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Beaches, Sunshine, and Public Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers

Year: 2014

Type: article

Abstract: Rent extraction by public sector workers may be limited by the ability of taxpayers to vote with their feet. But rent extraction may be higher in regions where high amenities mute the migration response. This paper develops a theoretical model that predicts such a link between public sector wage differentials and local amenities, and the predictions are tested by analyzing variation in these differentials and amenities across states. Public sector wage differentials are, in fact, larger in the presence of high amenities, with the effect stronger for unionized public sector workers, whose political power may allow greater scope for rent extraction. (JEL H75, H76, J31, J32, J45, J51)

Source: American Economic Journal Economic Policy

DOI: 10.1257/pol.6.2.198

Authors: Jan K. Brueckner, David Neumark

Institution: University of California, Irvine

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Reduced inequalities, Decent work and economic growth, Peace, justice, and strong institutions

Open Access status: bronze

OpenAlex ID: W2005646311

FWCI: 77.01

Cites: 40

Cited by: 162

Related to: 10