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

  • Ugo Panizza

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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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. International Monetary Fund, 1997. "Corruption and the Rate of Temptation; Do Low Wages in the Civil Service Cause Corruption?," IMF Working Papers 97/73, International Monetary Fund.
  2. Holmlund, B., 1991. "Wage Setting in Private and Public Sectors in a Model with Endogenous Government Behavior," Papers 1991i, Uppsala - Working Paper Series.
  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. James M. Poterba & Kim S. Rueben, 1998. "Fiscal Institutions and Public Sector Labor Markets," NBER Working Papers 6659, National Bureau of Economic Research, Inc.
  5. Ronald G. Ehrenberg & Joshua L. Schwarz, 1983. "Public Sector Labor Markets," NBER Working Papers 1179, National Bureau of Economic Research, Inc.
  6. Ballou, Dale, 1996. "Do Public Schools Hire the Best Applicants?," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 97-133, February.
  7. 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.
  8. 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.
  9. Richard A. Ippolito, 1987. "Why Federal Workers Don't Quit," Journal of Human Resources, University of Wisconsin Press, vol. 22(2), pages 281-299.
  10. 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.
  11. 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.
  12. 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.
  13. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  14. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
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