Human resource management as a tool to control corruption: Evidence from Mexican municipal governments

Principal-agent models of corruption control that emphasize rules, incentives, and sanctions as prime antecedents of corruption often stop short when evaluating how these general principles translate into concrete Human Resource Management (HRM) policies. Following a call to develop research about how day-to-day public management operations change incentives to be corrupt, we use data of 5.22 million USD audited to 545 local Mexican governments over 3 years to test the correlation between the misappropriation of public funds and specific HRM functions. Our results suggest that HRM is a critical, underseen factor in understanding the risk of corruption. In line with previous findings, we show that having merit-based recruitment can prevent corruption. However, we also find that having performance and departmental evaluations and a less unequal structure of remunerations may also help local governments effectively avoid the misappropriation of public money.