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Economic Effects of Municipal Government Institutions

  • Jeffrey S. Zax

This paper presents an analysis of employment and compensation practices under alternative institutions of municipal government which demonstrates that institutional variations have significant, important, and predictable effects upon outcomes in municipal labor markets. Municipal institutions in which a single official is responsible for office performance provide that official with incentives to emphasize efficiency in the production of municipal services. Institutions in which responsibility is shared provide individual officials with incentives to emphasize the allocation of municipal resources to their particular constituencies, among whom municipal employees may be prominent. Independently, city managers and mayors chosen through direct election reduce levels of employment and increase employee compensation. Managers offer compensation packages which emphasize nonwage components. In cities which have both institutions, competition between the two nullifies employment reductions and exacerbates compensation increases. Employment increases with the age of the manager's office. City council members chosen through at-large or nonpartisan elections increase levels of both employment and compensation. Compensation packages under both emphasize current components. With both reforms, employment and compensation increases are compounded.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1657.

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Date of creation: Jul 1985
Date of revision:
Publication status: published as "Reform City Councils and Municipal Employees," Public Choice, Vol. 64, pp. 167-177, 1990.
Handle: RePEc:nbr:nberwo:1657
Note: PE
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  1. F. Biesmans, 1977. "A Survey," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 48(1), pages 5-36, 01.
  2. Ronald G. Ehrenberg, 1973. "Municipal government structure, unionization, and the wages of fire fighters," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 27(1), pages 36-48, October.
  3. Ehrenberg, Ronald G. & Goldstein, Gerald S., 1975. "A model of public sector wage determination," Journal of Urban Economics, Elsevier, vol. 2(3), pages 223-245, July.
  4. Goldstein, Gerald S & Moses, Leon N, 1973. "A Survey of Urban Economics," Journal of Economic Literature, American Economic Association, vol. 11(2), pages 471-515, June.
  5. Bucovetsky, Sam, 1982. "Inequality in the Local Public Sector," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 128-45, February.
  6. Edwards, Linda N & Edwards, Franklin R, 1982. "Public Unions, Local Government Structure and the Compensation of Municipal Sanitation Workers," Economic Inquiry, Western Economic Association International, vol. 20(3), pages 405-25, July.
  7. Casey Ichniowski, 1980. "Economic effects of the firefighters' union," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 33(2), pages 198-211, January.
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