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The Impact of Public Employment: Evidence from Bonn

By Sascha Becker, Stephan Heblich and Daniel Sturm

Abstract

This paper evaluates the impact of relocations of public employment across cities on private sector activity. To identify the effect of changes in public employment on the private sector, we exploit the relocation of the German Federal Government from Berlin to Bonn in the wake of the Second Word War as a source of exogenous variation. In line with the predictions of a standard economic geography model we ...nd that an increase in public employment puts downward pressure on private sector employment. We provide evidence that this negative impact is driven by changes in wages and rents which are consistent with the mechanisms of the model

Topics: ddc:330, Public Employment, Crowding Out, Economic Geography, German Division
Publisher: Louvain-la-Neuve: European Regional Science Association (ERSA)
Year: 2013
OAI identifier: oai:econstor.eu:10419/124024
Provided by: EconStor

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