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Journal of Labor Research

, Volume 36, Issue 4, pp 347–388 | Cite as

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

  • Andrew Chamberlain
Article

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.

Keywords

Public-sector labor markets Union rents Displaced workers Privatization 

JEL Classifications

J45 J51 L33 J63 J68 

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of CaliforniaSan DiegoUSA
  2. 2.Glassdoor, Inc.Mill ValleyUSA

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