Relocation of public sector workers: Evaluating a place-based policy

This paper investigates the local labor market impact of a UK relocation initiative the 2004 Lyons Review. The review resulted in the dispersal of about 25,000 civil service jobs out of London and the South East towards other UK destinations. This study aims to detect whether the inflow of public sector jobs crowded out private sector activity or stimulated the local provision of jobs in the private sector. Focusing on short-term effects, I find that the relocation initiative raised private sector employment in receiving areas and changed the sectoral distribution of local employment towards services. I also find evidence of displacement, i.e. a tendency for private businesses to locate closer to a relocation site, moving out of areas at 1-2 km and 2-3 km distances into areas at 0-1 km distance. These agglomeration effects appear highly localized: the largest policy impact is found in areas that received the relocated jobs with spillover effects reducing sharply over distance.