Public Sector Motivation and Development Failures

This paper provides a theoretical analysis of the relationship between public sector motivation and development. We analyze a simple two sectors model: a public and a private sector in which the returns are increasing in the quality of the public good produced by the public sector. The main implication is that it is not necessarily a good thing to have cheap labor to hire in the public sector. Cheap labor makes more difficult to screen honest individuals. A relatively high level of social capital in the form of individuals animated by public service motivation is not sufficient to establish a well functioning public sector. The literature recognizes that a good public service can be obtained only with sufficient pecuniary incentives or personnel motivation. While empirical evidence exists casting some doubt on the first view, this paper shows that the latter one may not be sufficient