Small-scale corruption may take different forms—such as extortion, patronage, and the abuse of discretion (see Graycar
2015, 90)—yet is most often thought of in terms of bribery. Such behavior generally comes in two different forms, whereas non-collusive actions are practices of bribery where officials, such as administrative clerks, ask citizens for payments to obtain documents and services they are entitled to, collusive actions are the habit of enforcement officers, such as public employees in customs offices or the traffic police, who take bribes to overlook law violations (Smith et al.
2003). Reducing such behavior when widespread is tremendously difficult, and this problem has been named the “million dollar question” for public administration scholars to solve (Rothstein
2011).
Incentivizing Civil Servants to Reduce Bureaucratic Corruption
In recent decades, PRP reforms have increasingly been implemented in public administrations (OECD
2005). Estimates hold that PRP programs support nearly 300,000 federal employees in the USA alone (USOPM
2007, 3). One may also find such schemes in transitioning and developing countries. For instance, the performance-share of a salary for public employees in Ukraine was as high as 80% in 2006 (OECD
2014).
The occurrence of PRP reforms is a part of the trend in public administration, stemming from the New Public Management (NPM) doctrine (Peters
2009).
2 As such, these reforms are one of the several examples of “market mimicking” mechanisms. PRP programs build on the premise that financial incentives are a cost-efficient way to guide self-interested subordinates’ behavior in line with managerial expectations (Miller and Whitford
2007). Given its influence, it is not surprising that scholars have devoted significant attention to the effects from PRP reforms. While being outside the scope of this study, it can be mentioned that this literature highlights the complexity of implementing such schemes and outcomes may be contingent on historical and cultural factors (Schay and Fisher
2013). Overviews describe PRP programs being implemented “often with mixed or downright disappointing results” (Pollit and Bouckaert
2011, 92). Perry et al. (
2009) review 57 studies that evaluate PRP schemes in (US) government during the years 1977–2008 and collect several lessons regarding their implementation. Evaluating the performance of employees is a sensitive process. Also, in societies with well-functioning government institutions—such as the USA—employees perceive that factors unrelated to merits, such as “office politics,” influence performance ratings in PRP schemes (Kellough and Nigro
2002, 163).
Anticorruption reforms have targeted the incentives of public officials by linking rewards to their performance. The idea is to make it rational bureaucrats to refrain from corrupt acts by rewarding honest behavior: “Indeed, sufficiently high rewards would eliminate all incentives to accept bribes” (Polinsky and Shavell
2000, 3). This notion is similar to the thought that points to the importance of the fixed salary paid to public servants. Accordingly, the size of the salary, in relation to the gains from bribery and the risks of losing benefits from the employment if one gets caught, is a strong determinant for bureaucrats’ incentives to engage in bribery (Becker and Stigler
1974). Authors have therefore suggested that competitive salaries would “[reduce] the relative attractiveness of the quick returns available from corrupt individual practices” (Evans and Rauch
1999, 752). While widely investigated, it can be noted that the link between salaries of civil servants and corruption across countries is not uniformly supported (Van Rijckeghem and Weder
2001; Dahlström et al.
2012).
3
The incentive-focused reasoning likewise underpins PRP reforms: “pay for performance draws on standard economics, particularly the economic principal-agent view” (Weibel et al.
2010, 388). This is also the thinking behind the suggestion that PRP programs may reduce bureaucratic corruption (Elliott
1997). In line with the reasoning, “a powerful and determined outside monitor (principal) can reduce corruption and improve delivery of services by his bureaucratic agents” (Rauch and Evans
2000, 51), and accordingly, there are different “strategies a principal can use to elicit better performance from his agents, such as performance-based pay” (ibid, 51). Influential authors have argued that rather than focusing on the fixed part of the salary, it is the varying part that activates employees’ incentives and therefore should curb corruption: “a more effective strategy is to change the specific rewards that accrue to specific actions” (Klitgaard
1988, 77). Ades and Di Tella (
1997) argue that corruption may be reduced through “providing the right incentives to bureaucrats” (504), such as PRP reforms. However, the authors note that measureable performance indicators for reduced corruption are difficult to construct. Similarly, Rose-Ackerman (
1999) posits that “individualized incentive pay systems can be a tool to break up circles of corruption” (80). This reasoning is further developed by Skladany (
2009), arguing that PRP programs targeting bureaucrats in developing countries would “substitute for the money that corrupt public servants usually steal from the government” (7). This reasoning is again underpinned by principal-agent theory: “to motivate an agent to not shirk [i.e. avoid duties], the principal can also offer inducements or incentives to the agent that are linked to her performance. … These performance-based incentives are meant to reinforce the existing incentive that an agent has to act in the best interests of the principal—keeping her job” (23). While acknowledging the risk of capture of such reforms in developing countries, the article defends the merit of PRP reforms in such countries and argues that these programs are quite difficult to manipulate. It should be noted that the article defends a PRP scheme where “outsiders” evaluate bureaucrats’ performance.
Although such reforms do not lack proponents, few studies have examined the PRP-corruption relationship empirically. Some scholars have investigated the effect of PRP reforms on outcomes that are close to, or may be said to be indirect measures of, bureaucrats’ corrupt behavior. An observational study found that an incentive program in Brazil increased tax collection (an indication of decreased bribery among collectors) (Kahn et al.
2001). Relatedly, Duflo et al. (
2012) studied a randomized implementation of an incentive program in Indian schools. They found that when teachers are paid according to their attendance, absenteeism—a misuse of public funds that benefits individual officials—among teachers was reduced. Notably, this scheme was bolstered by a mechanism of monitoring, where pupils were instructed to take a photograph of the teacher and the other students at the start and end of each school day to document actual rates of absenteeism.
4 Kwon (
2014) uses a survey to investigate corruption perceptions among South Korean bureaucrats. The results suggest that officials who believe that their promotion is contingent on their performance are more likely to state that taking substantial gifts from contractors are considered corruption. Only one study has tested claims of the impact from PRP reforms on corruption empirically in a comparative perspective. Dahlström and Lapuente (
2012) examine a measure of the degree of PRP in public administrations across a large number of countries. When analyzing a multivariate model with controls for rivaling explanations, they do not find any association between the degree of PRP and corruption levels. Illustrative, a review concludes: “It is striking that few studies directly examine the impact of improved incentives [among bureaucrats] on corruption outcomes” (Olken and Pande
2012, 501).
There are examples suggesting that the success of administrative reforms is partially dependent on institutional quality in the context where they are implemented. Scholars have argued that performance-based management practices for public organizations (i.e., not individuals) may be less suitable in transitioning countries (Anderson et al.
2003).
5 Similarly, Sundell (
2014) proposes that the suitable type of administrative reforms—focusing on meritocratic recruitment—may depend on the context of patronage risk. The study argues that when patronage risks are high, the amount of discretion in recruitment needs to be low in order to prevent abuse. Therefore, while flexible recruitment may be the suitable in countries with low patronage, formal exams are the better option when patronage is widespread. There are hence reasons to suspect that the difference in levels of corruption is crucial to understand also why PRP reforms may be captured.
When corruption is widespread, conventional policy thinking tends to meet resistance because authorities cannot simply use exogenous policies to improve the situation (Andvig and Fjeldstad
2008). In a context of widespread bribery, it is said that corruption resembles a collective action problem where it becomes individually rational to engage in such behavior. If corruption is endemic, the bureaucrat not taking bribes becomes the “sucker” and actors will therefore tend to act corruptly since most other colleagues are perceived as doing it as well (Rothstein
2011). In such circumstances, the underlying foundations behind PRP schemes—principal-agent theory—are altered substantially.
This reasoning has been used to understand delegation in a bureaucracy where senior managers are the principals and bureaucrats are modeled as the agent. Yet, this thinking has been criticized when applied to situations of high corruption: “It assumes away the problem, especially in [a low developing country] context, because the political will to engage in vigorous monitoring and implement appropriate strategies is lacking, or worse yet the principal is himself corrupt” (Rauch and Evans
2000, 529). The postulation of an honest principal—for instance, a senior manager—is not necessarily true under widespread corruption. And if this assumption is no longer valid, it has consequences: “If the supposed principal is also corrupt and does not act in the interest of the public good, the principal–agent framework becomes useless as an analytical tool since there will simply be no actors willing to monitor and punish corrupt behavior” (Persson et al.
2013, 542). Moreover, they argue that this may lead to a breakdown of any anticorruption reform that builds on the principal-agent framework.
With the insights in mind that such principals may also become corrupted, the reasoning underpinning PRP reform may be questionable in a context of widespread bribery. In particular, such reforms have certain inherent features that possibly make them particularly ill-suited for corrupt contexts. The evaluation of performance is more complicated than the process of raising the fixed part of the salary to all employees (Dahlström and Lapuente
2010, 581). Moreover, a recent report from the OECD states: “Performance-based pay requires clear rules and transparency to avoid abuses. In [transition] countries, there are no clear and transparent criteria for the allocation of the variable part. This part provides a very broad, sometimes full, discretion to heads of public institutions in allocating bonuses and other additional payments to his or her subordinates” (OECD
2014, 110).
6 This point is important as the evaluation part of PRP programs inherently results in managers having discretion and room to maneuver.
7 Intuitively, large amounts of discretion in a high-corruption context raise the concern that opportunities for misbehavior may be created.
Following this notion, it therefore seems that rather convincing reasons exist to believe that (1) the line of thinking that underpins PRP schemes may be less suitable when imposed in corrupt contexts and (2) that such schemes may become captured due to their large share of managerial discretion. However, current research does not provide a detailed understanding of such processes. The purpose of this article is hence to explore the potential of PRP reforms to curb incentives for bribery among civil servants in a context of high corruption. The article investigates this issue empirically through an in-depth study of reforms in the South African civil service.