Public Sector Personnel Economics: Wages, Promotions, and the Competence-Control Trade-Off

54 Pages Posted: 27 Dec 2016 Last revised: 3 Apr 2022

See all articles by Charles M. Cameron

Charles M. Cameron

Princeton University - Department of Political Science; Princeton University - Princeton School of Public and International Affairs

John M. de Figueiredo

Duke University School of Law; Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

David E. Lewis

Vanderbilt University - Department of Political Science; Vanderbilt University - Law School

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Date Written: December 2016

Abstract

We model personnel policies in public agencies, examining how wages and promotion standards can partially offset a fundamental contracting problem: the inability of public sector workers to contract on performance, and the inability of political masters to contract on forbearance from meddling. Despite the dual contracting problem, properly constructed personnel policies can encourage intrinsically motivated public sector employees to invest in expertise, seek promotion, remain in the public sector, and develop policy projects. However, doing so requires internal personnel policies that sort "slackers" from "zealots." Personnel policies that accomplish this task are quite different in agencies where acquired expertise has little value in the private sector, and agencies where acquired expertise commands a premium in the private sector. Finally, even with well-designed personnel policies, there remains an inescapable trade-off between political control and expertise acquisition.

Suggested Citation

Cameron, Charles M. and de Figueiredo, John M. and Lewis, David E., Public Sector Personnel Economics: Wages, Promotions, and the Competence-Control Trade-Off (December 2016). NBER Working Paper No. w22966, Available at SSRN: https://ssrn.com/abstract=2890098

Charles M. Cameron (Contact Author)

Princeton University - Department of Political Science ( email )

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Princeton University - Princeton School of Public and International Affairs

Princeton University
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John M. De Figueiredo

Duke University School of Law ( email )

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Duke University - Fuqua School of Business ( email )

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David E. Lewis

Vanderbilt University - Department of Political Science ( email )

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Vanderbilt University - Law School

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