Motivation Crowding and the Federal Civil Servant: Evidence from the U.S. Internal Revenue Service
International Public Management Journal, Forthcoming
30 Pages Posted: 16 Nov 2005
Pay-for-performance reforms create high-powered incentives for civil servants to meet or exceed specified performance objectives as measured by such things as customer satisfaction. Economists and social psychologists have advanced the claim that high-powered incentives for performance may empirically lessen the effect of civil servants' intrinsic motivation toward achieving agency goals (motivation can be crowded-out). Nonetheless, well-designed pay-for-performance incentives may crowd-in intrinsic motivation. A number of federal agencies and subagencies have undergone personnel management reforms that raise the specter of this pattern of motivation crowding. Does it happen? Is intrinsic motivation crowded-in or crowded-out? This paper employs item response theory to create measurement models for the estimation a latent trait of intrinsic motivation for employees of the Internal Revenue Service (IRS) and Office of the Comptroller of the Currency (OCC) using data from the 2002 Federal Human Capital Survey. The IRS implemented a paybanding system that imposed high-powered performance incentives on supervisors, but not on non-supervisory personnel. Results suggest that the IRS reward structure crowded-in intrinsic motivation at the lowest levels intrinsic motivation, but that at the highest levels of motivation intrinsic motivation is crowded-out.
Keywords: motivation crowding, pay-for-performance, public management
JEL Classification: C42, M54, M40, M46, M48
Suggested Citation: Suggested Citation