Are Doctors the Better Health Ministers? – The Limits of Technocracy

Technocratic governments are often assumed to outperform partisan politicians because professionals can rely on expertise and independence. Technocracy however has a downside that is too frequently overlooked: Technocrats are aligned with professions, which heavily seek for rents. We assess the effects of professionals in government on economic outcomes. We exploit self-compiled biographical data of German state health ministers between 1955 and 2015 who enjoy great autonomy in designing hospital policy. Our results show that total factor productivity (TFP) growth in hospital care substantially slows down when medical doctors become health ministers. We can link this to in-group favoritism: Doctors serving as health ministers increase total hospital employment, and the number of doctors in particular, but hospital outputs and capital inputs do not change. We conclude that technocrats tend to gratify their profession, which hampers innovation, efficiency and growth.