The local impact of increased numbers of state employees on start-ups in Norway

This study assesses the impact of concentrations of state employees on local growth and development. Local multiplier effect theory suggests that the increased local demand of state employees, especially highly skilled employees, would stimulate the local supply of goods and services and, hence, local development. However, other theories of regional development have shown that factors such as having a university or city size might also explain why some municipalities with a high percentage of state employees grow faster than others.

By applying a multilevel panel data analysis of 417 Norwegian municipalities from 2006 to 2014, this study finds no effect of the percentage of state employees on local development, measured in terms of the relative number of start-up firms or population growth. While there is a small positive effect of state employees in the bivariate model, there is no significant effect of state employees on local development when controlling for relevant factors like municipality size or universities. This finding suggests that the relocation of state employees is a rather limited tool for stimulating local and regional growth; if applied, policymakers should consider how the relocation could stimulate place-sensitive development in individual municipalities.

Keywords: State employees, Start-ups, Development, Norway, Universities

This is an AM (Accepted Manuscript)-version of the The local impact of increased numbers of state employees on start-ups in Norway (AM).

Please cite the published version.

Jonas Stein (2019) The local impact of increased numbers of state employees on start-ups in Norway, Norsk Geografisk Tidsskrift – Norwegian Journal of Geography, DOI: 10.1080/00291951.2019.1644369

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