Working Paper Series, Uppsala Center for Labor Studies, Department of Economics, Uppsala University
Stimulating Local Public Employment: Do General Grants Work?
(), Matz Dahlberg
() and Eva Mörk
Abstract: 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.
Keywords: Fiscal federalism; intergovernmental grants; public employment; regression kink design; instrumental variables; (follow links to similar papers)
JEL-Codes: H11; H70; J45; (follow links to similar papers)
38 pages, September 2, 2010
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