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Cronyism

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  • Pedro S. Martins

Abstract

Politicians 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 Info

Paper provided by Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research in its series Working Papers with number 37.

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Date of creation: Dec 2010
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Handle: RePEc:cgs:wpaper:37

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Keywords: Corruption; matched employer-employee panel data; public-sector employment;

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  1. 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.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Minimising future problems
    by Pedro S. Martins in The Portuguese Economy on 2011-03-25 15:52:00

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