Redistribution Through Public Employment: The Case of Italy

Abstract

This paper examines the regional distribution of public employment in Italy. It documents two facts. The first is that public employment is used as a subsidy from the North to the less wealthy South. About half of the wage bill in the South of Italy can be identified as a subsidy. Both the size of public employment and the level of wages are used as a redistributive device. The second fact concerns the effects of subsidized public employment on individuals' attitudes toward job search, education, "risk taking" activities, and so on. Public employment discourages the development of market activities in the South. Copyright 2002, International Monetary Fund