Beaches, Sunshine, and Public-Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers
نویسندگان
چکیده
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. Beaches, Sunshine, and Public-Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers
منابع مشابه
Beaches , Sunshine , and Public Sector Pay : Theory and Evidence on Amenities and Rent Extraction by Government Workers † By Jan
Rent extraction by public sector workers may be limited by the ability of taxpayers to vote with their feet. But rent extraction may be higher in regions where high amenities mute the migration response. This paper develops a theoretical model that predicts such a link between public sector wage differentials and local amenities, and the predictions are tested by analyzing variation in these di...
متن کاملThe Size of Rent-seeking Activity in Iran's Foreign Trade Sector: An Application of the DSGE Approach
Rent-seeking in the trade sector is an outcome of restrictions imposed on tariffs and import quotas by a government. In an effort to acquire more privilege in foreign trade, labor allocates a part of its time-effort to rent-seeking activity, while cutting down on production work. Given the importance of rent-seeking activity due to restrictions imposed by the government in the Iranian economy, ...
متن کاملOn the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework
This paper studies the wasteful effect of bureaucracy on the economy by addressing the link between rent-seeking behavior of government bureaucrats and the public sector wage bill, which is taken to represent the rent component. In particular, public officials are modeled as individuals competing for a larger share of those public funds. The rent-seeking extraction technology in the government ...
متن کاملOptimal Government Spending and Taxation in Three-Sector Endogenous Growth Model-Case Iran
The recent literature on taxation and growth has stressed the optimality of a zero long-run taxation on all accumulative factors of production. For a given path of government spending, the optimal tax plan requires the government to build up a positive stock of public wealth in the short run in the long-run, government spending can be financed with the income accruing from the management of the...
متن کاملInvestigating the Role of "Privatization" Policy in the Reform Government In exacerbating the phenomenon of rent-seeking
The purpose of this study was to analyze the sociology of neoliberal policy during the Reformation. This research is a library, descriptive and documentary study and the period under review was the Reform Government (Seventh-Eighth Government). The findings of the study showed that during the reform period of the government's liberal economics approach, regardless of the consequences of its pol...
متن کامل