of the public sector. Educated agents are typically public spirited and are better at delivering public goods because they have superior skills but also because they are better at judging when it is appropriate to leave the private sector alone. This prediction is consistent with the positive association between less corruption and higher educational attainment shown in Chart 2. When talent is tilted toward more educated agents in the public sector, the result is more public goods and higher economic growth.
Compensation that rewards public-spirited agents raises the well-being of society as a whole, especially when institutions are weak. Such compensation programs make the public sector more attractive to public-spirited individuals and, as a result, improve the delivery of public goods and economic growth. This is consistent with some of our empirical findings that merit-based compensation is associated with better-educated public administrators.
•From a policy standpoint, our findings suggest that improving government effectiveness may be achieved, for instance, through strengthening the judiciary system. An effective judiciary that enforces the law with fairness is likely to dissuade civil servants from trying to manipulate rules and regulations to enrich themselves at public expense and discourage individuals disposed to corruption from entering public service.
Moving to merit-based compensation can also help attract well-educated individuals. The policy debate on issues of compensation has so far focused narrowly on chief operating officers’ compensation in the private sector. Countries around the world, and especially developing economies, should focus on attracting educated people to their public administration to enhance the delivery of key public goods and boost economic development. Singapore, among other countries, has adopted merit-based pay, which has allowed the public sector to attract and retain quality staff and certainly played a key role in enhancing government effectiveness and eventually the country’s good economic performance.■
This article is based on the authors’ IMF Working Paper 12/231, “Education Attainment in Public Administration around the World: Evidence from a New Dataset.”
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