DP12105 Measuring Rents from Public Employment: Regression discontinuity evidence from Kenya

Author(s): Nicholas Barton, Tessa Bold, Justin Sandefur
Publication Date: June 2017
Keyword(s): civil servants, motivation, public sector wages, wage gap
JEL(s): H1, J3, O1
Programme Areas: Labour Economics, Public Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12105

Public employees in many developing economies earn much higher wages than similar private-sector workers. These wage premia may reflect an efficient return to effort or unobserved skills, or an inefficient rent causing labor misallocation. To distinguish these explanations, we exploit the Kenyan government's algorithm for hiring eighteen-thousand new teachers in 2010 in a regression discontinuity design. Fuzzy regression discontinuity estimates yield a civil-service wage premium of over 100% (not attributable to observed or unobserved skills), but no effect on motivation, suggesting rent-sharing as the most plausible explanation for the wage premium.