We study how institutional wage reforms in one sector spill over to other sectors by analyzing the public sector.

We leverage the Japanese policy reform that cut public-sector wages only in certain municipalities and the institutional setting in which only young workers are eligible for public-sector jobs. We find that a 1% public-sector wage cut reduces the private-sector wages of young workers by 0.3%, with larger spillovers in municipalities with a larger share of public workers.

It also reduces the young population by 0.4%, suggesting a welfare decline based on spatial equilibrium and a decrease in private-sector labor demand.

What are the local economic impacts of foreign troop deployments? To answer this question, we exploit variation from the historical large-scale U.S. troop withdrawal from Germany at the end of the Cold War for identification. Administrative data by the U.S. Department of Defense enables the precise quantification of the shock at the municipal level. We find negative effects on local labor markets, which transmit to municipal finances. Revenues go down, which municipalities counter by decreasing their expenditures while increasing property tax multipliers. Long time-series enable us to show in a dynamic DID setup that these negative effects persist until today and often even increase over time. Persistently higher intergovernmental transfers allocated to affected municipalities alleviate the negative economic impacts.

Aging populations and labor shortages in skill-intensive sectors have led many countries to pursue targeted policies to attract international talent. We study a migration reform in Sweden that offered international doctoral students from outside the EU an easier path to permanent residency. Implemented in 2014, the reform shortened the required period of residence from eight to four years, allowed these students to obtain permanent residency immediately after graduation, and granted their spouses a work permit during their doctoral studies. Using the European students as a comparison group in a difference-in-differences design, we find that the treated international students are 13.5 pp (23%) more likely to stay in Sweden three years after graduation. Higher settlement prospects also increase their language investments and marriage rates during the PhD. In addition, the reform raises both employment and language investments among the partners of the treated international students.

This paper analyzes the effects of relaxing the residence status of foreign temporary workers to have some children and to live continuously in the host country when they are retired. It is argued that immigration may have indirect negative effects, for example, imposing the additional burden of educating foreign worker children who require additional support to master the culture, customs, and language in the host country. The findings indicates that the relaxing policy can improve the welfare of the natives. This is because relaxing residence rights imposes an additional educational burden on native residents and leads to a shift of native workers from the consumption sector to the education sector, resulting in a relatively higher capital-labor ratio in the consumption sector.