HORIZONTAL RENTS: A STUDY OF COMPENSATION PREMIUMS IN U.S. STATE PUBLIC SECTORS

Abstract

Contemporary discussions surrounding income inequality primarily revolve around the concept of "unearned" incomes, where the affluent accumulate wealth from the labor of the less privileged. However, this paper posits that there are additional income disparities that warrant attention, characterized as "unearned" or unwarranted concerning economic fairness and efficiency. This study delves into a specific category of such potentially unmerited income disparities: the compensation premiums provided to public sector employees, which surpass the remuneration of their counterparts in the private sector during the period 2011-2015. We term these additional rewards as "horizontal rents," distinguishing them from the "top rents" acquired by individuals at the pinnacle of the income distribution.