NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Jan K. Brueckner, David Neumark

NBER Working Paper No. 16797
Issued in February 2011
NBER Program(s):   LS

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 in pdf format
   (263 K)

email paper

This paper is available as PDF (263 K) or via email.

This paper was revised on May 4, 2012

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16797

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. citation courtesy of

Users who downloaded this paper also downloaded these:
Barro and McCleary w9682 Religion and Economic Growth
Allcott w18373 Site Selection Bias in Program Evaluation
Levitt, List, Neckermann, and Sadoff w18165 The Behavioralist Goes to School: Leveraging Behavioral Economics to Improve Educational Performance
Duflo and Hanna w11880 Monitoring Works: Getting Teachers to Come to School
Gruber w11377 Religious Market Structure, Religious Participation, and Outcomes: Is Religion Good for You?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us