Measuring the Effect of Arbitration on Wage Levels: The Case of Police Officers

Abstract

In this paper we provide an empirical evaluation of the effect that the provision of an arbitration statute has on the wage levels of police officers. We analyze the effect of arbitration on wages by comparing wage levels across political jurisdictions and over time using a sample of states. Two complementary data sources are used: panel data on state level wages of police officers, and individual level data on police officers from Decennial Censuses. The empirical results from both data sets are remarkably consistent and provide no robust evidence that the presence of arbitration statutes has a consistent effect on overall wage levels. On average, the effect of arbitration is approximately zero, although there is substantial heterogeneity in the estimated effects across states.