Labor-market risk drives public sector size in Swedish municipalities.
The size of the public sector in a region is influenced by how risky the private job market is. In places where private jobs are uncertain, the public sector tends to be larger. A study in Swedish municipalities found that the riskiness of the labor market has a big impact on public sector employment. However, the effect on overall spending and taxes is not as strong. This means that how risky private jobs are can affect how many people work in the public sector in a region.