A model of public sector wage determination

The paper presents an empirical model of wage determination in the public sector that leads to the specification of a system of interrelated wage equations for municipal employees, which allows for occupational and geographic interdependence of wages. The model also considers the influence of public employee unions, municipal government form, and monopsony power of local governments on the wages of municipal employees. Several variants of the derived system of equations are estimated based upon 1967 cross-section data for 478 cities, and the policy implications of the results are discussed.