Selection and Oversight in the Public Sector, With The Los Angeles Police Department as an Example

Public sector officials are typically not rewarded by explicit pay for performance mechanisms. Instead, they are often monitored by sporadic investigation, where the relevant issues for oversight are (i) who oversees performance, and (ii) what triggers an investigation. I consider a choice between internal and external monitoring of public agencies. I argue that a drawback with internal oversight is that officials have (efficiently) different preferences to the population whose objectives they implement. Specifically, they are biased against consumers, and are unwilling to investigate their legitimate complaints. But external parties are usually less well informed than are insiders, and often rely on a consumer complaint to pique their interest. As a result, bureaucrats become excessively worried about the prospect of an investigation, where external monitoring may result in a failure to efficiently deny benefits to consumers. I provide evidence from the Los Angeles Police Department to show that officers appear to have responded to increased external oversight by reducing crime-fighting activities in an attempt to avoid investigation. ∗I would like to thank the Los Angeles Police Department, the Los Angeles Sheriff’s Department, and the Santa Barbara Sheriff’s Department for kindly sharing their data. I am also grateful to Sendhil Mullanaithan, Raghu Rajan, and Tano Santos for helpful comments, to Lan Shi for excellent research assistance, and to the University of Chicago for generous support. Any errors are my own.