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Contemporary Microeconomic Foundations for the Structure and Management of the Public Sector

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  • Lewis Evans
  • Graeme Guthrie
  • Neil Quigley

    ()
    (The Treasury)

Abstract

The new public management of the 1980s was based in part on a range of important new insights about the role of transaction and agency costs arising from contractual incompleteness in defining the boundaries of the firm and the governance relationships within it. In this paper, we consider the literature of the last 25 years which extends our understanding of allocations of ownership rights and the boundaries of the firm as responses to contractual incompleteness. From this perspective, ownership represents an allocation of control rights to those with the potential to make the most important (value-enhancing) relationship-specific investments. We provide an outline of this modern approach to contractual incompleteness, illustrate its application to a range of issues in public and private ownership, investment, governance and decision-making, and provide suggestions about the impact that this approach might have on the scope, structure and management of the public sector in the 21st century.

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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 12/01.

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Length: 77
Date of creation: May 2012
Date of revision:
Handle: RePEc:nzt:nztwps:12/01

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Keywords: Incomplete contracts; investment decision-making; public ownership; management and governance;

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References

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Cited by:
  1. Sebastian Goerg & Sebastian Kube & Ro'i Zultan, 2007. "Treating Equals Unequally - Incentives in Teams, Workers' Motivation and Production Technology," Bonn Econ Discussion Papers bgse17_2007, University of Bonn, Germany, revised Jan 2008.
  2. Lewis Evans & Neil Quigley, 2013. "Intergenerational Contracts and Time Consistency: Implications for Policy Settings and Governance in the Social Welfare System," Treasury Working Paper Series 13/25, New Zealand Treasury.

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