June 1, 1981
The government can not base the amount it pays its employees on the market value of the services it provides. Instead, it tries to set pay for each job at a level equal to pay for comparable work in private employment. Although a survey of pay for private sector workers is taken each year, there are indications that the survey is faulty and that government pay levels are too high. One indication is that quit rates are considerably lower in the government than in the private sector. Quit rates are a function of pay levels. The estimating equations in this study are derived from a simple model of labor market behavior.This model makes it clear that efficient behavior for the government does not imply either the same pay or total compensation as the private sector.
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