Brussels

This paper deals with the consequence of public employment on labor market perfor-mances in 17 OECD countries over the period 1960-2000. It is argued that public em-ployment had an important crowding out e¤ect on the private sector and increased the unemployment rate over this period. More precisely, empirical evidence suggests that the creation of one public job destroyed about 1.5 private job, sightly decreased participation to the labor market and eventually increased the number of unemployed workers by 0:3: Theoretical considerations and empirical evidence also suggest that the crowding out e¤ect of public jobs on private jobs is more important in countries in which public production is highly substitutable to private activities and in which the public sector provides high rents.