Journal of Political Institutions and Political Economy > Vol 2 > Issue 2

Jurisdictional Competition, Market Power, and the Compensation of Public Employees

Vladimir Kogan, Department of Political Science, Ohio State University,
Suggested Citation
Vladimir Kogan (2021), "Jurisdictional Competition, Market Power, and the Compensation of Public Employees", Journal of Political Institutions and Political Economy: Vol. 2: No. 2, pp 281-302.

Publication Date: 10 Jun 2021
© 2021 V. Kogan
Panel data,  Government programs and public policy,  Industrial organization,  Labor economics,  Public economics,  Federalism,  Government,  Interest groups,  Public policy,  Urban politics
Jurisdictional competitionTiebout choicegovernment efficiencymonopsonypublic employee compensationK-12 educationpublic employment


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In this article:
Empirical Strategy 
Inefficiency or Higher Quality? 


Jurisdictional competition can encourage government efficiency but may also lead to collective action problems (e.g., bidding wars) that increase taxpayer costs. The net effect is particularly consequential for the cost of public employee compensation, which accounts for more than half of local government spending. Examining two decades of U.S. teacher salary data and changes in local teacher labor markets over time, I show that jurisdictional competition is associated with lower teacher salaries. One mechanism consistent with the evidence is that competitive markets help encourage lower spending through "yardstick competition." The findings may help explain why government consolidations designed to promote economies of scale and efforts to take advantage of coordinated buying power do not always produce the expected savings.



Journal of Political Institutions and Political Economy, Volume 2, Issue 2 Special Issue - Local Political Economy
See the other articles that are part of this special issue.