Public employees in many developing economies earn much higher wages than similar private-sector workers. These wage premia may reflect an efficient return to effort or unobserved skills, or an inefficient rent causing labor misallocation. To distinguish these explanations, we exploit the Kenyan government’s algorithm for hiring 18,000 new teachers in 2010 in a regression discontinuity design. Fuzzy regression discontinuity estimates yield a civil-service wage premium of over 100 percent (not attributable to observed or unobserved skills), but no effect on motivation, suggesting rent-sharing as the most plausible explanation for the wage premium.
This work is part of the Department for International Development’s ‘Research on Improving Systems of Education’ (RISE) Programme
Burton, N.; Bold, T.; Sandefur, J. Measuring Rents from Public Employment: Regression Discontinuity Evidence from Kenya. RISE Working Paper 17/015