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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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Publication status: published as Ernesto Dal Bó & Frederico Finan & Martín A. Rossi, 2013. "Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1169-1218.
Handle: RePEc:nbr:nberwo:18156

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Cited by:
  1. Cantoni, Davide & Yuchtman, Noam, 2013. "The political economy of educational content and development: Lessons from history," Munich Reprints in Economics, University of Munich, Department of Economics 20002, University of Munich, Department of Economics.
  2. Tonin, Mirco & Vlassopoulos, Michael, 2014. "Are Public Sector Workers Different? Cross-European Evidence from Elderly Workers and Retirees," IZA Discussion Papers 8238, Institute for the Study of Labor (IZA).
  3. Alessandro Fedele & Paolo Naticchioni, 2013. "Moonlighting Politicians: Motivation Matters!," BEMPS - Bozen Economics & Management Paper Series, School of Economics and Management at the Free University of Bozen BEMPS08, School of Economics and Management at the Free University of Bozen.
  4. 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).
  5. Jurgen Blum & Nick Manning & Vivek Srivastava, 2012. "Public Sector Management Reform : Toward a Problem-Solving Approach," World Bank Other Operational Studies 17057, The World Bank.
  6. Josse Delfgaauw & Michiel Souverijn, 2014. "Biased Supervision," Tinbergen Institute Discussion Papers 14-115/VII, Tinbergen Institute.
  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. Gustavo J. Bobonis & Luis R. Cámara Fuertes & Rainer Schwabe, 2012. "The Dynamic Effects of Information on Political Corruption: Theory and Evidence from Puerto Rico," Working Papers, Banco de México 2012-14, Banco de México.
  9. Torberg Falch, 2013. "Wages and Recruitment: Evidence from External Wage Changes," CESifo Working Paper Series 4078, CESifo Group Munich.
  10. Andrew Beath & Fotini Christia & Georgy Egorov & Ruben Enikolopov, 2014. "Electoral Rules and the Quality of Politicians: Theory and Evidence from a Field Experiment in Afghanistan," NBER Working Papers 20082, National Bureau of Economic Research, Inc.
  11. 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, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 47, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  12. Gill, Andrej & Heinz, Matthias & Schumacher, Heiner, 2014. "Trust, trustworthiness and selection into the financial industry," CFS Working Paper Series 458, Center for Financial Studies (CFS).
  13. F. Barigozzi & N. Burani & 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.

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