Civil service reform is a deliberate action to improve the efficiency, effectiveness, professionalism, representativity and democratic character of a civil service, with a view to promoting better delivery of public goods and services, with increased accountability. Such actions can include data gathering and analysis, organizational restructuring, improving human resource management and training, enhancing pay and benefits while assuring sustainability under overall fiscal constraints, and strengthening measures for performance management, public participation, transparency, and combating corruption.
The academic literature on civil service reform has provided arguments and counterarguments clarifying how several approaches to reform affect the overall performance of the civil service. The increasing availability of empirical data allows to test the effectiveness of specific reforms in a given context. While designing effective civil service reforms is a tremendously complex task considering that the right mix of corruption control and performance improvements may vary greatly across and within countries, empirical as well as qualitative research can contribute to the body of evidence-based knowledge on civil service reforms in developing countries.
Approaches to civil service reform
The influence of Weberian bureaucracy Max Weber's model of the ideal type of public administration has been an influential approach to civil service reforms in the 20th century. The bureaucratic type of administration contrasts with the patrimonial type in its underlying organizing principles. Weber's organization of the public administration relies on a clearly defined hierarchical structure with a system of subordination and supervision, a division of labor and specified positions with assigned responsibilities. Contrary to the patrimonial system in which there is no distinction between private and public domains, the Weberian bureaucracy is defined by its impersonal and impartial character. Civil servants operate according to a set of rules and procedures they must observe. Impartiality is in part attained through the professionalization of the civil service and meritocratic recruitment through competitive examinations. For full-time and professionalized civil servants, public office-holding becomes a 'vocation'.
Weberian ideal-typical principles have served as foundations for civil service reforms in developing countries. Scholars and policymakers have been interested in identifying the specific features that determine bureaucratic efficiency and corruption and the mechanisms through which these features increase effectiveness and restrict corrupt behaviour in the civil service.
Empirical studies found that meritocratic recruitment of public officials in particular is associated with lower corruption levels. There are several ways in which meritocratic recruitment and promotion can restrict corrupt behaviour. To begin with, administering entry examinations and educational attainment requirements enable the selection of competent civil servants. A study by the International Monetary Fund shows that better-educated civil servants are related to lower levels of corruption, better performance including better public finance management and higher tax revenue mobilization, as well as higher economic growth.
Furthermore, the internal promotion and career stability of merit-recruited civil servants create a sense of shared commitment to the 'vocation' of office-holding that establishes 'esprit de corps', making it harder for corruption to occur.
Other evidence suggests that a professional merit-based civil service preempts corruption not necessarily through the selection of capable officials but rather through the appointment of civil servants whose interests differ from politicians'. Misaligned interests create a coordination problem which prevents corrupt practices and instead introduces a system of mutual monitoring.
Employment and pay reforms During the 1980s, developing countries subject to structural adjustment programs (SAPs) experienced fiscal austerity notably manifested through pressures to reduce the public wage bill. R. Klitgaard raised concerns that falling civil service wages could exacerbate bureaucratic inefficiencies and corruption. Low public sector wages have been associated with lower performance and motivation. Salaries below opportunity cost can induce civil servants to opt for potentially harmful adaptive strategies and seek opportunities for own-account activities. Public officials may ask for compensation through informal or illegal means and these coping strategies compromise the efficiency and honesty of civil service organizations.
Given these arguments, increasing public officials' wages and other employment benefits has been an important aspect of the civil service reform agenda in developing countries. Economic models based on the early work of Becker and Stigler have had a particular influence on the policy debate.
Principal-agent models of corruption in the civil service provide a theoretical analysis of the relationship between public service pay and corruption. The shirking model (Shapiro–Stiglitz) is centred on the choice public officials who have the opportunity to be corrupt must make. These rational utility-maximizing agents decide to engage in morally hazardous behaviour based on a cost-benefit analysis equating the expected returns to corruption (bribes) to the costs of being corrupt (penalties, potential foregone future earnings). Corruption is detected with a certain probability and is punished by job loss or other penalties. The model predicts that, all else equal, higher wages can deter corruption by increasing the value of behaving honestly. However, when bribes are high and punishment and the probability of detection are low, substantial increases in public official's wages may be required to preempt bribery. Another model explaining bureaucratic corruption, the fair-wage model, makes a distinction between need-based and greed-based corruption. According to this theory, public officials are not necessarily driven by greed but find corruption tempting when their salaries do not allow to meet subsistence levels. 'Fairness' is also determined by other factors, such as the salaries of peers within the civil service, private sector wages, social expectations and the status of civil servants. The perception of not being paid a fair wage increases corruptibility and also reduces the moral costs of corruption. This model therefore suggests that even modest increases in salaries ensuring 'fair wages' can reduce civil servants' propensity to solicit and accept bribes.
The theoretical linkage between public salary increases and corruption remains ambiguous. In a context of constrained government fiscal resources, the question of cost-effectiveness to design optimal wage policies arises. A cross-country study by Van Rijckeghem and Weder endeavours to find empirical support for the fair-wage and efficiency wage hypotheses. The authors conclude that relative government wages are negatively and significantly correlated with measures of corruption but that eradicating corruption would necessitate unrealistic increases in relative wages. These correlations, however, cannot be interpreted as evidence of a causal relationship going from public sector wages to corruption. Causality may run in the reverse direction, pervasive corruption has been shown to reduce tax revenue collection and public expenditures. Poor public finance performance and strong budgetary pressures due to corruption may in turn sustain low civil service salaries. This endogeneity problem complicates the understanding of the relationship between pay reforms and corruption.
Klaus Abbink also tests the fair salary hypothesis in a laboratory experimental setting. The controlled environment in this experiment allows to isolate and identify the impact of 'fair income' considerations on corrupt behaviour. He finds that public officials in two treatments with different perceptions of 'fairness' behave similarly in a bribery game. In other words, high relative public officials salaries do not alter decisions to be corrupt through fairness considerations. These experimental results substantiate Van Rijckeghem and Weder's findings and cast doubt on the cost-effectiveness of increasing public salaries to combat corruption.
Di Tella and Schargrodsky provide additional evidence with their micro-empirical analysis on wages and auditing during a crackdown on corruption in Buenos Aires, Argentina, in 1996–97. They argue that wage increases can be effective only when combined with intermediate levels of monitoring intensity (the probability of detection in the shirking model). They test their hypotheses using variations in audit intensity during the crackdown on corruption in public hospitals and find that procurement officers' wages alone have no statistically significant effect on corruption but detect a negative relationship when wages are interacted with audit intensity. The authors make the case that higher wages and monitoring ("carrots and sticks") should be used simultaneously to act as an effectual anti-corruption strategy.
The literature on public officials' salaries and corruption offers mixed or inconclusive evidence and seems to indicate that pay increases is a necessary but insufficient condition for curbing corruption.
Wage hikes could also have varying effects depending on whether reforms focus on base-salary (unconditional) increases or performance-related pay increases.
Decentralization Following the dissatisfaction with centralized forms of governance, decentralization of public service provision to sub-national governments became a global trend, particularly in developing countries. Decentralization is the transfer of authority, resources and responsibilities from higher to lower levels of government. Scott and Rao distinguish three types of decentralization: Administrative decentralization refers to the ability of local governments to hire, fire and set terms of reference for their own employees and on the human resource management and government organization framework. Under Political or Democratic Decentralization, power is transferred to lower levels of government, public officials are elected by local citizens and are accountable to citizens rather than to the central government. Fiscal Decentralization involves assigning responsibilities for expenditures and revenues to local governments. The degree of fiscal decentralization varies according to local governments' ability to raise revenues and the extent to which they are given autonomy in allocating their expenditures.
Countries differ in their degree of administrative, political and fiscal decentralization. For instance, in China there is a devolution of administrative and fiscal responsibilities but no political decentralization whereas it is the opposite in India.