Document Type

Working Paper

Publication Date

2016

Keywords

Personnel Economics, Public Sector Personnel, Human Capital

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.

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Library of Congress Subject Headings

Employee motivation, Civil service--Salaries, etc., Civil service--Personnel management, Human capital, Labor economics

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