Jobs for Sale: Corruption and Misallocation in Hiring

Abstract

Corrupt government hiring is common in developing countries. This paper uses original data to document the operation and consequences of corrupt hiring in a health bureaucracy. Hires pay bribes averaging 17 months of salary, but contrary to conventional wisdom, their observable quality is comparable to counterfactual merit-based hires. Exploiting variation across jobs, I show that the consequences of corrupt allocations depend on the correlation between wealth and quality among applicants: service delivery outcomes are good for jobs where this was positive and poor when negative. In this setting, the correlation was typically positive, leading to relatively good performance of hires. (JEL D73, I11, J16, J24, J45, M51, O17)