The composition of public sector compensation: The effects of unionization and bureaucratic size

This paper examines the effect of the political power of public sector unions on the composition of public sector compensation. Public employee unions provide a relatively low-cost vehicle for organizing workers’ political activity in support of the rent-seeking behavior of local politicians. The unions also provide a conduit for employees to capture part of these rents as payment for political services. Since the public has little interest in paying for the political activities of public workers, these payments are most likely to be made through fringe benefits so as to minimize public scrutiny. The authors would like to thank an anonymous referee for helpful suggestions. Any errors remain those of the authors.