Bureaucracy

What we have discussed so far are classical ways of addressing principal-agent issues as applied to bureaucracy. We now discuss two additional issues that go beyond the standard approach and, even though the work is recent, are now attracting increased attention from researchers.

Task assignment and matching

In our discussion of selection we discussed the potential for matching mission-preferences or competence to positions. There is a growing literature that exploits the mobility of bureaucrats across different units to disentangle the attributes of bureaucrats and the location that they work in (Best et al. 2019, Fenizia 2022, Dahis et al. 2023, Prem and Muñoz 2021). This applies ideas that have gained traction in corporate finance where transitions of executives are used to estimate “CEO fixed effects” - average effects that are contributed to each individual CEO (as pioneered by Bertrand and Schoar 2003). In contrast to the private sector literature that typically focuses on transitions across firms, work in the context of bureaucracies has largely exploited transitions within an internal public sector labour market. A potential advantage of doing this in the public sector compared to the standard “CEO fixed effects” approach is the much larger number of transfers that can be exploited for empirical purposes.

The increased availability of administrative data has meant that work in this area can adapt the so-called “AKM-framework”, allowing the researcher to decompose measured output (or productivity) into differences driven by variation in bureaucrat quality and the quality of organisations in which they work (Abowd et al. 1999, Card et al. 2013 for the estimation). The results typically find large differences attributable to individuals, suggesting that bureaucrats do have a substantial bearing on outcomes (Best et al. 2019).

While the decomposition literature is interested in estimating individual and organisation effects, a new literature has emerged to estimate match effects. Doing so is motivated by the low exit rates among bureaucrats; once selected, bureaucrats tend to remain within an organisation. This can create skill mismatches when technology and the external conditions change. How to make best use of the existing talent pool thus becomes an important question. In the context of a public organisation, whether bureaucrats should be generalists or specialists is an issue of particular interest. A traditional argument in public administra- tion is that bureaucrats ought to work across a wide range of tasks and ministries, serving the state and not particular organisations (e.g. Northcote et al. 1854). The disadvantage, of course, is that frequent rotation across different tasks will limit the amount of specialisation that can be attained. While there is work on skill-mismatch in the private sector, research on public organisations remains limited (Ferguson and Hasan 2013).

How far skill mismatch is malleable through training is also an interesting issue on which evidence is also scarce. As the state has grown in its scope and scale, there is a need for increasingly specialised competence in managing how the state operates and, even routine tasks, can be completed with higher levels of efficiency when training is good. How far the state provides such training on the job or relies on it being provided elsewhere is a key issue. Moreover, training is not just about skills as it can instill norms and values that are required to deliver tasks in the right way to maximise benefits to citizens. Some kinds of bureaucracies involve significant amounts of specific human capital that can only be acquired over a career. And the system can be structured to maximise such skills being acquired by permitting a high degree of specialisation. Others operate a rotation system where the expectation is that individuals move around within the system and operate as “generalists”. 

Bergeron et al. (2022) provide unique evidence for the gains of optimal assignment from a randomised control trial among tax collectors in the DRC. Exploiting random assignment of tax collectors into teams and to neighborhoods, they find evidence for positive assortative matching: under the optimal assignment case with high (low) ability collectors paired together, and high (low) ability teams paired to high (low) payment propensity households, they estimate an increase in tax compliance by 3%.

A related discussion on matching bureaucrats to workplaces revolves on whether there is a tension between embeddedness and autonomy. On the one hand, greater embeddedness of bureaucrats into society and business can increase bias and promote clientelism. On the other hand, lack of embeddedness can reduce the amount of local information that bureaucrats can leverage – a key feature highlighted in the earlier work on the rise of East Asia. The question of how organisational design can strike the right balance in this trade-off is an old issue that resonates with “home avoidance” rules implemented across many bureaucracies (see, for example, Wade 1985, 1992). The existing empirical work finds evidence for both channels. On the negative side, Vannutelli (2021) exploits the staggered introduction of random auditor assignment across Italian municipalities to show that municipalities paired with a random (as opposed to a mayor nominated) auditor experience greater revenue performance. Similarly, Xu et al. (2023) exploit random variation in home assignment owing to an allocation rule. They find that Indian civil servants allocated to their home states are perceived to be less able to withstand illegitimate political pressure, with the negative effects stronger in high corruption states. Bandiera et al. (2021) show in the context of Uganda how delivery agents favour their own social ties in the implementation of policies. Finally, a set of papers also document the positive effects of embeddedness. Bhavnani and Lee (2018) show that local embeddedness is associated with greater provision of schools. In the context of colonial administration of India during the 1918 pandemic, Xu (2023) shows that local administrators are more responsive in the provision of disaster relief, reducing overall mortality. Balan et al. (2022) document in the context of the DRC – a low tax capacity setting – how local chiefs allow the state to tap into local information in order to increase tax collection through better targeting.

References

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Balan, P, A Bergeron, G Tourek, and J Weigel (2022), “Local Elites as State Capacity: How City Chiefs Use Local Information to Increase Tax Compliance in the D.R. Congo”, American Economic Review, 112(3): 762-797.

Bandiera, O, M C Best, A Q Khan, and A Prat (2021), "The Allocation of Authority in Organizations: A Field Experiment with Bureaucrats", Quarterly Journal of Economics, 136(4): 2195–2242.

Bergeron, A, P Bessone, J K Kabeya, G Tourek, and J Weigel (2022), “Optimal Assignment of Bureaucrats: Evidence from Randomly Assigned Tax Collectors in the DRC”, Working Paper.

Bertrand, M, and A Schoar (2003), “Managing with Style: The Effect of Managers on Firm Policies”, Quarterly Journal of Economics, 118(4): 1169–1208.

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Card, D, J Heining, and P Kline (2013), “Workplace Heterogeneity and the Rise of West German Wage Inequality”, Quarterly Journal of Economics, 128(3): 967–1015.

Dahis, R, L Schiavon, and T Scot (2023), “Selecting Top Bureaucrats: Admission Exams and Performance in Brazil”, Review of Economics and Statistics, 1-47.

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