INSTITUTIONAL INEQUITIES: HORIZONTAL RENTS IN THE ARCHITECTURE OF U.S. STATE GOVERNANCE

This paper examines the compensation premiums paid to public sector workers in the United States relative to their private sector counterparts during the years 2011-2015, which we refer to as "horizontal rents." Our analysis reveals that, on average, public sector workers earn approximately 10% more than their private sector peers, even after controlling for a variety of factors such as education, skills, age, work experience, professional occupation, and other observable characteristics. Additionally, we observe that the magnitude of horizontal rents is not uniform across the country but instead varies depending on the state and level of government. These findings provide valuable insights into the dynamics of public sector compensation and offer a foundation for further discussions on the broader implications of wage disparities between public and private sector workers in the context of public policy, fiscal sustainability, and labor market fairness