Pro-social incentives and skills in the public sector

Yesterday was a fantastic day for applied microeconmists, and which further reminded me of the very reasons why I eventually seek to become one. The European Economic Association (EEA) announced that the 2019 Yrjö Jahnsson Award, a prestigious bi-annual prize awarded to European economists under the age of 45, went to Oriana Bandiera (LSE) and Imran Rasul (UCL).

Let me still call myself a student for this occasion. My interests for economics only revived as soon as I graduated in 2016 and began working professionally. And Bandiera and Rasul, among others, have played a large role to this in terms of their scholarly work and kind generosity toward students, including myself. I still remember vividly about being so thankful when Bandiera sent me her powerpoint slides at 1:30 AM despite herself being an extremely busy person.

By 2014, I was a trained macroeconomist but who had lost all of her appetite for economics due to the non-apparent social component about this particular branch of economics (though this is now changing, e.g. “When Inequality Matters for Macro and Macro Matters for Inequality” or a shorter version). In terms of scholarly work, Bandiera and Rasul’s studies on the role of social incentives and relationships in economics opened up the world of applied microeconomics for me. A favourite of mine is the field experiment of possible strategies and determinants for Zambia’s Ministry of Health to attract high-quality civil servants (“Losing Pro-Sociality In The Quest for Talent? Sorting, Selection and Productivity In The Delivery of Public Services“). Here is a summary. On 29 April Paul Johnson, an economist at the UK’s Institute for Fiscal Studies, also wrote a very informative piece of Bandiera and Rasul’s research works worth reading.

What was found from this study is that, attracting people with both strong skills and having pro-social motivations to the (public sector) workplace is perfectly possible, depending on whether the workplace offers career incentives (e.g. opportunities of promotion, skills progression and so forth). This goes beyond the traditional “carrot” of pay rise as the suggested means of attracting high-quality workers into the public sector in a developing country. Similar challenges have recently been pointed out in China and Vietnam.

But what would be more fulfilling for any future study on this issue is to involve cultural economics and look at the role in which work culture might shun talented people away from the public sector. From personal encounters with talented friends from China and Vietnam: in one hand, while many of them initially desire to become a civil servant, they end up moving into the private sector due to rampant culture of cronyism, nepotism and dishonesty in the public sector. On the other hand, while salaries by official figures are low, civil servants carry the reputation of seeking to join the public sector nonetheless because of 1) expectations of high aggregate income from many unofficial streams (e.g. bribery), 2) promotion and power and 3) strong pro-social motivations. But worth noting is that number 1 tend to only be true for mid-senior level civil servants. Many other civil servants still mention lack of robust finances amid rising living costs, and often have to take on 2-3 additional jobs (gig economy) outside the public sector. It would be interesting to see what’s the net effect of this culture on public sector efficiency in these countries, in terms of public service delivery and the kinds of people recruited. In a recent podcast episode from 29 March by Vox on the under-studied long-term effects of randomized controlled trials, it would also be interesting to understand the time variation of social incentives at the workplace.

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