Title: Beaches, sunshine, and public-sector pay
Description: "The absence of a competitive market and the presence and strength of public-sector labor unions make it likely that public-sector pay reflects an element of rent extraction by government workers.  In this paper, we test a specific hypothesis that connects such rent extraction to the level of local amenities.  Specifically, although migration of taxpayers limits the extent of rent-seeking, public-sector workers may be able to extract higher rents in regions where high amenities mute the migration response.  We develop a theoretical model that predicts such a link between public-sector wage differentials and local amenities, and we test the model's predictions by analyzing variation in these wage differentials and amenities across states.  The evidence reveals that public-sector wage differentials are, in fact, larger in the presence of high amenities, with the effect being stronger for unionized public-sector workers, who are likely better able to exercise political power in extracting rents"--National Bureau of Economic Research web site.