Relocating to Peripheral Cities: Development and Diversity From Relocating Government Jobs

ABSTRACT The local labor market effects of relocating central government jobs to cities in rural municipalities is investigated by considering two small‐scale interventions by the Danish government in the mid‐2000s. We leverage the Synthetic Control Method to compare the two affected municipalities to a synthetic counterfactual. Results show that relocating central government jobs: (1) increased government employment; (2) had no impact on private employment; and (3) had little impact on diversity even if (1) and (2) suggest otherwise. These results add new insights into the effects of small‐scale relocations relative to previous contributions.