Why Do Lazy People Make More Money? The Strange Case of the Public Sector Wage Premium

Inter-American Development Bank Working Paper No. 403

23 Pages Posted: 28 Sep 1999

See all articles by Ugo Panizza

Ugo Panizza

Graduate Institute of International and Development Studies (IHEID) - Department of Economics; CEPR

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Date Written: August 1999

Abstract

Empirical work suggests the presence of a public sector wage premium. This paper investigates the theoretical reasons for the presence of a such a premium. The results of the paper are consistent with the higher premium paid to women and with the fact that the premium decreases with skills. The key insight of the paper is that job security undermines the incentive to work hard and forces the public sector to pay higher wages. One implication of the paper is that the public sector wage premium can be used as an indicator of inefficiency in the public sector.

JEL Classification: H50, J45

Suggested Citation

Panizza, Ugo, Why Do Lazy People Make More Money? The Strange Case of the Public Sector Wage Premium (August 1999). Inter-American Development Bank Working Paper No. 403, Available at SSRN: https://ssrn.com/abstract=174710 or http://dx.doi.org/10.2139/ssrn.174710

Ugo Panizza (Contact Author)

Graduate Institute of International and Development Studies (IHEID) - Department of Economics ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland

CEPR

London
United Kingdom

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