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Motivational Capital and Incentives in Health Care Organisations

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  • Mikel Berdud

    ()
    (Departamento de Economía-UPNA)

  • Juan M. Cabasés Hita

    ()
    (Departamento de Economía-UPNA)

  • Jorge Nieto

    ()
    (Departamento de Economía-UPNA)

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    Abstract

    This paper explores optimal incentive schemes in public health institutions when agents (doctors) are intrinsically motivated. We develop a principal-agent dynamic model with moral hazard in which agents’ intrinsic motivation could be promoted (crowding-in) by combining monetary and non-monetary rewards. Intrinsic motivation could also be discouraged (crowding-out) when the health manager uses only monetary incentives. We discuss the conditions under which investing in doctors’ motivational capital by the use of well designed nonmonetary rewards is optimal for the health organizations manager. Our results show that such investments will be more efficient than pure monetary incentives in the long run. We will also prove that when doctors are risk-averse, it is profitable for the health manager to invest in motivational capital.

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    File URL: ftp://ftp.econ.unavarra.es/pub/DocumentosTrab/DT1209.PDF
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    Bibliographic Info

    Paper provided by Departamento de Economía - Universidad Pública de Navarra in its series Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra with number 1209.

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    Length: 43 pages
    Date of creation: 2012
    Date of revision:
    Publication status: Published in
    Handle: RePEc:nav:ecupna:1209

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    Related research

    Keywords: contracts; moral hazard; intrinsic motivation; crowding effects; motivational capital;

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    References

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    1. Tim Besley & Maitreesh Ghatak, 2005. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 928, London School of Economics and Political Science, LSE Library.
    2. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
    3. Maitreesh Ghatak & Hannes Mueller, 2009. "Thanks for Nothing? Not-for-Profits and Motivated Agents," STICERD - Economic Organisation and Public Policy Discussion Papers Series 014, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    4. Kevin Murdock, 2002. "Intrinsic Motivation and Optimal Incentive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 650-671, Winter.
    5. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 199-217, January.
    6. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    7. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 183-98, January.
    8. Samuel Bowles & Sandra Polania-Reyes, 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 368-425, June.
    9. Canice Prendergast, 2007. "The Motivation and Bias of Bureaucrats," American Economic Review, American Economic Association, vol. 97(1), pages 180-196, March.
    10. Pinto-Prades, Jose Luis & Loomes, Graham & Brey, Raul, 2009. "Trying to estimate a monetary value for the QALY," Journal of Health Economics, Elsevier, vol. 28(3), pages 553-562, May.
    11. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
    12. Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, vol. 78(3), pages 275-299, November.
    13. Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 191-210, Fall.
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