DP13051 Are Bureaucrats Really Paid Like Bureaucrats?

Author(s): Ruben Enikolopov
Publication Date: July 2018
Keyword(s): bureaucrats, city managers, incentives of politicians, pay for performance
JEL(s): H7, J3
Programme Areas: Labour Economics, Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13051

Abstract Traditionally, bureaucrats are viewed as a stereotypical example of employees with flat pay schedules and low-powered incentive schemes. This paper provides evidence that the wages of a particular group of senior bureaucrats - city managers in US cities - are tightly connected to city outcomes. City outcomes affect city managers' wages not only in the city in which they are currently employed, but also in the city in which they work afterwards. At the same time, the salaries of city managers do not react to observable exogenous shocks to city outcomes. These results suggest that the relationship between city outcomes and the wages of city managers reflects a reward for performance, rather than rent extraction, and that the power of these incentives is sufficiently strong.