AbstractPoliticians can use the public sector to give jobs to cronies, at the expense of the efficiency of those organisations and general welfare. Motivated by a simple model of cronyism that predicts spikes in appointments to state-owned firms near elections, we regress 1980-2008 monthly hirings across all state-owned Portuguese firms on the country's political cycle. In most specifications, we also consider private-sector firms as a control group. Consistent with the model, we find that public-sector appointments increase significantly over the months just before a new government takes office. Hirings also increase considerably just after elections but only if the new government is of a different political colour than its predecessor. These results also hold when conducting the analysis separately at different industries and most job levels, including less skilled positions. We find our evidence to be consistent with cronyism and politically-induced misallocation of public resources.
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Bibliographic InfoPaper provided by Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research in its series Working Papers with number 37.
Date of creation: Dec 2010
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Corruption; matched employer-employee panel data; public-sector employment;
Other versions of this item:
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
- NEP-CDM-2011-01-03 (Collective Decision-Making)
- NEP-POL-2011-01-03 (Positive Political Economics)
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- Postel-Vinay, Fabien & Turon, Hélène, 2005.
"The Public Pay Gap in Britain: Small Differences That (Don't?) Matter,"
IZA Discussion Papers
1637, Institute for the Study of Labor (IZA).
- Fabien Postel-Vinay & Hélène Turon, 2007. "The Public Pay Gap in Britain: Small Differences That (Don't?) Matter," Economic Journal, Royal Economic Society, vol. 117(523), pages 1460-1503, October.
- Postel-Vinay, Fabien & Turon, Hélène, 2005. "The Public Pay Gap in Britain: Small Differences That (Don’t?) Matter," CEPR Discussion Papers 5296, C.E.P.R. Discussion Papers.
- Helene Turon & Fabien Postel-Vinay, 2005. "The Public Pay Gap in Britain: Small Differences that (Don't?) Matter," 2005 Meeting Papers 92, Society for Economic Dynamics.
- Fabien Postel-Vinay & Hélène Turon, 2005. "The Public Pay Gap in Britain: Small Differences That (Don't?) Matter," PSE Working Papers halshs-00590765, HAL.
- Fabien Postel-Vinay & Hélène Turon, 2005. "The Public Pay Gap in Britain: Small Differences That (Don't?) Matter," The Centre for Market and Public Organisation 05/121, Department of Economics, University of Bristol, UK.
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