Leaders and the quality of public finance and service delivery

The What difference do organisational leaders make for the quality of public financial management and service delivery outcomes? Much of the academic and applied literature on public finance has focused on the procedures and institutions that guide resource allocation and service delivery (e.g. Allen et al. 2013). The influence of organisational leaders on public financial governance has received less attention. Yet examples and case studies suggest that individual leaders can have tremendous impacts on institutions, both positive and negative (e.g., Okonjo-Iweala 2012, Pauw 2017). However, this is difficult to quantify and compare in systematic ways. A small set of literature has exploited randomly timed leadership changes to examine effects on economic outcomes, mostly at the national level (e.g., Besley et al. 2011). This project aims to tackle this gap by estimating and understanding the role of individuals in determining public financial management outcomes that are directly linked to service delivery in developing country settings, such as the provision of drinking water or electricity, or education and health services.

We analyse an under-used source of objective information on the quality of public financial management: independently produced audits of public bodies (Olken 2007, Ferraz and Finan 2008). We draw on the audit outcomes produced by the Auditor General of South Africa for provincial departments and national departments, going back more than a decade under three different presidents. We also collect information on the political and administrative head of each of these. This allows us to estimate individual-level effects of leaders on the level and trajectory of audit outcomes, holding constant a range of observable and unobservable co-variates with (year, electoral term, geographic location, policy area, etc) fixed effects.

As a second step, we use our estimates to identify specific leaders who are associated with significant changes in the quality of public financial management and service delivery and explore their role in a small number of qualitative case studies drawing on interviews, press reports, and available literature. Taken together, our study aims to quantify leadership effects on public financial governance and to elucidate the underpinning mechanisms, yielding both avenues for further research as well as potential levers for policy interventions to safeguard service delivery from adverse leadership effects.