Can the increase in senior advisory positions be beneficial for public administration?

Responsible researcher: Eduarda Miller de Figueiredo

Article title: INCENTIVES TO CORRUPTION AND INACTION IN THE PUBLIC SERVICE: A MECHANISM DESIGN ANALYSIS

Article authors: Mauricio Bugarin and Fernando B. Meneguin

Location of intervention: Brazil

Sample size: TCU data 2002-2013

Sector: Economic Policy and Governance

Type of intervention: Effects of management and senior advisory positions (DAS)

Variables of interest: Special account takings

Assessment method: Stacked Least Squares (POLS)

Policy Problem

Laws and judicial decisions provide a set of rules for economic situations that need to be regulated, and cannot be left to society's free will, and this ends up reflecting on the efficiency of economic transactions. Still, it is necessary that institutions are functioning perfectly calibrated to allow the economic system to be efficient. In other words, institutions that are too loose can generate abuse, however, extremely rigid institutions generate exaggeratedly cautious behavior. Therefore, a balance between these two opposites is extremely necessary.

Efficiency in spending public resources is a growing requirement of society due to the quality of government service provision. Therefore, the authors sought to evaluate the incentives generated by institutions in public manager behavior.

As Mendes (2011) states, the current bidding model present in the country, which favors companies that operate at the lowest price, giving the opportunity for companies with a precarious structure to obtain bids at prices that are too low, receiving advance payments and offering poor service. quality. Because of this, Mendes (2011) suggests that there should be the option of free appointment to high-level management roles, as these people would be the ones to guide administrative policy.

Therefore, the issues evaluated during the research include controlling corruption versus maximizing the social return of the manager's actions and how temporary employees react to institutional incentives compared to career employees.

Assessment Context

According to Tanzi (1998), the efficiency of the public sector is harmed by corruption, because if there is fraud during the bidding process, the winning company may not be the most efficient in providing services and, furthermore, it reduces the effectiveness of public spending on money diverted for personal enrichment. In Brazil, the productivity of public spending is 60% of the productivity of spending made by the private sector, according to a comparative study between sectors carried out by Cândido Jr. (2001).

The Transparency International ranking demonstrates the level of corruption in the country. Brazil, in 2013, obtained a score of 4.2, which is identified as an indication of a serious level of corruption, as scores below 5 have this characteristic.

There are two categories of professionals who occupy senior management and advisory positions (DAS): (i) permanent career employees (category C) and (ii) commissioned and temporary positions (category T). In which the manager, both private and public, is concerned with the social return related to his actions. Since the more you dedicate yourself, the greater the social benefit you will produce while holding the position of DAS.

Policy Details

Considering that different managers attribute different weights to the value of their contribution to society and the private personal return of occupying a DAS position, the authors define two types of managers:

• Social Manager: those who attach high value to their social contribution;
• Private Manager: those who attribute low value to their social contribution.

Furthermore, in addition to the salary affecting the manager's income, it is also affected by the decisions that the individual makes in the exercise of their role. In view of this, the authors define three possible distinct decisions:

• Decision N: manager who fulfills his role by carefully following all regulations, regardless of the result, thus not posing any type of risk to himself.
  • Social benefit of the decision: .
• Decision S: manager focuses his work on the social return that can be generated, using questionable instruments for this in the future.
  • Social benefit of the decision: .
• Decision P: manager who makes decisions based only on direct private personal benefit via misuse of public machinery, which could probably lead to future punishment.
  • Additional income:

It is assumed that the private benefit of corruption is greater than the social return of the activity ( ) and that there is a net benefit from innovative actions for the manager regardless of the choice of decision S or P. As these two decisions involve disregard for regulations, there is a they face the risk of future punishment, which is the loss of public office.

Therefore, the authors define that if the manager assigns a low value to social well-being, he will prefer decision P, while the manager who assigns a high value to social well-being will have the following conclusion:

•   manager prefers to take risks in corrupt activities for the benefit of society than to take risks for personal benefit.
•   manager prefers to take risks in corrupt activities for his own benefit than to take risks for the benefit of society.

Methodology Details

To assess the possible relationship between the practice of crimes in public administration and the presence of commissioned employees in ministries, the variable of Special Accounts Receipts (TCE) sent to the Federal Audit Court was used. The controls used are: percentage of DAS positions occupied by career employees, expenditure carried out by the ministry, number of DAS, total number of employees in the ministry and types of ministries.

Due to the fact that it has panel data and, after a series of tests, the authors chose to estimate the model using the Stacked Least Squares Method (POLS).

Results

During 2002 to 2013, the average percentage of commission positions occupied by permanent employees was around 65%, varying from 15% to 93% between ministries. The Ministries of Finance, Science and Technology and Development, Industry and Commerce had the most career civil servants filling commission positions and, perhaps, this is due to the fact that these ministries deal with more complex issues.

Graph 1: Evolution of the filling of commission positions by career server

However, even though the Ministries of Tourism and Sports have the lowest participation of career civil servants such as DAS, both ministries were highlighted in national news coverage for involvement in scandals of misapplication of financial resources. Therefore, according to the authors, this evidence may suggest more opportunistic behavior by people who do not have a permanent connection with the public service.

The main results estimated through POLS demonstrated the same effect suggested by the theoretical model, that is, the more career employees occupying DAS positions, the lower the occurrence of TBI per authorized budget unit. In other words, by reducing the relative participation of career employees in occupying DAS positions in a ministry by 10 points, it can generate around 7 TCE's per billion of expenditure in that ministry.

Furthermore, another result suggests that the increase in the number of DAS positions may be beneficial for public administration, suggesting that part of the TCE processes may be motivated by administrative incompetence.

Another point made by the authors is that actions taken outside the legislation are treated with the same severity, regardless of whether they were motivated by corruption or the desire to improve the social results of public policies.

Public Policy Lessons

As a general rule, the study demonstrates the need to think of a way to motivate career civil servants to take actions that will result in an improvement in public administration. Furthermore, it was possible to observe that the filling of DAS positions must adopt merit criteria instead of political criteria.

Reference

BUGARIN, Mauricio; MENEGUIN, Fernando B. Incentives for corruption and inaction in the public service: An analysis of mechanism design♦. Economic Studies (São Paulo), v. 46, p. 43-89, 2016.