Does transparency lead to pay compression?

Alexandre Mas

Research output: Contribution to journalArticlepeer-review

50 Scopus citations

Abstract

This paper asks whether pay disclosure in the public sector changes wage setting at the top of the distribution. I examine a 2010 California mandate that required municipal salaries to be posted online. Among top managers, disclosure led to approximately 7 percent average compensation declines, and a 75 percent increase in their quit rate, relative to managers in cities that had already disclosed salaries. The wage cuts were largely nominal.Wage cuts were larger in cities with higher initial compensation, but not in cities where compensation was initially out of line with (measured) fundamentals. The response is more consistent with public aversion to high compensation than the effects of increased accountability.

Original languageEnglish (US)
Pages (from-to)1683-1721
Number of pages39
JournalJournal of Political Economy
Volume125
Issue number5
DOIs
StatePublished - Oct 2017

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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