Incentives and evaluation of public managers in Italy

We analyse the current structure and the most recent evolution of the legislation concerning incentives for public managers in Italy. In the light of the main findings of economic theory, we identify the most critical issues inherent to the design of an optimal system of incentives. These are the existence of multi-principle agency problems involving public managers; the difficulty of observing and measuring the output produced in the public sector; the excessive limits to managers� autonomy imposed by the need to respect the rule of law. Along these three lines, we analyse the reforms of public management that have been adopted in Italy from the nineties and evaluate their effectiveness through an empirical analysis of the premiums paid to public managers in 2012. The empirical analysis reveals a substantial flattening of the premiums paid and highlights that only the age of the manager significantly affects how much they receive. We conclude that the poor effectiveness of the current system of incentives for public managers is mainly due to the undifferentiated application of the same rules to all organizations, to an inadequate planning of the objectives and to the excessive limits to managers� autonomy.