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Fiscal Institutions and Public Sector Labor Markets

  • James M. Poterba
  • Kim S. Rueben

This paper investigates how state and local fiscal institutions affect the pattern of relative wages between state and local government employees and their private sector counterparts. It focuses on changes in relative wages during the 1979-1986 period. Empirical analysis of data from the Current Population Survey suggests that in places with limitations on local property taxes, and to a lesser extent state-level tax and expenditure caps, public sector wages grew more slowly than the wages paid to comparable workers in the private sector. The differential movement of public sector and private sector wages is particularly pronounced for college-educated women who work in the local public sector. Many of these employees are public school teachers. There is some evidence that the impact of fiscal limits is most pronounced in the years immediately following their adoption, and that the effect of these limits weakens over time.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6659.

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Date of creation: Jul 1998
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Handle: RePEc:nbr:nberwo:6659
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  1. William J. Moore & Robert J. Newman, 1991. "Government Wage Differentials in a Municipal Labor Market: The Case of Houston Metropolitan Transit Workers," ILR Review, Cornell University, ILR School, vol. 45(1), pages 145-153, October.
  2. 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.
  3. Burton Abrams & William Dougan, 1986. "The effects of constitutional restraints on governmental spending," Public Choice, Springer, vol. 49(2), pages 101-116, January.
  4. James M. Poterba, 1993. "State Responses to Fiscal Crisis: The Effects of Budgetary Institutionsand Politics," NBER Working Papers 4375, National Bureau of Economic Research, Inc.
  5. Lawrence Katz & Alan Krueger, 1991. "Changes in the Structure of Wages in the Public and Private Sectors," Working Papers 662, Princeton University, Department of Economics, Industrial Relations Section..
  6. Ehrenberg, Ronald G. & Schwarz, Joshua L., 1987. "Public-sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 22, pages 1219-1260 Elsevier.
  7. Robert Valletta & Richard B. Freeman, 1988. "Appendix B: The NBER Public Sector Collective Bargaining Law Data Set," NBER Chapters, in: When Public Sector Workers Unionize, pages 399-420 National Bureau of Economic Research, Inc.
  8. Joseph Gyourko & Joseph Tracy, 1989. "Public Sector Bargaining and the Local Budgetary Process," NBER Working Papers 2915, National Bureau of Economic Research, Inc.
  9. William J. Moore & Robert J. Newman, 1991. "Government wage differentials in a municipal labor market: The case of Houston Metropolitan Transit workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(1), pages 145-153, October.
  10. James M. Poterba & Kim S. Rueben, 1994. "The Distribution of Public Sector Wage Premia: New Evidence Using Quantile Regression Methods," NBER Working Papers 4734, National Bureau of Economic Research, Inc.
  11. Jeffrey S. Zax & Casey Ichniowski, 1990. "Bargaining laws and unionization in the local public sector," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(4), pages 447-462, April.
  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. Borjas, George J., 1986. "The earnings of state government employees in the United States," Journal of Urban Economics, Elsevier, vol. 19(2), pages 156-173, March.
  14. Poterba, James M & Rueben, Kim S, 1995. "The Effect of Property-Tax Limits on Wages and Employment in the Local Public Sector," American Economic Review, American Economic Association, vol. 85(2), pages 384-89, May.
  15. Ichniowski, Casey & Zax, Jeffrey S, 1991. "Right-to-Work Laws, Free Riders, and Unionization in the Local Public Sector," Journal of Labor Economics, University of Chicago Press, vol. 9(3), pages 255-75, July.
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