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Fiscal Institutions and Public Sector Labor Markets

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  • James M. Poterba
  • Kim S. Rueben

Abstract

This paper investigates how state and local fiscal institutions affect the pattern of relative wages between state and local government employees and their private sector counterparts. It focuses on changes in relative wages during the 1979-1986 period. Empirical analysis of data from the Current Population Survey suggests that in places with limitations on local property taxes, and to a lesser extent state-level tax and expenditure caps, public sector wages grew more slowly than the wages paid to comparable workers in the private sector. The differential movement of public sector and private sector wages is particularly pronounced for college-educated women who work in the local public sector. Many of these employees are public school teachers. There is some evidence that the impact of fiscal limits is most pronounced in the years immediately following their adoption, and that the effect of these limits weakens over time.

Suggested Citation

  • James M. Poterba & Kim S. Rueben, 1998. "Fiscal Institutions and Public Sector Labor Markets," NBER Working Papers 6659, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6659
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    References listed on IDEAS

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    Cited by:

    1. Fontaine, Idriss & Gálvez-Iniesta, Ismael & Gomes, Pedro & Vila-Martin, Diego, 2020. "Labour market flows: Accounting for the public sector," Labour Economics, Elsevier, vol. 62(C).
    2. Aaronson, Daniel, 1999. "The Effect of School Finance Reform on Population Heterogeneity," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(1), pages 5-29, March.
    3. John Gibson, 2009. "The public sector pay premium, compensating differentials and unions: propensity score matching evidence from Australia, Canada, Great Britain and the United States," Economics Bulletin, AccessEcon, vol. 29(3), pages 2325-2332.
    4. Panizza, Ugo, 1998. "Why Do Lazy People Make More Money?: The Strange Case of the Public Sector Wage Premium," IDB Publications (Working Papers) 1896, Inter-American Development Bank.
    5. Gabriela Miranda Moriconi & João S. Moura Neto & Nelson Marconi & Paulo Roberto Arvate, 2006. "Evidências Sobre O Comportamento Dos Governos Estaduais Na Determinação Dos Salários Dos Servidores Públicos No Brasil," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 135, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    6. Panizza, Ugo & Qiang, Christine Zhen-Wei, 2005. "Public-private wage differential and gender gap in Latin America: Spoiled bureaucrats and exploited women?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 34(6), pages 810-833, December.
    7. Ugo Panizza, 1999. "¿Por qué la gente floja gana más dinero? El extraño caso de la prima salarial del sector público," Research Department Publications 4177, Inter-American Development Bank, Research Department.
    8. Damian Hattingh & James Hodge & Sandrine Rospabé, 2003. "The Impact of Privatisation and Regulatory Reform on Wage Premia in State-Owned Enterprises in South Africa," Working Papers 03078, University of Cape Town, Development Policy Research Unit.
    9. Martin F. Grace & Richard D. Phillips, 2007. "The Allocation of Governmental Regulatory Authority: Federalism and the Case of Insurance Regulation," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(1), pages 207-238, March.

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    More about this item

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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