A new GLO Discussion Paper finds for Portugal that public-sector appointments increase significantly over the months just after elections but only if the new government is of a different political color than its predecessor suggesting a misallocation of public resources.

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GLO Discussion Paper No. 624, 2020

Jobs Cronyism in Public-Sector Firms – Download PDF
by Martins, Pedro S.

GLO Fellow Pedro S. Martins

Author Abstract: Politicians can use the public sector to give jobs to cronies, at the expense of the efficiency of those organizations and general welfare. In this paper, we regress monthly hires across all firms in Portugal with some degree of public ownership on the country’s 1980-2018 political cycle. We find that public-sector appointments increase significantly over the months just after elections but only if the new government is of a different political color than its predecessor. These results are consistent with a simple model of cronyism and hold in multiple robustness checks. Overall, we find our evidence to be consistent with politically-induced misallocation of public resources.

GLO Discussion Papers are research and policy papers of the GLO Network which are widely circulated to encourage discussion. Provided in cooperation with EconStor, a service of the ZBW – Leibniz Information Centre for Economics, GLO Discussion Papers are among others listed in RePEc (see IDEAS,  EconPapers). Complete list of all GLO DPs – downloadable for free.

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