effects on the private sector. The results suggest that 10 additional jobs in the public sector destroy 8 jobs in the private sector. I further show that public sector employment has an impact on the structure of the private sector. By raising wages in the private sector, public sector employment crowds out employment in the tradable sector. In contrast, employment in nontradable industries is largely unaffected. Creation Date: 2014-12-10