Public Sector Salaries and the Quality of Governance: Evidence from Frontline Bureaucrats in India

96 Pages Posted: 21 Oct 2024

See all articles by Siddharth George

Siddharth George

Independent

Martin Mattsson

National University of Singapore (NUS) - Department of Economics

Date Written: September 12, 2024

Abstract

Bureaucrat salaries are the largest expenditure item for most governments. We examine the effects of an unconditional increase in bureaucrats' pay, by analyzing a policy change in Telangana, India, where one group of frontline bureaucrats experienced a 91% pay increase while another group of bureaucrats performing the same job did not. Using a difference-indifferences design, we show that, on average, higher salaries (i) had no impact on performance, (ii) did not affect dishonest or corrupt behavior, (iii) reduced quit rates by 2.4 percentage points (16%) after 2 years but did not affect selection as the average quality of bureaucrats in service remained the same. Higher salaries increased effort among bureaucrats who were unhappy about their pay, but decreased effort from top performers. Experts incorrectly predicted that higher salaries would improve both bureaucrat performance and selection.

Keywords: Bureaucracy, Panchayat Secretaries, Public Sector Pay

Suggested Citation

George, Siddharth and Mattsson, Martin, Public Sector Salaries and the Quality of Governance: Evidence from Frontline Bureaucrats in India (September 12, 2024). Available at SSRN: https://ssrn.com/abstract=4955273 or http://dx.doi.org/10.2139/ssrn.4955273

Siddharth George

Independent ( email )

Martin Mattsson (Contact Author)

National University of Singapore (NUS) - Department of Economics ( email )

21 Lower Kent Ridge Rd
Singapore, 119077
Malaysia

HOME PAGE: http://www.martin-mattsson.com

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