Public policy, local labor demand, and migration in Sweden, 1979-84

"A model of private local labor demand and interjurisdictional migration is presented and estimated using data from Swedish counties and municipalities for 1979-84. Our goal is to compare the effects on local labor markets of distinctive public-sector programs with those of traditional market variables. We find that local income taxes and tax-equalization grants have important effects on local labor markets; regional development policy measures and geographical-mobility subsidies do not. Thus, recent efforts scaling back some of these programs may not materially alter the regional economy's performance. Wages and other traditional market variables are also often found to influence significantly local labor markets."