A multiconstituency, vote-maximizing model for the determination of public-sector wage and employment levels

by Richard A. Victor

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Develops a model of municipal decisionmaking to remedy deficiencies in the standard analysis. Municipal officials are considered vote-maximizers who must contend with multiple and diverse subconstituencies. Municipal employee groups are considered distinct subconstituents. The arguments in the utility functions of the various subconstituent median voters, which are considered endogenous to the fiscal decisionmaking will differ across groups. As consumers, municipal employees care about services and tax rates; as employees, however, they also value higher wage and employment levels. Under the standard single-constituency model, wage and employment outcomes will be consistent with a production and consumption efficient optimum. Under the multiple-constituency model, as the political power of the various groups diverges, wage and employment outcomes will increasingly reflect the desires of the most powerful groups. The political role of municipal employee unions is also integrated into the model on the demand side.

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