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Performance Incentives in the Public Sector: Evidence from the Job Training Partnership Act

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  • Cragg, Michael
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    Abstract

    It is curious that more government programs do not use performance based contracts for human-resource-oriented programs. Theoretical explanations for their limited use are that agents' risk aversion limits the effectiveness of performance incentives, and moral hazard can restricted the efficacy of performance incentives if the performance measures do not fully reflect program goals. This article examines the validity of these explanations by studying the performance management system used in the major federal job training program, the Job Training Partnership Act (JTPA). Existing JTPA performance measures lead to problems of moral hazard. This article provides empirical evidence for the notion that unless performance standards are carefully designed, problems of moral hazard may preclude the widespread use of performance incentives in government programs. Copyright 1997 by Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Journal of Law, Economics and Organization.

    Volume (Year): 13 (1997)
    Issue (Month): 1 (April)
    Pages: 147-68

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    Handle: RePEc:oup:jleorg:v:13:y:1997:i:1:p:147-68

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    Cited by:
    1. Peter Z. Schochet & John A. Burghardt, 2008. "Do Job Corps performance measures track program impacts?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(3), pages 556-576.
    2. Pascal Courty & Do Han Kim & Gerald Marschke1, 2009. "Curbing cream-skimming: Evidence on enrolment incentives," Economics Working Papers ECO2009/03, European University Institute.
    3. Pascal Courty & Gerald Marschke, 2004. "A General Test of Gaming," Economics Working Papers ECO2004/33, European University Institute.
    4. Robert Gibbons, 1998. "Incentives in Organizations," NBER Working Papers 6695, National Bureau of Economic Research, Inc.
    5. Garicano, Luis & Posner, Richard A., 2005. "Intelligence Failures: An Organizational Economics Perspective," CEPR Discussion Papers 5186, C.E.P.R. Discussion Papers.
    6. Ivo Bischoff & Frédéric Blaeschke, 2013. "Incentives and Influence Activities in the Public Sector: the Trade-off in Performance Budgeting and Conditional Grants," MAGKS Papers on Economics 201320, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Pascal Courty & Gerald Marschke, 2003. "Making Government Accountable: Lessons from a Federal Job Training Program," The Centre for Market and Public Organisation 03/083, Department of Economics, University of Bristol, UK.
    8. Garicano, Luis & Palacios-Huerta, Ignacio, 2005. "Sabotage in Tournaments: Making the Beautiful Game a Bit Less Beautiful," CEPR Discussion Papers 5231, C.E.P.R. Discussion Papers.
    9. Ivo Bischoff & Frédéric Blaeschke, 2012. "Window-Dressing and Lobbying in Performance-Budgeting: a Model for the Public Sector," MAGKS Papers on Economics 201212, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. James Heckman & Carolyn Heinrich & Jeffrey Smith, 2002. "The Performance of Performance Standards," NBER Working Papers 9002, National Bureau of Economic Research, Inc.
    11. Kuhn, Michael & Siciliani, Luigi, 2007. "Performance Indicators for Quality with Adverse Selection, Gaming and Inequality Aversion," CEPR Discussion Papers 6261, C.E.P.R. Discussion Papers.
    12. Gerald Marschke & Pascal Courty, 2000. "An Empirical Investigation of Gaming Responses to Performance Incentives," Discussion Papers 00-12, University at Albany, SUNY, Department of Economics.

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