The Demand for State and Local Government Employees.

Excerpt] The primary purpose of this paper is to present empirical estimates of the wage elasticities of demand for different categories of state and local government employees. The employment demand equations that are estimated are derived from a utility maximization model of state and local government behavior. After presenting this model in the first section, we next briefly discuss the data used in the study. The structural system of demand equations is then estimated using pooled time-series and cross-section information, with annual individual state data as the units of observation. A number of alternative estimation methods are used in the analysis. Parameter estimates obtained from the model are utilized in the final section to simulate the disemployment effects of postulated future relative wage increases for individual classes of state and local government employees, as well as increases for all classes relative to the private sector.