SOEP Brown Bag Seminar

As regional economic disparities within countries grow, governments are increasingly experimenting with public employment reallocation as a place-based policy. In this paper, I estimate the causal effect on local labor markets of a German policy that relocated about 3,000 public sector jobs to lagging regions. Using novel data on 60 agency relocations from 2015–2025, I estimate employment and population effects for receiving and sending municipalities and use the results to discipline a quantitative spatial model that simulates spatial reallocation and welfare effects. I find that relocations increased private employment shares by up to 2.3% (1.3 percentage points), reduced unemployment by up to 11.9% (0.33 percentage points), and raised population by 1.6%, implying a public-to-private jobs multiplier of 1.08 in receiving locations. Sending locations also see an increase in private sector employment that is rationalized in the model by within-private-sector spillovers exceeding public-to-private sector spillovers.