Choosing your Battles: Governors' Career Path, Spending Priorities and Performance

Abstract

The managerial quality hypothesis suggests managers/leaders' quality (e.g., experience) contributes to performance. However, this proposition assumes all types of experience contribute equally to all spectra of policies. This oversimplification may explain the inconsistency in the leaders' quality-performance relationship. We offer a contingency perspective in which the performance effects of a leader's accumulated skills are contingent on (a) the nature of the leader's predominant career path (e.g., technocratic vs. political) as well as (b) the type of implementation process (e.g., administrative vs. political) a policy requires. We estimate the causal effect of leaders' career paths on spending priorities and argue that skills accumulated in technocratic posts differ from those accrued in political posts. Once in office, leaders align their differentiated set of skills with implementing and spending on certain policies to boost performance. Specifically, chief executives who pursue mainly technocratic career paths will prioritize policies requiring an administrative implementation process. In contrast, those with political career paths will prioritize policies requiring a political implementation process. We test our propositions using a panel data set of Mexican governors during the 1995-2014 period, covering four gubernatorial administrations. The causal effect of career paths on spending priorities is estimated using a two-stage regression estimation, using an instrumental variable approach combined with a generalized difference-in-differences design. Our findings suggest governors with greater technocratic experiences spend more on health policies, characterized by an administrative implementation process. On the contrary, governors with greater political career paths spend more on labor policies, characterized by a political implementation process.