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Does Transparency Lead to Pay Compression?

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  • Alexandre Mas

Abstract

This paper asks whether pay disclosure in the public sector changes wage setting at the top of the distribution. I examine a 2010 California mandate that required municipal salaries to be posted online. Among top managers, disclosure led to approximately 7 percent average compensation declines, and a 75 percent increase in their quit rate, relative to managers in cities that had already disclosed salaries. The wage cuts were largely nominal. Wage cuts were larger in cities with higher initial compensation, but not in cities where compensation was initially out of line with (measured) fundamentals. The response is more consistent with public aversion to high compensation than the effects of increased accountability.

Suggested Citation

  • Alexandre Mas, 2017. "Does Transparency Lead to Pay Compression?," Journal of Political Economy, University of Chicago Press, vol. 125(5), pages 1683-1721.
  • Handle: RePEc:ucp:jpolec:doi:10.1086/693137
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    File URL: http://dx.doi.org/10.1086/693137
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    Cited by:

    1. Dube, Arindrajit & Giuliano, Laura & Leonard, Jonathan, 2015. "Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior," IZA Discussion Papers 9149, Institute for the Study of Labor (IZA).
    2. Yamamura, Eiji & Ishida, Ryo, 2017. "Analysis of the implementation of information disclosure ordinances in Japan: the effect on the income of mayors and chief executives in local governments," MPRA Paper 83337, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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