IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v131y2016ipap51-60.html
   My bibliography  Save this article

High-powered incentives and communication failure

Author

Listed:
  • Mishra, Ajit
  • Sarangi, Sudipta

Abstract

This paper uses a donor–provider–agent framework to study the role of provider incentives for the delivery of developmental goods like aid, credit, or technology transfer to the poor. It considers a situation where credible communication by the provider is the key to successful delivery. The study focuses on the interplay between incentives and communications and shows that the use of high-powered incentives can lead to breakdown of communication between providers and agents, leading to undesirable outcomes. However, in many situations motivated providers or state-contingent contracts can be used to achieve the second best outcome.

Suggested Citation

  • Mishra, Ajit & Sarangi, Sudipta, 2016. "High-powered incentives and communication failure," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 51-60.
    • Handle: RePEc:eee:jeborg:v:131:y:2016:i:pa:p:51-60
    DOI: 10.1016/j.jebo.2016.08.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268116301664
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2016.08.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Tirole, Jean, 1994. "The Internal Organization of Government," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 1-29, January.
    2. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    3. Macchiavello, Rocco, 2008. "Public sector motivation and development failures," Journal of Development Economics, Elsevier, vol. 86(1), pages 201-213, April.
    4. Dirk Sliwka, 2007. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," American Economic Review, American Economic Association, vol. 97(3), pages 999-1012, June.
    5. Vijay Krishna & John Morgan, 2001. "A Model of Expertise," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 747-775.
    6. Dino Gerardi & Leeat Yariv, 2008. "Costly Expertise," American Economic Review, American Economic Association, vol. 98(2), pages 187-193, May.
    7. Makris, Miltiadis, 2009. "Incentives for motivated agents under an administrative constraint," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 428-440, August.
    8. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    9. William Easterly & Tobias Pfutze, 2008. "Where Does the Money Go? Best and Worst Practices in Foreign Aid," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 29-52, Spring.
    10. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June.
    11. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 489-520.
    12. Farrell, Joseph, 1995. "Talk Is Cheap," American Economic Review, American Economic Association, vol. 85(2), pages 186-190, May.
    13. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    14. Canice Prendergast, 2015. "Professionalism and Contracts in Organizations," Journal of Labor Economics, University of Chicago Press, vol. 33(3), pages 591-621.
    15. Delfgaauw, Josse & Dur, Robert, 2007. "Signaling and screening of workers' motivation," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 605-624, April.
    16. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    17. Patrick Francois & Michael Vlassopoulos, 2008. "Pro-social Motivation and the Delivery of Social Services," CESifo Economic Studies, CESifo, vol. 54(1), pages 22-54, March.
    18. Avinash Dixit, 2002. "# Incentives and Organizations in the Public Sector: An Interpretative Review," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 696-727.
    19. Canice Prendergast, 2016. "Bureaucratic Responses," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 183-215.
    20. Robert Dur & Otto H. Swank, 2005. "Producing and Manipulating Information," Economic Journal, Royal Economic Society, vol. 115(500), pages 185-199, January.
    21. Suman Ghosh & Eric Van Tassel, 2008. "A Model of Mission Drift in Microfinance Institutions," Working Papers 08003, Department of Economics, College of Business, Florida Atlantic University.
    22. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    23. Copestake, James, 2007. "Mainstreaming Microfinance: Social Performance Management or Mission Drift?," World Development, Elsevier, vol. 35(10), pages 1721-1738, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ajit Mishra & S Sarangi, 2010. "Provider Incentives and Delivery of Developmental Goods," Department of Economics Working Papers 14/10, University of Bath, Department of Economics.
    2. repec:eid:wpaper:14/10 is not listed on IDEAS
    3. Stijn VAN PUYVELDE & Marc JEGERS, 2016. "Heterogeneity and self-selection into nonprofit management," CIRIEC Working Papers 1603, CIRIEC - Université de Liège.
    4. Valasek, Justin, 2018. "Dynamic reform of public institutions: A model of motivated agents and collective reputation," Journal of Public Economics, Elsevier, vol. 168(C), pages 94-108.
    5. Ester Manna, 2017. "Customer‐oriented employees: Blessing or curse for firms?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(4), pages 842-875, December.
    6. Rebitzer, James B. & Taylor, Lowell J., 2011. "Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 8, pages 701-772, Elsevier.
    7. Bengtsson, Niklas & Engström, Per, 2011. "Control and Efficiency in the Nonprofit Sector Evidence from a Randomized Policy Experiment," Working Paper Series 2011:8, Uppsala University, Department of Economics.
    8. Tonin, Mirco & Vlassopoulos, Michael, 2010. "Disentangling the sources of pro-socially motivated effort: A field experiment," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1086-1092, December.
    9. Banuri, Sheheryar & Keefer, Philip, 2016. "Pro-social motivation, effort and the call to public service," European Economic Review, Elsevier, vol. 83(C), pages 139-164.
    10. Josse Delfgaauw & Robert Dur, 2008. "Incentives and Workers' Motivation in the Public Sector," Economic Journal, Royal Economic Society, vol. 118(525), pages 171-191, January.
    11. Ester Manna, 2013. "Intinsically Motivated Agents: Blessing or Curse for Firms ?," Working Papers ECARES ECARES 2013-37, ULB -- Universite Libre de Bruxelles.
    12. Prüfer, Jens & Xu, Y., 2021. "The Nonprofit's Dilemma," Other publications TiSEM 237785b1-929d-40db-872f-d, Tilburg University, School of Economics and Management.
    13. Grout, Paul & Schnedler, Wendelin, 2008. "Non-Profit Organizations in a Bureaucratic Environment," Sonderforschungsbereich 504 Publications 08-17, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    14. Makris, Miltiadis, 2009. "Incentives for motivated agents under an administrative constraint," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 428-440, August.
    15. Mirco Tonin & Michael Vlassopoulos, 2009. "Disentangling the sources of pro-social behavior in the workplace: A field experiment," Natural Field Experiments 00313, The Field Experiments Website.
    16. Robert Dur & Ola Kvaløy & Anja Schöttner, 2022. "Leadership Styles and Labor Market Conditions," Management Science, INFORMS, vol. 68(4), pages 3150-3168, April.
    17. Michael Kuhn, "undated". "Delegating Budgets when Agents Care About Autonomy," Discussion Papers 04/10, Department of Economics, University of York.
    18. Kirsten Bregn, 2013. "Detrimental Effects of Performance-Related Pay in the Public Sector? On the Need for a Broader Theoretical Perspective," Public Organization Review, Springer, vol. 13(1), pages 21-35, March.
    19. Jonathan Lipow & Jay Simon, 2014. "Attitude, Aptitude, and Testing in the Efficient Mobilization of Military Manpower," Defence and Peace Economics, Taylor & Francis Journals, vol. 25(2), pages 113-124, April.
    20. Gregg, Paul & Grout, Paul A. & Ratcliffe, Anita & Smith, Sarah & Windmeijer, Frank, 2011. "How important is pro-social behaviour in the delivery of public services?," Journal of Public Economics, Elsevier, vol. 95(7), pages 758-766.
    21. Joseph Lanfranchi & Mathieu Narcy, 2022. "How do prosocial motivation and performance‐related pay interact in the workplace context? Evidence from the non‐profit sector," Kyklos, Wiley Blackwell, vol. 75(3), pages 436-455, August.

    More about this item

    Keywords

    Incentives; Communication; Motivated provider;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:131:y:2016:i:pa:p:51-60. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.