Public employment and the double role of bureaucrats

Bureaucrats in the government sector have a double role since they are both suppliers and demanders of public employment; they are publicly employed (supply labor) and they have an important say in deciding the size of the municipal employment (demand labor). In this paper we present and estimate a theoretical model that focuses on this double role of bureaucrats. The predictions from the theoretical model are supported by our empirical results: The estimates based on data from Swedish municipalities 1990–2002, show that wages have smaller effects on the demand for bureaucrats than on the demand for other types of public employees. Actually wages have no significant effect on the number of bureaucrats the municipality employs.Public employment; bureaucrats

On Mandatory Activation of Welfare Recipients

This paper investigates whether mandatory activation programs for welfare recipients have effects on welfare participation, employment and disposable income. In contrast to earlier studies, we are able to capture both entry and exit effects. The empirical analysis makes use of a Swedish welfare reform in which the city districts in Stockholm gradually implemented mandatory activation programs for individuals on welfare. Overall, we find that mandatory activation of welfare recipients reduces overall welfare participation and increases employment. We also find that mandatory activation programs appear to work best for young people and for people born in non-Western countries.welfare reform, mandatory activation programs, welfare participation, employment, difference-in-differences

Childcare Costs and the Demand for Children – Evidence from a Nationwide Reform

We study the effect of child care costs on the fertility behavior of Swedish women and find that reductions in child care charges influence fertility decisions, even when costs are initially highly subsidized. Exploiting the exogenous variation in child care costs caused by a Swedish child care reform, we are able to identify the causal effect of child care costs on fertility in a context in which child care enrolment is almost universal and the labor force participation of mothers is very high. A typical household planning another child experienced a reduction in expected future child care costs of SEK 106,000 (USD 17,800). This reduction resulted in 3–5 more child births per 1,000 women during an 18 month period, which corresponds to a 4–6 per cent increase in the birth rate.Child Care; Cost of children; Fertility; Quasi-experiment; Difference-indifferences

Do Politicians’ Preferences Matter for Voters’ Voting Decisions?

Using unique survey data that allows us to observe both voters’ and politicians’ preferences for local public spending as well as voting decisions, this paper tests if voters typically support parties in which the politicians’ preferences are closest to their own. Doing so would be rational for the voters to do if politicians’ preferences matter for policy outcomes, as is the case in e.g. the citizen-candidate model. It is found that this is indeed the case. This finding is in line with theoretical models such as the citizen-candidate model arguing that politicians cannot credibly commit to election platforms that differ from their true policy preferences.Elections; voting; preferences for public services

Is there an election cycle in public employment? Separating time effects from election year effects

Do governments increase public employment in election years? This paper answers this question by using data from Sweden and Finland, two countries that are similar in many respects but in which local elections are held at different points in time. These facts make it possible for us to separate an election effect from other time effects. Our results indicate that there is a statistically significant election year effect in local public employment, a production factor that is highly visible in the welfare services provided by the local governments in the Scandinavian countries. The effect also seems to be economically significant; the municipalities employ 0.6 more full-time employees per 1,000 capita in election years than in other years (which correspond to an increase by approximately 1 percent).election cycle, public employment, exogenous elections

Effects of decentralization on school resources

Sweden has undertaken major national reforms of its schooling sector which, consequently, has been classified as one of the most decentralized ones in the OECD. This paper investigates the extent to which local tax base, grants, preferences and structural characteristics affected local schooling resources as decentralization took place. We use municipal data for the period 1989–95 which covers the key reform years without confounding decentralization with institutional changes after 1995. The main arguments against decentralization are not supported by our findings. First, school spending as well as teacher density is found to be more equally distributed across municipalities following decentralization. Second, local tax capacity does not influence schooling resources more in the decentralized regime than in the centralized regime. We also find that the form in which grants are distributed matter: Targeted grants have a significant positive impact on resources while general grants have not.School resources; school finance reform; decentralization

Using a discontinuous grant rule to identify the effect of grants on local taxes and spending

When investigating the effects of federal grants on the behavior of lower-level governments, it is hard to defend the handling of grants as an exogenous factor affecting local governments; federal governments often set grants based on characteristics and performance of local governments. In this paper we make use of a discontinuity in the Swedish grant system in order to estimate the causal effects of general intergovernmental grants on local spending and local tax rates. The formula for the distribution of funds is used as an exclusion restriction in an IV-estimation. We find evidence of crowding-in, where federal grants are shifted to more local spending, but not to reduced local tax rates. Our results thus confirm a flypaper effect for Sweden.Fiscal federalism, grants, flypaper effect, local taxation, local government expenditure, causal effects

Using a Discontinuous Grant to Identify the Effect of Grants on Local Taxes and Spending

When investigating the effects of federal grants on the behavior of lower-level governments, it is hard to defend the handling of grants as an exogenous factor affecting local governments; federal governments often set grants based on characteristics and performance of local governments. In this paper we make use of a discontinuity in the Swedish grant system in order to estimate the causal effects of general intergovernmental grants on local spending and local tax rates. The formula for the distribution of funds is used as an exclusion restriction in an IV-estimation. We find evidence of crowding-in, where federal grants are shifted to more local spending, but not to reduced local tax rates. Our results thus confirm a flypaper effect for Sweden.fiscal federalism, grants, flypaper effect, local taxation, local government expenditure, causal effects

Stimulating Local Public Employment: Do General Grants Work?

The effectiveness of public funds in increasing public employment has long been a question on public and labor economists’ minds. In most federal countries local governments employ large fractions of the working population, meaning that a tool for stimulating local public employment can substantially affect the overall unemployment level. This paper asks whether general grants to lower-level governments have the potential of doing so. Applying the regression kink design to the Swedish grant system, we are able to estimate causal effects of intergovernmental grants on personnel in different local government sectors. Our robust conclusion is that personnel in the central administration increased substantially after a marginal increase in grants, but that such an effect was lacking both for total personnel and personnel in child care, schools, elderly care, social welfare and in technical services. We suggest several potential reasons for these results, such as heterogeneous treatment effects and bureaucratic influence in the local decision-making process.Fiscal federalism; intergovernmental grants; public employment; regression kink design; instrumental variables

Is there an election cycle in public employment? Separating time effects from election year effects

Do governments increase public employment in election years? This paper answers this question by using data from Sweden and Finland, two countries that are similar in many respects but in which local elections are held at different points in time. These facts make it possible for us to separate an election effect from other time effects. Our results indicate that there is a statistically significant election year effect in local public employment, a production factor that is highly visible in the welfare services provided by the local governments in the Scandinavian countries. The effect also seems to be economically significant; the municipalities employ 0.6 more full-time employees per 1,000 capita in election years than in other years (which correspond to an increase by approximately 1 percent)