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

53 Pages Posted: 16 Dec 2016 Last revised: 8 Feb 2017

See all articles by Charles M. Cameron

Charles M. Cameron

Princeton University - Department of Political Science; Princeton University - Woodrow Wilson 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

Multiple version iconThere are 2 versions of this paper

Date Written: October 15, 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.

Keywords: Personnel Economics, Public Sector Personnel, Human Capital

JEL Classification: H83, J24, J31, J45, K00

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 (October 15, 2016). Duke I&E Research Paper No. 2017-04; Duke Law School Public Law & Legal Theory Series No. 2017-14. Available at SSRN: https://ssrn.com/abstract=2886189 or http://dx.doi.org/10.2139/ssrn.2886189

Charles M. Cameron

Princeton University - Department of Political Science ( email )

Corwin Hall
Princeton, NJ 08544-1013
United States

Princeton University - Woodrow Wilson School of Public and International Affairs

Princeton University
Princeton, NJ 08544-1021
United States

John M. De Figueiredo (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative

215 Morris St., Suite 300
Durham, NC 27701
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David E. Lewis

Vanderbilt University - Department of Political Science ( email )

VU Station B #351817
Nashville, TN 37235-1817
United States
615-322-6222 (Phone)

Vanderbilt University - Law School

131 21st Avenue South
Nashville, TN 37203-1181
United States

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