The Effect of Final Offer Arbitration on the Salaries of Municipal Police Officers in New Jersey

Abstract

This study investigates the effect of final-offer arbitration on the salaries of municipal police officers in New Jersey using a regression model to control for the possible biases introduced by non-random use of the procedure. The results indicate that, despite the greater fraction of union victories than employer victories under final-offer arbitration, arbitrated salary settlements are not significantly higher or lower than nonarbitrated settlements. The results also contain evidence of asymmetric behavior by the parties under final-offer arbitration with the unions appearing more risk averse than the employers.