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Incentives and Workers’ Motivation in the Public Sector

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Author Info
Josse Delfgaauw ()
Robert A. J. Dur ()

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Abstract

Civil servants have a bad reputation of being lazy. However, citizens' personal experiences with civil servants appear to be significantly better. We develop a model of an economy in which workers differ in laziness and in public service motivation, and characterise optimal incentive contracts for public sector workers under different informational assumptions. When civil servants' effort is unverifiable, lazy workers find working in the public sector highly attractive and may crowd out workers with a public service motivation. When effort is verifiable, the government optimally attracts motivated workers as well as the economy's laziest workers by offering separating contracts, which are both distorted. Even though contract distortions reduce aggregate welfare, a majority of society may be better off as public goods come at a lower cost.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1223.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1223

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Related research
Keywords: public sector labour markets incentive contracts work ethics public service motivation

Other versions of this item:

Find related papers by JEL classification:
H10 - Public Economics - - Structure and Scope of Government - - - General
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
M50 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Boyer, Marcel & Laffont, Jean-Jacques, 2003. "Competition and the reform of incentive schemes in the regulated sector," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2369-2396, September. [Downloadable!] (restricted)
    Other versions:
  2. Andrew Jenkins, 2001. "Companies use of psychometric testing and the changing demand for skills: A review of the literature," CEE Discussion Papers 0012, Centre for the Economics of Education, LSE. [Downloadable!]
  3. Rama, Martin, 1999. "Public Sector Downsizing: An Introduction," World Bank Economic Review, Oxford University Press, vol. 13(1), pages 1-22, January.
  4. Moen, Espen R. & Rosén, Åsa, 2001. "Performance pay and adverse selection," Working Paper Series 2/2001, Swedish Institute for Social Research. [Downloadable!]
    Other versions:
  5. Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, vol. 78(3), pages 275-299, November. [Downloadable!] (restricted)
  6. Jeon, Doh-Shin & Laffont, Jean-Jacques, 1999. "The Efficient Mechanism for Downsizing the Public Sector," World Bank Economic Review, Oxford University Press, vol. 13(1), pages 67-88, January.
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  7. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June. [Downloadable!] (restricted)
    Other versions:
  8. Roland Benabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Blackwell Publishing, vol. 70(3), pages 489-520, 07. [Downloadable!] (restricted)
  9. Josse Delfgaauw & Robert A.J. Dur, 2002. "Signaling and Screening of Workers' Motivation," Tinbergen Institute Discussion Papers 02-050/3, Tinbergen Institute, revised 04 Mar 2005. [Downloadable!]
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  10. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  11. Josse Delfgaauw & Robert A.J. Dur, 2002. "From Public Monopsony to Competitive Market: More Efficiency but Higher Prices," Tinbergen Institute Discussion Papers 02-118/1, Tinbergen Institute, revised 31 Jan 2008. [Downloadable!]
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  12. John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June. [Downloadable!] (restricted)
  13. James J. Heckman & Jeffrey A. Smith & Christopher Taber, 1996. "What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program," NBER Working Papers 5535, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
  15. Lazear, Edward P, 1986. "Salaries and Piece Rates," Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July. [Downloadable!] (restricted)
  16. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)
  17. Glazer, Amihai, 2004. "Motivating devoted workers," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 427-440, March. [Downloadable!] (restricted)
  18. Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-63, October. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jana Vyrastekova & Sander Onderstal & Pierre Koning, 2006. "Team incentives in public organisations; an experimental study," CPB Discussion Papers 60, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  2. Robert A. J. Dur & Amihai Glazer, 2005. "The Desire for Impact," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  3. Josse Delfgaauw, 2007. "Dedicated Doctors: Public and Private Provision of Health Care with Altruistic Physicians," Tinbergen Institute Discussion Papers 07-010/1, Tinbergen Institute, revised 17 Sep 2007. [Downloadable!]
  4. Robert Dur & Hein Roelfsema, 2007. "Social Exchange and Common Agency in Organizations," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  5. Paolo Balduzzi, 2006. "Models of Partnerships," Working Papers 96, University of Milano-Bicocca, Department of Economics, revised May 2006. [Downloadable!]
  6. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June. [Downloadable!] (restricted)
    Other versions:
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