Department of Economics, City, University of London
Abstract
We use the move of the seat of the German government from Bonn to Berlin in 1999 to test competing views about the impact of public employment on private sector activity in a local labor market. Using employment data from a 50% sample of establishments across 190 Berlin postcodes, we apply a treatment intensity approach which takes the possibility of spillovers into account. Results indicate that the arrival of 100 public sector jobs into an area generates 55 additional jobs in the private sector. There is evidence of spillovers: relocations up to a distance of 1km from a postcode boundary increases employment in the private sector by 36 jobs. These effects are coming through job gains in the service sector, while manufacturing employment is not influenced by the relocation
