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

Andrew Chamberlain

Journal of Labor Research, 2015, vol. 36, issue 4, 347-388

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

Keywords: Public-sector labor markets; Union rents; Displaced workers; Privatization; J45; J51; L33; J63; J68 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s12122-015-9212-1

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