IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Beaches, Sunshine, and Public-Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers

Author Info

Listed author(s):
  • Jan K. Brueckner
  • David Neumark

Abstract

The 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 Info

If 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.

File URL: http://www.nber.org/papers/w16797.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16797.

as
in new window

Length:
Date of creation: Feb 2011
Publication status: published as Brueckner, Jan, and David Neumark, “Beaches, Sunshine, and Public-Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers,” forthcoming in American Economic Journal: Economic Policy.
Handle: RePEc:nbr:nberwo:16797
Note: LS
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

Keywords:

Other versions of this item:

Find related papers by JEL classification:
  • 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:

References listed on IDEAS
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.:

as
in new window


  1. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
  2. Henderson, J. Vernon, 1982. "Evaluating consumer amenities and interregional welfare differences," Journal of Urban Economics, Elsevier, vol. 11(1), pages 32-59, January.
  3. 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.
  4. Glaeser, Edward L. & Kahn, Matthew E., 2004. "Sprawl and urban growth," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 56, pages 2481-2527 Elsevier.
  5. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
  6. 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.
  7. 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.
  8. 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 1208-1231, October.
  9. 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 753-771, September.
  10. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(2), pages 269-304, June.
  11. Freeman, Richard B, 1986. "Unionism Comes to the Public Sector," Journal of Economic Literature, American Economic Association, vol. 24(1), pages 41-86, March.
  12. 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.
  13. Richard B. Freeman & Casey Ichniowski, 1988. "When Public Sector Workers Unionize," NBER Books, National Bureau of Economic Research, Inc, number free88-1, October.
  14. 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.
  15. 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 443-452, August.
  16. repec:aei:rpaper:31094 is not listed on IDEAS
  17. 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.
  18. Alan B. Krueger, 1988. "Are Public Sector Workers Paid More Than Their Alternative Wage? Evidence from Longitudinal Data and Job Queues," NBER Chapters,in: When Public Sector Workers Unionize, pages 217-242 National Bureau of Economic Research, Inc.
  19. 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.
  20. Gyourko, Joseph & Tracy, Joseph, 1989. "Local public sector rent-seeking and its impact on local land values," Regional Science and Urban Economics, Elsevier, vol. 19(3), pages 493-516, August.
  21. Gramlich, Edward M, 1976. "The New York City Fiscal Crisis: What Happened and What Is to Be Done?," American Economic Review, American Economic Association, vol. 66(2), pages 415-429, May.
  22. 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.
  23. 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.
  24. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
Full references (including those not matched with items on IDEAS)

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Two Photos Explain Why Coastal California Continues to Be #1
    by Matthew Kahn in Environmental and Urban Economics on 2014-11-23 19:50:00
  2. In Praise of David Neumark
    by Adam Ozimek in Modeled Behavior on 2015-07-30 00:07:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as
in new window


Cited by:

  1. Mirco Tonin & Michael Vlassopoulos, 2015. "Are public sector workers different? Cross-European evidence from elderly workers and retirees," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-21, December.
  2. Lutgen, Vanessa & Van der Linden, Bruno, 2015. "Regional equilibrium unemployment theory at the age of the Internet," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 50-67.
  3. Kahn, Matthew E. & Walsh, Randall, 2015. "Cities and the Environment," Handbook of Regional and Urban Economics, Elsevier.
  4. Rickman, Dan S. & Wang, Hongbo & Winters, John V., 2015. "Adjusted State Teacher Salaries and the Decision to Teach," IZA Discussion Papers 8984, Institute for the Study of Labor (IZA).
  5. Brülhart, Marius, 2014. "Agglomeration economies, taxable rents, and government capture: evidence from a place-based policy," Papers 835, World Trade Institute.
  6. Peter McHenry & Melissa McInerney, 2014. "The Importance of Cost of Living and Education in Estimates of the Conditional Wage Gap Between Black and White Women," Journal of Human Resources, University of Wisconsin Press, vol. 49(3), pages 695-722.
  7. Alexandre Mas, 2014. "Does Transparency Lead to Pay Compression?," NBER Working Papers 20558, National Bureau of Economic Research, Inc.
  8. Rebecca Diamond, 2017. "Housing Supply Elasticity and Rent Extraction by State and Local Governments," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 74-111, February.
  9. 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.
  10. Andrew Chamberlain, 2015. "Are State Workers Overpaid? Survey Evidence from Liquor Privatization in Washington State," Journal of Labor Research, Springer, vol. 36(4), pages 347-388, December.
  11. Brunner, Eric J. & Johnson, Erik B., 2016. "Intergenerational conflict and the political economy of higher education funding," Journal of Urban Economics, Elsevier, vol. 91(C), pages 73-87.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16797. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.