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Journal of Law, Economics, and Organization Advance Access published online on December 2, 2007
Journal of Law, Economics, and Organization, doi:10.1093/jleo/ewm057
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© The Author 2007. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Bureaucratic Rents and Life Satisfaction

Simon Luechinger*

University of Zurich

Stephan Meier**

Federal Reserve Bank of Boston

Alois Stutzer***

University of Basel

* Institute for Empirical Research in Economics, University of Zurich, Zurich, Switzerland. Email: sluechinger{at}iew.unizh.ch.

** Center for Behavioral Economics and Decision Making, Federal Reserve Bank of Boston, Boston, MA. Email: stephan.meier{at}bos.frb.org.

*** Department of Business and Economics University of Basel, Basel, Switzerland. Email: alois.stutzer{at}unibas.ch.

Institutions affect bureaucrats' possibilities to acquire rents; they determine the degree of accountability and responsiveness of officials and of political control of the bureaucracy and, thereby, the size and distribution of rents in the public sphere. Those rents can involve higher wages, monetary and nonmonetary fringe benefits, and bribes. We propose a direct measure to capture the total of these rents: the difference in subjective well-being between bureaucrats and people working in the private sector. In a sample of 42 countries, we find large variations in the extent of rents in the public bureaucracy. The extent of rents is determined by differences in institutional and political constraints. In particular, we find judicial independence to be of major relevance for a tamed bureaucracy. Further, our measure for rents correlates with indicators of regulatory policies and perceptions of corruption.


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