Efficiency wages, wage comparison, and public sector budgeting

Kåre Johansen () and Bjarne Strøm

Economics of Governance, 2003, vol. 4, issue 3, 215-228

Abstract: We develop a government decision model where efficiency wage mechanisms affect the allocation of resources between different public services. We show how the introduction of interdepartment wage relativities modifies the standard Solow wage setting conditions. We compare the outcome under centralised and decentralised wage setting, and show that a decentralised wage setting system creates a distortion. Finally, we discuss the possibility of elimination this distortion using alternative financing systems. Copyright Springer-Verlag Berlin/Heidelberg 2003

Keywords: Efficiency wages; wage comparison; public sector budgeting; grants (search for similar items in EconPapers)
Date: 2003
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DOI: 10.1007/s10101-003-0063-5

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