DP13051 | Are Bureaucrats Really Paid Like Bureaucrats?

Author(s)

Publication Date

07/15/2018

JEL Code(s)

Keyword(s)

Programme Area(s)

Network(s)

Abstract

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.