TY  - JOUR
AU  - Brueckner,Jan K.
AU  - Neumark,David
TI  - Beaches, Sunshine, and Public-Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16797
PY  - 2011
Y2  - February 2011
DO  - 10.3386/w16797
UR  - http://www.nber.org/papers/w16797
L1  - http://www.nber.org/papers/w16797.pdf
N1  - Author contact info:
Jan Brueckner
Department of Economics
UCI
3151 Social Science Plaza
Irvine, CA  92697
E-Mail: jkbrueck@uci.edu

David Neumark
Department of Economics
University of California, Irvine
3151 Social Science Plaza
Irvine, CA  92697
Tel: 949-824-8496
Fax: 949/824-2182
E-Mail: dneumark@uci.edu
AB  - 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.
ER  -