Michael Clemens

Corruption in hiring for public sector jobs is common in developing countries, and has been assumed to have a detrimental effect on delivery of government services. This paper provides a framework for understanding this type of corruption and demonstrates that it need not have negative consequences. Weaver collects original data from a hiring process for managerial positions in a developing country health bureaucracy, and finds that hires paid large bribes, averaging 17 months’ salary. He uses data on bribe offers to characterize the structure of these markets, showing that job allocations are made as if via a first-price, winner-pay, sealed bid auction. To establish the consequences of corruption, he estimates a structural model of entry to determine hires under counterfactual hiring procedures, such as standardized testing, and compares them to actual hires. For this comparison, Weaver identifies causal relationships between a set of hire characteristics and better delivery of health services. Based on these characteristics, actual hires are of comparable or superior quality to the hires under counterfactual systems, e.g. as compared to hires under a knowledge-based test, actual hires are 4.3-8.7 percentage points closer to the predicted optimal set of hires. Although hiring decisions are based primarily on bribes, hires are high quality because applicant wealth and willingness to pay for the position are strongly positively correlated with quality. Applying this to a general model of hiring, he identifies the environments in which corruption will lead to misallocation, discusses how anti-corruption efforts should be designed, and argues for a greater focus on hiring for mid-level government managers.