State and local government wage differentials: An intrastate analysis

Previous estimates of state and local government wage differentials have been typically based on data aggregated across all states, and such aggregation may produce seriously misleading differential estimates. We estimate intrastate earnings differentials for the state and local sectors in Wisconsin, four other midwestern states, and two states outside the midwest. There is substantial variation in the differentials: aggregated differentials can be misleading. Our work also confirms that state and local government labor markets have reduced earnings dispersion and investigates the possibility that higher public sector earnings may attract an “over-qualified” work force. The authors thank the Wisconsin Policy Research Institute for financial support and members of the UWM economics seminar and Sammis White for detailed comments on earlier drafts.