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This paper discusses the interaction between the local government and private sector in an institutional context consistent with a centralized fiscal system. Under decentralized wage setting in the private sector, the effects of shocks in the two sectors depend on whether private and local public goods are substitutes or complements in the union utility function. Higher wage markup in the local government sector unambiguously decreases government output while the effect on private sector employment is ambiguous. Higher income taxes have ambiguous effects on local government output. Shocks in the private sector can be reinforced through feedback effects from the local government sector. A shift from decentralized to centralized wage setting in the private sector reduces wages and increases employment in both sectors.

Do individuals finishing compulsory school in economic downturns end up with higher skills in adulthood than comparable individuals that finish compulsory school in economic upturns? This article answers this question by exploring data on country unemployment rates combined with individual data on educational attainment and adult skills in numeracy and literacy from the Program for the International Assessment of Adult Competencies. We find that completed education is countercyclical, and the same pattern is found for adult skills in numeracy and literacy. The results are fairly robust across different model specifications including fixed country and cohort effects and country-specific cohort trends. The results indicate that the labor market conditions at the time when young people make crucial educational decisions have long-lasting effect on skills and potential earnings in adulthood.

We study the effects of giving poor females the right to vote in local elections on education spending and teacher-student ratios. To estimate causal effects, we exploit a national voting reform in Norwegian local elections that removed socioeconomic restrictions on female voting rights. The identification strategy exploits heterogeneous changes in the share of females in the voting franchise from the pre-reform (1907) to the post-reform election (1910) across local governments. While US studies find positive effects on government spending of the introduction of female suffrage, we find no systematic effects on education spending, despite a significant increase in female turnout. ; publishedVersion

Hanushek et al (2015, 'Returns to Skills Around the World: Evidence from PIAAC', European Economic Review 73: 103) find a weak wage–skill relationship in countries with limited skill reward possibilities due to high union density, strict employment protection, and large public sector. If these factors also restrict employment possibilities and the incentives to join the labor market, a possible mirror image of the weak wage–skill relationship is a steeper employment–skill gradient. We use PIAAC data to estimate the employment–skill association, and the results for the whole sample of individuals give some indication that the employment–skill gradient is steeper in countries with strict employment rules and centralized bargaining. Our results for subgroups show imprecisely estimated employment–skill gradients for immigrants. For individuals with poor health conditions and low formal education, the estimated gradient is somewhat higher than in the whole sample in countries with high bargaining coverage, a large public sector, and centralized collective bargaining systems.

Local government mergers are an important policy issue in many countries, yet empirical evidence of the effects of merging and of local government size on the production and quality of local public services is scarce. We use the spatial and temporal variation in forced mergers between cities and their surrounding local governments in Norway to provide quasi-experimental evidence of the effect on long-run student outcomes. We find that the mergers increase students' educational attainment by about 0.1 years and income by about 4%, suggesting that mergers improve long-run student outcomes through increased school productivity. ; publishedVersion

Local government mergers are an important policy issue in many countries, yet empirical evidence of the effects of merging and of local government size on the production and quality of local public services is scarce. We use the spatial and temporal variation in forced mergers between cities and their surrounding local governments in Norway to provide quasi-experimental evidence of the effect on long-run student outcomes. We find that the mergers increase students' educational attainment by about 0.1 years and income by about 4%, suggesting that mergers improve long-run student outcomes through increased school productivity. ; publishedVersion