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04-02-2016

Capture and the bureaucratic mafia: does the revolving door erode bureaucratic integrity?

Authors: Sounman Hong, Jeehun Lim

Published in: Public Choice | Issue 1-2/2016

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Abstract

Does the revolving door phenomenon erode bureaucratic integrity? To answer this question, we undertake a quantitative case study of a private university in South Korea that recruited a former vice minister of education as its president. Specifically, we investigate whether after employing this high-ranking former public official the university received favorable treatment from the education ministry in terms of funding. Estimates from difference-in-difference, triple difference, and synthetic control methods all suggest that the high-profile public official’s recruitment is associated with financial benefits from the official’s former employing agency; no such advantage, however, was observed for benefits from other agencies. This result offers suggestive but compelling evidence that the revolving door distorts the allocation of government resources; the financial benefits the university received are due not to the recruited official’s greater competence, expertise, or knowledge but rather to his implicit collusion with the government.

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http://euobserver.com/opinion/120840.

Strictly speaking, amakudari differs from the revolving door (see Mizoguchi and Van 2012, p. 816).

The first two are sometimes called, respectively, the entry and exit sides of the revolving door (Cohen 1986).

In Korea, private universities are funded mainly through operational revenue (e.g., tuition). However, a substantial part of funding still comes from government grants.

There is a third category for public universities: supporting operational expenses.

This data can be obtained from univ.joongang.co.kr. As of 2012, the dataset covered 94 universities; the total number of four-year universities is 189.

Our results are robust: including the full variable list that Joong Ang Daily uses to estimate the four scores in place of the four measures does not change the findings.

hiedupport.kedi.re.kr.

It also indicates whether the funding is provided to the university itself or to a specific researcher working for the university. As we are considering the case in which a high-level bureaucrat is appointed as university president, we focus our analysis on public funding provided to the university itself, not to an individual researcher.

The identification assumption necessary for consistency of the DID estimate is that the time trend in log grant funding received across treated and control groups would have been similar absent the revolving-door appointment.

We added 1 to the amount of grant funding before the log transformation to avoid missing values for years in which universities did not receive any funding.

Note that the bureaucrat in question did not enter the government through haeng-si, a highly competitive entrance examination for public servants known for building a strong familial culture among cohorts, who spend several months together in training before being posted to agencies. Among haeng-si entrants, such ties could also foster cross-agency rent-seeking. However, the personal connections of the bureaucrat considered herein should be largely limited to the agency for which he worked.

DDD estimation still requires that there is no contemporaneous shock during the treatment period that affected the number of education ministry grants received only by the treated group. We believe that this rather weak assumption is likely to be satisfied and hence that DDD provides a consistent estimate of the treatment effect.

As done in previous studies (e.g., Abadie et al. 2010), we discarded samples with pre-treatment mean squared prediction errors ten times larger than Tongmyong’s.

Evidence suggests that laws restricting the revolving door may somewhat reduce capture (e.g., Law and Long 2012).

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Title: Capture and the bureaucratic mafia: does the revolving door erode bureaucratic integrity?
Authors: Sounman Hong
Jeehun Lim
Publication date: 04-02-2016
Publisher: Springer US
Published in: Public Choice / Issue 1-2/2016
Print ISSN: 0048-5829
Electronic ISSN: 1573-7101
DOI: https://doi.org/10.1007/s11127-016-0315-x

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