Document type
Working paperPublication date
Publication license
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/116595
Beaches, sunshine, and public-sector pay: theory and evidence on amenities and rent extraction by government workers
Journal Title
Authors
Director/Tutor
Journal ISSN
Volume Title
Related resource
Abstract
The absence of a competitive market and the presence and strength of public-sector labor unions make it likely that public-sector pay reflects an element of rent extraction by government workers. In this paper, we test a specific hypothesis that connects such rent extraction to the level of local amenities. Specifically, although migration of taxpayers limits the extent of 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. The evidence reveals that public-sector wage differentials are, in fact, larger in the presence of high amenities, with the effect being stronger for unionized public-sector workers, who are likely better able to exercise political power in extracting rents.
Subject (English)
Citation
Citation
BRUECKNER, Jan K. and NEUMARK, David. Beaches, sunshine, and public-sector pay: theory and evidence on amenities and rent extraction by government workers. IEB Working Paper 2011/42. [consulted: 15 of August of 2026]. Available at: https://hdl.handle.net/2445/116595