Working Paper: NBER ID: w22966
Authors: Charles M. Cameron; John M. De Figueiredo; David E. Lewis
Abstract: We model personnel policies in public agencies, examining how wages and promotion standards can partially offset a fundamental contracting problem: the inability of public sector workers to contract on performance, and the inability of political masters to contract on forbearance from meddling. Despite the dual contracting problem, properly constructed personnel policies can encourage intrinsically motivated public sector employees to invest in expertise, seek promotion, remain in the public sector, and develop policy projects. However, doing so requires internal personnel policies that sort "slackers" from "zealots." Personnel policies that accomplish this task are quite different in agencies where acquired expertise has little value in the private sector, and agencies where acquired expertise commands a premium in the private sector. Finally, even with well-designed personnel policies, there remains an inescapable trade-off between political control and expertise acquisition.
Keywords: public sector; personnel economics; wages; promotions; competence-control tradeoff
JEL Codes: H11; J24; J45; K2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| design of personnel policies (M51) | employee motivation (M52) |
| design of personnel policies (M51) | agency performance (L32) |
| promotion standards (M51) | employee motivation (M52) |
| promotion standards (M51) | agency performance (L32) |
| wages and promotion standards (J31) | employee retention (M51) |
| wages and promotion standards (J31) | agency turnover rates (J63) |
| political interference (D73) | agency performance (L32) |
| political interference (D73) | employee motivation (M52) |