SELF-SELECTION AND GOOD GOVERNANCE

Abstract

In this paper we explore how self-selection in the job market affects outcomes in the public sector. We utilize the self-selection model to focus on the choices of individuals between public sector and private sector employment. These choices depend on observable and unobservable characteristics. One of the implications of the self-selection model is that the unobservable characteristics are not randomly distributed in the private and public sectors. These affect outcomes in developing countries, and we specifically focus on the case of anti-corruption policies in Kazakhstan – a country that consistently ranks highly in corruption scores despite the numerous attempts in policy. One of the reasons why anti-corruption policies/strategies fail in the case of Kazakhstan, is not because they are improperly drafted or implemented, but because they fail to take into account the self-selection problem. We find evidence for self-selection into public sector by subjects who are more likely to cheat in a dice task game. Secondly, altruism has no significant correlation with public sector career choices but negative correlation with the corruption. More importantly we find that the correlation between altruism and honest behavior is more likely to be due to framing effects.