Civil Service Exams and Organizational Performance: Evidence from the Pendleton Act

We use newly digitized data to study the impacts of a historical reform that mandated exams for some employees in the largest US customs-collection districts. Although the reform improved targeted employees’ professional backgrounds and reduced turnover, it did not lead to significant improvements in the cost-effectiveness of customs revenue collection. The incomplete reach of the reform was key for this partial success. First, the reform incentivized hiring in exam-exempted positions, distorting districts’ hierarchical structure. Second, since we find suggestive evidence that districts’ top managers mattered for performance, not changing their appointment method might have constituted a missed opportunity for improvement. (JEL D23, D73, H83, J45, N31, N41)