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Organisational form and individual motivation: public ownership, privatisation and fat cats

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  • Sonja Grönblom
  • Johan Willner

Abstract

We add potential intrinsic motivation to an agency model that is applied on public ownership and privatisation. Conventional agency theory suggests private ownership to be superior if pay under public ownership is not performance-related, but the ranking is otherwise reversed. However, we predict that motivation crowding out (MCO) can cause performance differences to go either way in both cases. Fat-cat salaries occur if public ownership with intrinsic motivation and a fixed wage is followed by privatisation with MCO, performance-related pay and a lower effort. The analysis also identifies factors that affect the performance of a given type of organisation.

Suggested Citation

  • Sonja Grönblom & Johan Willner, 2014. "Organisational form and individual motivation: public ownership, privatisation and fat cats," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 17(3), pages 267-284, July.
    • Handle: RePEc:taf:jecprf:v:17:y:2014:i:3:p:267-284
    DOI: 10.1080/17487870.2014.883923
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    Cited by:

    1. Antonio Massarutto & Andrea Garlatti & Stefano Miani & Ernesto Cassetta & Silvia Iacuzzi, 2021. "Evaluating the performance of local SoEs as output‐maximizing entities: The case of Friuli Venezia Giulia," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 92(2), pages 307-332, June.
    2. Johan Willner & Sonja Grönblom, 2021. "Quality provision under conditions of oligopoly," Journal of Economics, Springer, vol. 132(2), pages 103-131, March.
    3. Johan WILLNER & Sonja GRÖNBLOM, 2017. "Public Enterprises – Objectives and Performance," Departmental Working Papers 2017-03, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    4. Johan Willner & Sonja Gronblom, 2016. "The organisation of services of general interest in Finland," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2016(3), pages 89-116.
    5. Caroline Stiel, 2017. "Modern Public Enterprises: Organisational Innovation and Productivity," Discussion Papers of DIW Berlin 1713, DIW Berlin, German Institute for Economic Research.
    6. Johan WILLNER & Sonja GRÖNBLOM, 2015. "The Organisation of Services of General Interest in Finland," CIRIEC Working Papers 1520, CIRIEC - Université de Liège.

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