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Public Sector Motivation and Development Failures

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  • Macchiavello, Rocco

Abstract

This paper provides a theoretical analysis of the relationship between public sector motivation and development. In the model the public sector produces a public good and workers are heterogeneous in terms of public sector motivation (PSM). Wages in the private sector are increasing in the quality of the public good. In this context, public sector wage premia (PSWP) have two opposite effects: low PSWP help screen workers with PSM into the public sector, while high PSWP help motivate workers to be honest. Raising PSWP may not improve the quality of governance and multiple equilibria might arise. The model highlights that the relative importance of workers selection and provision of "on the job" incentives in the public sector varies in systematic ways with wages in the private sector. I provide anecdotal and original empirical evidence consistent with the theoretical predictions and discuss some policy implications for public sector reforms in developing countries.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5906.

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Date of creation: Oct 2006
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Handle: RePEc:cpr:ceprdp:5906

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Keywords: corruption; developing countries; multiple equilibria; public sector motivation;

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References

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  1. Ugo Panizza, 2001. "Public Sector Wages and Bureaucratic Quality: Evidence from Latin America," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
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  5. Ghatak, Maitreesh & Nien-Huei Jiang, Neville, 2002. "A simple model of inequality, occupational choice, and development," Journal of Development Economics, Elsevier, vol. 69(1), pages 205-226, October.
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  11. International Monetary Fund, 1997. "Corruption and the Rate of Temptation," IMF Working Papers 97/73, International Monetary Fund.
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  13. Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, vol. 78(3), pages 275-299, November.
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Cited by:
  1. Ghatak, Maitreesh & Mueller, Hannes, 2011. "Thanks for nothing? Not-for-profits and motivated agents," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 94-105, February.
  2. Delfgaauw, Josse & Dur, Robert, 2010. "Managerial talent, motivation, and self-selection into public management," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 654-660, October.
  3. Esteban Jaimovich & Juan Pablo Rud, 2009. "Excessive Public Employment and Rent-Seeking Traps," Carlo Alberto Notebooks 118, Collegio Carlo Alberto.
  4. Van-Ha Le & Jakob de Haan & Erik Dietzenbacher, 2013. "Do Higher Government Wages Reduce Corruption? Evidence Based on a Novel Dataset," CESifo Working Paper Series 4254, CESifo Group Munich.

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