Redistribution Through Public Employment: The Case of Italy

Author: Mr. Stephan Danninger, Mr. Alberto Alesina, and Mr. Massimo V. Rostagno

This paper examines the regional distribution of public employment in Italy and documents two sets of facts. The first is the use of public employment as a subsidy from the North to the less wealthy South. We calculate that about half of the wage bill in the South of Italy can be identified as a subsidy, with both the size of public employment and wage levels used as a redistributive device. The second set of facts concerns the negative effects of subsidized public employment on individuals' attitudes toward job search, education, and "risk-taking" activities. We conclude that heavy reliance on public employment distorts incentives and discourages the development of market activities in the South.

Volume/Issue: Volume 1999 Issue 177

Publication date: December 1999

ISBN: 9781451858853

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Topics covered in this book

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Business and Economics , Labor , Economics- Macroeconomics , WP , private sector , dependent variable , wage premium , cost of living , Public Employment , Redistribution of Income , Public Policy and Economic Behavior of Agents , wage regression , work experience , wage bill , wage comparison , wage rate , entrepreneurial activity , public sector wage policy , bill of the South , benchmark wage , wage variation , price level , Public sector , Wages , Employment

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Summary

This paper examines the regional distribution of public employment in Italy and documents two sets of facts. The first is the use of public employment as a subsidy from the North to the less wealthy South. We calculate that about half of the wage bill in the South of Italy can be identified as a subsidy, with both the size of public employment and wage levels used as a redistributive device. The second set of facts concerns the negative effects of subsidized public employment on individuals’ attitudes toward job search, education, and “risk-taking” activities. We conclude that heavy reliance on public employment distorts incentives and discourages the development of market activities in the South.