Job market paper

Corruption and Talent Allocation

Talent is a key input in the delivery of public services, yet less is known about what affects the supply of talent for the public sector. This paper studies the role of political corruption in shifting talent allocation across public and private sector careers. I exploit a randomized anti-corruption audit program in Brazil together with comprehensive micro-data on educational and labor market outcomes of college students. Using a generalized difference-in-difference research design, I find that high-ability students in audited municipalities are less likely to choose majors tailored toward public sector careers, such as business administration and law. Moreover, tracking students to the labor market demonstrates that audits also lead to a lower share of high-ability students working as civil servants. Finally, I provide suggestive evidence that the effects of audits on talent allocation can be driven by the perception of lower rent-seeking returns and higher reputation costs. Taken together, these findings highlight an understudied negative consequence of corruption on the economy: the distortion of talent allocation toward rent-seeking in the public sector.

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