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Cronyism

Author

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  • Martins, Pedro S.

    () (Queen Mary, University of London)

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.

Suggested Citation

  • Martins, Pedro S., 2010. "Cronyism," IZA Discussion Papers 5349, Institute for the Study of Labor (IZA).
    • Handle: RePEc:iza:izadps:dp5349
    as

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    File URL: http://ftp.iza.org/dp5349.pdf
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    Other versions of this item:

    • Pedro S. Martins, 2010. "Cronyism," Working Papers 37, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.

    References listed on IDEAS

    as
    1. Fabien Postel-Vinay & Hélène Turon, 2007. "The Public Pay Gap in Britain: Small Differences That (Don't?) Matter," Economic Journal, Royal Economic Society, vol. 117(523), pages 1460-1503, October.
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    Blog mentions

    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 20:52:00

    More about this item

    Keywords

    corruption; matched employer-employee panel data; public-sector employment;

    JEL classification:

    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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