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Incentives and their dynamics in public sector performance management systems

  • Carolyn J. Heinrich

    (Professor and Director, La Follette School of Public Affairs, University of Wisconsin-Madison)

  • Gerald Marschke

    (Associate Professor, Department of Public Administration and Policy and Department of Economics, State University of New York at Albany, Faculty Research Fellow at NBER, and Research Fellow at IZA)

We use the principal-agent model as a focal theoretical frame for synthesizing what we know, both theoretically and empirically, about the design and dynamics of the implementation of performance management systems in the public sector. In this context, we review the growing body of evidence about how performance measurement and incentive systems function in practice and how individuals and organizations respond and adapt to them over time, drawing primarily on examples from performance measurement systems in public education and social welfare programs. We also describe a dynamic framework for performance measurement systems that takes into account strategic behavior of individuals over time, learning about production functions and individual responses, accountability pressures, and the use of information about the relationship of measured performance to value added. Implications are discussed and recommendations derived for improving public sector performance measurement systems. © 2010 by the Association for Public Policy Analysis and Management.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

Volume (Year): 29 (2010)
Issue (Month): 1 ()
Pages: 183-208

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Handle: RePEc:wly:jpamgt:v:29:y:2010:i:1:p:183-208
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  1. Jesse Rothstein, 2008. "Teacher Quality in Educational Production: Tracking, Decay, and Student Achievement," NBER Working Papers 14442, National Bureau of Economic Research, Inc.
  2. Courty, Pascal & Kim, Do Han & Marschke, Gerald, 2009. "Curbing Cream-Skimming: Evidence on Enrolment Incentives," CEPR Discussion Papers 7121, C.E.P.R. Discussion Papers.
  3. James Heckman & Carolyn Heinrich & Jeffrey Smith, 2002. "The Performance of Performance Standards," NBER Working Papers 9002, National Bureau of Economic Research, Inc.
  4. Cory Koedel & Julian Betts, 2009. "Value-Added to What? How a Ceiling in the Testing Instrument Influences Value-Added Estimation," NBER Working Papers 14778, National Bureau of Economic Research, Inc.
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  9. Gerald Marschke & Pascal Courty, 2002. "Dynamics of Performance Measurement Systems," Discussion Papers 02-09, University at Albany, SUNY, Department of Economics.
  10. Pascal Courty & Gerald Marschke, 2008. "A General Test for Distortions in Performance Measures," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 428-441, August.
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  17. James J. Heckman & Jeffrey A. Smith & Christopher Taber, 1996. "What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program," NBER Working Papers 5535, National Bureau of Economic Research, Inc.
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