THE ESTIMATION OF LOCAL EMPLOYMENT MULTIPLIERS FOR PORTUGAL

This Dissertation analyses the relationship between employment in the “Tradable” and “Non-Tradable” sectors for Portugal. More specifically, the size of the employment multiplier effect between them. To do so, we have conducted a study at two different regional levels: municipalities and NUTS III for the Portuguese economy. The aim is to measure the size of the employment multiplier of the “Tradable” sector onto the “Non-Tradable” sector through multiple econometric methods. We used Pooled OLS estimations, Panel Data estimations with fixed and random effects and Instrumental Variable Regressions. The results from the estimations provide evidence of a statistically significant employment multiplier ranging between 0.4 and 0.9 extra jobs in the “Non-Tradable” sector for each new job in the “Tradable” sector in the average NUTS III region and between 0.32 and 0.77 in municipalities. The results are presented as an interval because the values differ with different econometric methods used. The main conclusion from this Dissertation is that we were able to find a positive and statistically significant employment multiplier which is coherent with previous literature in this topic.