Do You Believe Me? Public Sector Incentive Systems in Japan, Korea, Spain, and Sweden

Abstract

This paper presents a theoretical hypothesis for understanding the success of performance-related incentives in the public sector, based on insights developed in the private sector. The paper argues that incentives are more likely to be implemented in administrations in which there is a relative separation between those who benefit from the incentive system (e.g. politicians) and those who manage it (e.g. senior civil servants). Where the interests of both groups overlap (e.g. the careers of senior officials and politicians are intertwined), incentives will be less credible and thus less likely. Narratives from four OECD countries – Sweden, Korea, Spain and Japan – show that performance-related pay is used significantly more in contexts with clearer separation of interests between politicians and senior civil servants (Sweden and Korean) than in countries with a historical integration of careers and activities at the top of the administration (Spain and Japan).