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Incentives and Workers’ Motivation in the Public Sector

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  • Josse Delfgaauw
  • Robert Dur

Abstract

Civil servants have a bad reputation of being lazy. However, citizens' personal experiences with civil servants appear to be significantly better. We develop a model of an economy in which workers differ in laziness and in public service motivation, and characterise optimal incentive contracts for public sector workers under different informational assumptions. When civil servants' effort is unverifiable, lazy workers find working in the public sector highly attractive and may crowd out workers with a public service motivation. When effort is verifiable, the government optimally attracts motivated workers as well as the economy's laziest workers by offering separating contracts, which are both distorted. Even though contract distortions reduce aggregate welfare, a majority of society may be better off as public goods come at a lower cost.

Suggested Citation

  • Josse Delfgaauw & Robert Dur, 2004. "Incentives and Workers’ Motivation in the Public Sector," CESifo Working Paper Series 1223, CESifo.
    • Handle: RePEc:ces:ceswps:_1223
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    More about this item

    Keywords

    public sector labour markets; incentive contracts; work ethics; public service motivation;
    All these keywords.

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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