Public employment in Russia: Do social security or economic factors matter?

Abstract

The paper contains analysis of Russian public employment and its segments: public administration, education and health care, in 2000-2014. The per capita number of public sector employees in Russia substantially exceeds that of countries with comparable GDP per capita. The results of the region-level analysis do not support the hypothesis that the public sector acts as an "employer of last resort", smoothing the effect of the labor market shocks. At the same time the region-level analysis reveals a positive relation of fiscal transfers from other budgets, which in case of public administration underpins the "ratchet effect" - an increase in case of additional revenues and no effect in case of the decrease of the inflow. In all segments there is evidence of the "economy of scale": the negative relation between the per capita employment and regional population numbers. There is also some support of the hypothesis that public employment depends on the demand for public goods: we have found positive relation of employment in public administration with urbanization and of employment in education with the share of young population.