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Are State Workers Overpaid? Survey Evidence from Liquor Privatization in Washington State

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  • Andrew Chamberlain

Abstract

Industry privatizations that result in exogenous job displacement of public employees can be exploited to estimate public sector wage rents. I report the findings of an original survey I administered to examine how wages of displaced government workers were affected by a 2012 privatization of liquor retailing in Washington State. Based on a panel difference-in-differences estimator I find that privatization reduced wages by $2.51 per hour or 17 percent compared to a counterfactual group of nearly identical non-displaced workers, with larger effects for women. I decompose wage losses into three rents identified in the literature: public sector rents, union premiums, and industry-specific human capital. Public sector wage premiums separately account for 85 to 90 percent of overall wage losses, while union premiums and industry-specific human capital account for just 10 to 15 percent. The results are consistent with a roughly 16 percent public sector wage premium. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Andrew Chamberlain, 2015. "Are State Workers Overpaid? Survey Evidence from Liquor Privatization in Washington State," Journal of Labor Research, Springer, vol. 36(4), pages 347-388, December.
    • Handle: RePEc:spr:jlabre:v:36:y:2015:i:4:p:347-388
    DOI: 10.1007/s12122-015-9212-1
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    More about this item

    Keywords

    Public-sector labor markets; Union rents; Displaced workers; Privatization; J45; J51; L33; J63; J68;
    All these keywords.

    JEL classification:

    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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