The news from Cali isn’t getting any better

by Craig Newmark | June 4, 2011 7:46 am

“Riverside’s Hillcrest High: What if they built a school and nobody got to go?[1]” A $105 million high school–yes,: $105 million–will be unused for at least one year.

Walter Russell Mead plays taps[2]. (And proposes a solution I haven’t seen before–split the state up into five parts. Interesting.)

And here’s one new, interesting reason for Cali’s problems: “Beaches, Sunshine, and Public-Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers[3]“.

The absence of a competitive market and the presence and strength of public-sector labor unions make it likely that public-sector pay reflects an element of rent extraction by government workers. In this paper, we test a specific hypothesis that connects such rent extraction to the level of local amenities. Specifically, although migration of taxpayers limits the extent of rent-seeking, public-sector workers may be able to extract higher rents in regions where high amenities mute the migration response. We develop a theoretical model that predicts such a link between public-sector wage differentials and local amenities, and we test the model’s predictions by analyzing variation in these wage differentials and amenities across states. The evidence reveals that public-sector wage differentials are, in fact, larger in the presence of high amenities, with the effect being stronger for unionized public-sector workers, who are likely better able to exercise political power in extracting rents.

Endnotes:
  1. Riverside’s Hillcrest High: What if they built a school and nobody got to go?: http://www.latimes.com/news/local/la-me-empty-school-20110531,0,1584339.story
  2. Walter Russell Mead plays taps: http://blogs.the-american-interest.com/wrm/2011/05/27/scotus-makes-it-official-california-a-failed-state/
  3. Beaches, Sunshine, and Public-Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers: http://www.socsci.uci.edu/~jkbrueck/rentseeking.pdf

Source URL: https://rightwingnews.com/economy/the-news-from-cali-isnt-getting-any-better/