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Why Do Lazy People Make More Money? The Strange Case of the Public Sector Wage Premium

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  • Ugo Panizza

Abstract

Empirical work suggests the presence of a public sector wage premium, the reasons for which are investigated in this paper. The results demonstrate a higher premium paid to women and premium decreases concurrent with skills. Job security undermines the incentive to work hard and forces the public sector to pay higher wages. Thus, the public sector wage premium can be used as an indicator of inefficiency in the public sector.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4176.

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Date of creation: Aug 1999
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Handle: RePEc:idb:wpaper:4176

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  1. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
  2. Beggs, John J & Chapman, Bruce J, 1988. "Labor Turnover Bias in Estimating Wages," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 117-23, February.
  3. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  4. Ballou, Dale, 1996. "Do Public Schools Hire the Best Applicants?," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 97-133, February.
  5. Ehrenberg, Ronald G. & Schwarz, Joshua L., 1987. "Public-sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 22, pages 1219-1260 Elsevier.
  6. Richard A. Ippolito, 1987. "Why Federal Workers Don't Quit," Journal of Human Resources, University of Wisconsin Press, vol. 22(2), pages 281-299.
  7. James M. Poterba & Kim S. Rueben, 1998. "Fiscal Institutions and Public Sector Labor Markets," NBER Working Papers 6659, National Bureau of Economic Research, Inc.
  8. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  9. International Monetary Fund, 1997. "Corruption and the Rate of Temptation," IMF Working Papers 97/73, International Monetary Fund.
  10. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  11. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  12. Holmlund, Bertil, 1993. "Wage setting in private and public sectors in a model with endogenous government behavior," European Journal of Political Economy, Elsevier, vol. 9(2), pages 149-162, May.
  13. Psacharopoulos, George & Velez, Eduardo, 1992. "Schooling, Ability, and Earnings in Colombia, 1988," Economic Development and Cultural Change, University of Chicago Press, vol. 40(3), pages 629-43, April.
  14. Quinn, Joseph F, 1982. "Pension Wealth of Government and Private Sector Workers," American Economic Review, American Economic Association, vol. 72(2), pages 283-87, May.
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Cited by:
  1. Sebastian Saiegh & Marcela Montero & Anibal Pérez-Liñán & José Molinas, 2006. "Political Institutions, Policymaking Processes and Policy Outcomes in Paraguay, 1954-2003," Research Department Publications 3194, Inter-American Development Bank, Research Department.
  2. Sebastian Saiegh & Marcela Montero & Anibal Pérez-Liñán & José Molinas, 2006. "Instituciones políticas, procesos de diseño de políticas y resultados de políticas en Paraguay, 1954-2003," Research Department Publications 3195, Inter-American Development Bank, Research Department.

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