Monitoring and Internal Efficiency: A Comparison of Public and Private Ownership
The paper compares the productive efficiency of public and private enterprises in an adverse selection model with managerial effort. Under either ownership structure, the firm's manager has private information on his ability. The principal can invest in monitoring to elicit this ability. As a benchmark, we show that the manager's equilibrium effort in absence of monitoring is strictly higher in a public firm where the principal is a benevolent government. These results may be reversed when both principals have access to a monitoring technology. We show that, under the optimal monitoring and contracting decisions, the public principal may refrain from audits, while the private principal monitors. In this case, managerial effort and thus productive efficiency can be higher in a private firm. Conversely, in situations where both principals endogenously monitor, effort and welfare levels under either governance structure coincide.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Dec 1999|
|Date of revision:|
|Contact details of provider:|| Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany|
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
When requesting a correction, please mention this item's handle: RePEc:bon:bonsfa:608. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (BGSE Office)
If references are entirely missing, you can add them using this form.