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Incentive Transfer Schemes with Marketable and Nonmarketable Public Services


  • Nobuo Akai
  • Keizo Mizuno
  • Hiroshi Osano


We examine an incentive transfer scheme in an executive agency system when there are both marketable and nonmarketable public services. We show that because of the incentive transfer scheme, which contributes to the elimination of a government's budget deficit, social welfare is higher in the executive agency system than in a traditional system when the shadow cost of public funds is large. In addition, the scheme is desirable from a welfare viewpoint when the marketable and nonmarketable public services are complements, or when the production technology exhibits a high degree of cost complementarity.

Suggested Citation

  • Nobuo Akai & Keizo Mizuno & Hiroshi Osano, 2010. "Incentive Transfer Schemes with Marketable and Nonmarketable Public Services," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(4), pages 614-640, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201012)166:4_614:itswma_2.0.tx_2-6

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    References listed on IDEAS

    1. Itoh, Hideshi, 1992. "Cooperation in Hierarchical Organizations: An Incentive Perspective," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(2), pages 321-345, April.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    4. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    5. Hemmer, Thomas, 1995. "On the interrelation between production technology, job design, and incentives," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 209-245, April.
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    Cited by:

    1. Meg Sato & Kazuya Kamiya, 2011. "A Multitask Model Without Any Externalities," Crawford School Research Papers 1106, Crawford School of Public Policy, The Australian National University.

    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises


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