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Working in Public and Private Firms

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  • Giacomo Corneo
  • Rafael Rob

Abstract

We develop a theoretical framework for comparing the style of work in public and private enterprises. We incorporate ‘socializing’, as an activity that yields utility for workers and affects a firm’s output, into a simple multitask model of work organization. In contrast with previous models, we establish the two following results. First, the optimal workers’ compensation policy displays a larger incentive intensity in the private firm than in the public firm. Second, labour productivity in the private firm may be higher or lower than in the public firm. Both results fit well with the findings of empirical work.

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Paper provided by Penn Economics Department in its series Penn CARESS Working Papers with number 7942b6b570793de0891a05acb5d61374.

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Handle: RePEc:cla:penntw:7942b6b570793de0891a05acb5d61374

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  1. Atkinson, Scott E. & Halvorsen, Robert, 1986. "The relative efficiency of public and private firms in a regulated environment: The case of U.S. electric utilities," Journal of Public Economics, Elsevier, vol. 29(3), pages 281-294, April.
  2. Andrei Shleifer, 1998. "State Versus Private Ownership," NBER Working Papers 6665, National Bureau of Economic Research, Inc.
  3. Chamley, C. & Marchand, M. & Pestieau, P., 1989. "Linear incentive schemes to control public firms," European Journal of Political Economy, Elsevier, vol. 5(2-3), pages 229-243.
  4. Roemer, John E. & Silvestre, Joaquim, 1992. "A welfare comparison of private and public monopoly," Journal of Public Economics, Elsevier, vol. 48(1), pages 67-81, June.
  5. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  6. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
  7. Boardman, Anthony E & Vining, Aidan R, 1989. "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 1-33, April.
  8. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
  9. repec:sae:niesru:v:107:y::i:1:p:63-73 is not listed on IDEAS
  10. Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation for Research in Economics, Yale University.
  11. Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January.
  12. Corneo, Giacomo & Rob, Rafael, 2001. "Working in Public and Private Firms," CEPR Discussion Papers 2719, C.E.P.R. Discussion Papers.
  13. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  14. Jean-Jacques Laffont & Jean Tirole, 1991. "Privatization and Incentives," Working papers 572, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  16. De Fraja, Giovanni, 1993. "Productive efficiency in public and private firms," Journal of Public Economics, Elsevier, vol. 50(1), pages 15-30, January.
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