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Does Government Employment "Crowd-Out" Private Employment? Evidence from Sweden

Jim Malley and Thomas Moutos
The Scandinavian Journal of Economics
Vol. 98, No. 2 (Jun., 1996), pp. 289-302
Published by: Wiley on behalf of The Scandinavian Journal of Economics
DOI: 10.2307/3440860
Stable URL: http://www.jstor.org/stable/3440860
Page Count: 14
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Does Government Employment "Crowd-Out" Private Employment? Evidence from Sweden
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Abstract

It is argued that increases in government spending which take the form of increases in government employment can have a negative impact on private sector employment by increasing real wages. In fact, once the supply reducing effects of higher taxes needed to finance the increase in government employment are taken into account, the fall in private employment can be so large as to cause decreases in aggregate employment. We demonstrate this with quarterly Swedish data for the period 1964-90.

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