Seminario IECON: "Monitoring Performance, Organizational Culture, and Public Sector Efficiency"

We use a cluster randomized field experiment to study the effect of performance monitoring on the efficiency of public procurement in Chile. In collaboration with the Chilean Public Procurement Office, we provided monthly reports on the purchasing performance of individual procurement officers and services to a sample of 2,600 procurement officers in 184 public services purchasing units. We randomly varied whether the individual performance was disclosed to managers (public) or not (private). After 5 months of treatment exposure, we find that the reports generated significant reductions in overspending in the public treatment group but not in the private treatment group, i.e., only when individual performance was observable for managers. This is consistent with the mechanism being that extrinsic motivation and not intrinsic motivation was driving the behavior of procurement officers. We further find that most of the treatment effect comes from purchasing units where the value of efficiency was highly aligned across managers and officers, suggesting that organizational culture plays a key role in mediating the impact of performance monitoring and preventing the misuse of public resources.

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