The Personnel Economics of the State
Governments play a central role in facilitating economic development. Yet while economists have long emphasized the importance of government quality, historically they have paid less attention to the internal workings of the state and the individuals who provide the public services. This paper reviews a nascent but growing body of field experiments that explores the personnel economics of the state. To place the experimental findings in context, we begin by documenting some stylized facts about how public sector employment differs from that in the private sector. In particular, we show that in most countries throughout the world, public sector employees enjoy a significant wage premium over their private sector counterparts. Moreover, this wage gap is largest among low-income countries, which tends to be precisely where governance issues are most severe. These differences in pay, together with significant information asymmetries within government organizations in low-income countries, provide a prima facie rationale for the emphasis of the recent field experiments on three aspects of the state–employee relationship: selection, incentive structures, and monitoring. We review the findings on all three dimensions and then conclude this survey with directions for future research.
Prepared for the Handbook of Field Experiments. We thank Nils Enevoldsen and Joyce Hahn for exceptional research assistance, and Abhijit Banerjee, Alan Gerber, and Adnan Khan for comments. We acknowledge financial support from the William and Flora Hewlett Foundation and the UK Department for International Development. The views expressed here are those of the authors alone. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.