Beaches, Sunshine, and Public-Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers
AbstractThe absence of a competitive market may enable public-sector workers to extract rents from taxpayers in the form of high pay, especially when public-sector workers are unionized. On the other hand, this rent extraction may be suppressed by the ability of taxpayers to vote with their feet, leaving jurisdictions where public-sector workers extract high rents. However, although migration of taxpayers may limit rent-seeking, public-sector workers may be able to extract higher rents in regions where high amenities mute the migration response. We develop a theoretical model that predicts such a link between public-sector wage differentials and local amenities, and we test the model’s predictions by analyzing variation in these wage differentials and amenities across states. We find that public-sector wage differentials are, in fact, larger in the presence of high amenities, with the effect stronger for unionized public-sector workers who are likely better able to exercise political power in extracting rents. The implication is that the mobility of taxpayers is insufficient to prevent rent-seeking behavior of public-sector workers from leading to higher public-sector pay.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16797.
Date of creation: Feb 2011
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Jan K. Brueckner & David Neumark, 2011. "Beaches, sunshine, and public-sector pay: theory and evidence on amenities and rent extraction by government workers," Working Papers 2011/42, Institut d'Economia de Barcelona (IEB).
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
- J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
- R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-LAB-2011-02-26 (Labour Economics)
- NEP-MIG-2011-02-26 (Economics of Human Migration)
- NEP-URE-2011-02-26 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph Gyourko & Joseph S. Tracy, 1986.
"The Importance of Local Fiscal Conditions in Analyzing Local Labor Markets,"
NBER Working Papers
2040, National Bureau of Economic Research, Inc.
- Gyourko, Joseph & Tracy, Joseph, 1989. "The Importance of Local Fiscal Conditions in Analyzing Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1208-31, October.
- Richard B. Freeman & Casey Ichniowski, 1988. "When Public Sector Workers Unionize," NBER Books, National Bureau of Economic Research, Inc, number free88-1.
- Rose, Heather & Sonstelie, Jon, 2010. "School board politics, school district size, and the bargaining power of teachers' unions," Journal of Urban Economics, Elsevier, vol. 67(3), pages 438-450, May.
- Edward L. Glaeser & Matthew E. Kahn, 2003.
"Sprawl and Urban Growth,"
NBER Working Papers
9733, National Bureau of Economic Research, Inc.
- Edward L. Glaeser & Matthew E. Kahn, 2003. "Sprawl and Urban Growth," Harvard Institute of Economic Research Working Papers 2004, Harvard - Institute of Economic Research.
- Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
- Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-71, September.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June Cita.
- Andrew G. Biggs, 2010. "The Market Value of Public-Sector Pension Deficits," Working Papers 31094, American Enterprise Institute.
- Rappaport, Jordan & Sachs, Jeffrey D, 2003. " The United States as a Coastal Nation," Journal of Economic Growth, Springer, vol. 8(1), pages 5-46, March.
- David Albouy, 2009. "What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values," NBER Working Papers 14981, National Bureau of Economic Research, Inc.
- Jeffrey Thompson & John Schmitt, 2010. "The Wage Penalty for State and Local Government Employees in New England," Working Papers wp233, Political Economy Research Institute, University of Massachusetts at Amherst.
- Richard B. Freeman & Robert Valletta, 1988. "The Effects of Public Sector Labor Laws on Labor Market Institutions and Outcomes," NBER Chapters, in: When Public Sector Workers Unionize, pages 81-106 National Bureau of Economic Research, Inc.
- Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
- Edwards, Jeremy & Keen, Michael, 1996.
"Tax competition and Leviathan,"
European Economic Review,
Elsevier, vol. 40(1), pages 113-134, January.
- Patricia E. Beeson & Randall W. Eberts, 1987.
"Identifying productivity and amenity effects in interurban wage differentials,"
8707, Federal Reserve Bank of Cleveland.
- Beeson, Patricia E & Eberts, Randall W, 1989. "Identifying Productivity and Amenity Effects in Interurban Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 443-52, August.
- Richard B. Freeman, 1986.
"Unionism Comes to the Public Sector,"
NBER Working Papers
1452, National Bureau of Economic Research, Inc.
- Gyourko, Joseph & Kahn, Matthew & Tracy, Joseph, 1999. "Quality of life and environmental comparisons," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 37, pages 1413-1454 Elsevier.
- George J. Borjas, 2002. "The Wage Structure and the Sorting of Workers into the Public Sector," NBER Working Papers 9313, National Bureau of Economic Research, Inc.
- Stuart A. Gabriel & Stuart S. Rosenthal, 2004. "Quality of the Business Environment Versus Quality of Life: Do Firms and Households Like the Same Cities?," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 438-444, February.
- Firth, Michael & Gong, Stephen X. & Shan, Liwei, 2013. "Cost of government and firm value," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 136-152.
- Vanessa LUTGEN & Bruno VAN DER LINDEN, 2013.
"Regional Equilibrium Unemployment Theory at the Age of the Internet,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
2013024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Lutgen, Vanessa & Van der Linden, Bruno, 2013. "Regional Equilibrium Unemployment Theory at the Age of the Internet," IZA Discussion Papers 7763, Institute for the Study of Labor (IZA).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.