Fiscal Institutions and Public Sector Labor Markets

39 Pages Posted: 4 Sep 1998 Last revised: 10 Oct 2010

See all articles by James M. Poterba

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Kim S. Rueben

Tax Policy Center

Date Written: July 1998

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

Poterba, James M. and Rueben, Kim S., Fiscal Institutions and Public Sector Labor Markets (July 1998). NBER Working Paper No. w6659. Available at SSRN: https://ssrn.com/abstract=122633

James M. Poterba (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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617-253-6673 (Phone)
617-253-1330 (Fax)

Kim S. Rueben

Tax Policy Center ( email )

Urban Institute
2100 M Street NW
Washington, DC 20009
United States

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