The quality of public management is a recurrent concern in many countries. Calls to attract the economy's best and brightest managers to the public sector abound. This paper studies self-selection into managerial positions in the public and private sector, using a model of a perfectly competitive economy where people differ in managerial ability and in public service motivation. We find that, if demand for public sector output is not too high, the equilibrium return to managerial ability is always higher in the private sector. As a result, relatively many of the more able managers self-select into the private sector. Since this outcome is efficient, our analysis implies that attracting a more able managerial workforce to the public sector by increasing remuneration to private-sector levels is not cost-efficient.

compensating differentials, managerial ability, public management, public service motivation, self-selection
Public Administration; Public Sector Accounting and Audits (jel H83), Human Capital; Skills; Occupational Choice; Labor Productivity (jel J24), Wages, Compensation, and Labor Costs (jel J3), Public Sector Labor Markets (jel J45),
Journal of Public Economics
Erasmus School of Economics

Delfgaauw, J, & Dur, A.J. (2010). Managerial talent, motivation, and self-selection into public management. Journal of Public Economics, 94(9-10), 654–660. doi:10.1016/j.jpubeco.2010.06.007