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Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service

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  • Ernesto Dal Bó
  • Frederico Finan
  • Martín Rossi

Abstract

We study a recent recruitment drive for public sector positions in Mexico. Different salaries were announced randomly across recruitment sites, and job offers were subsequently randomized. Screening relied on exams designed to measure applicants' intellectual ability, personality, and motivation. This allows the first experimental estimates of (i) the role of financial incentives in attracting a larger and more qualified pool of applicants, (ii) the elasticity of the labor supply facing the employer, and (iii) the role of job attributes (distance, attractiveness of the municipal environment) in helping fill vacancies, as well as the role of wages in helping fill positions in less attractive municipalities. A theoretical model guides each stage of the empirical inquiry. We find that higher wages attract more able applicants as measured by their IQ, personality, and proclivity towards public sector work – i.e., we find no evidence of adverse selection effects on motivation; higher wage offers also increased acceptance rates, implying a labor supply elasticity of around 2 and some degree of monopsony power. Distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18156.

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Date of creation: Jun 2012
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Handle: RePEc:nbr:nberwo:18156

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Cited by:
  1. Alessandro Fedele & Paolo Naticchioni, 2013. "Moonlighting Politicians: Motivation Matters!," BEMPS - Bozen Economics & Management Paper Series BEMPS08, School of Economics and Management at the Free University of Bozen.
  2. Cantoni, Davide & Yuchtman, Noam, 2013. "The political economy of educational content and development: Lessons from history," Journal of Development Economics, Elsevier, vol. 104(C), pages 233-244.
  3. Timothy Besley & Maitreesh Ghatak, 2013. "Profit with Purpose? A Theory of Social Enterprise with Experimental Evidence," STICERD - Economic Organisation and Public Policy Discussion Papers Series 47, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. Gustavo J Bobonis & Luis R Cámara Fuertes & Rainer Schwabe, 2011. "The Dynamic Effects of Information on Political Corruption: Theory and Evidence from Puerto Rico," Working Papers tecipa-428, University of Toronto, Department of Economics.
  5. F. Barigozzi & D. Raggi, 2013. "The Lemons Problem in a Labor Market with Intrinsic Motivation. When Higher Salaries Pay Worse Workers," Working Papers wp883, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. Burks, Stephen V. & Cowgill, Bo & Hoffman, Mitchell & Housman, Michael, 2013. "The Value of Hiring through Referrals," IZA Discussion Papers 7382, Institute for the Study of Labor (IZA).
  7. Banuri, Sheheryar & Keefer, Philip, 2013. "Intrinsic motivation, effort and the call to public service," Policy Research Working Paper Series 6729, The World Bank.
  8. Torberg Falch, 2013. "Wages and Recruitment: Evidence from External Wage Changes," CESifo Working Paper Series 4078, CESifo Group Munich.

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