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Optimal Patronage

Author

Listed:
  • Drugov, Mikhail

Abstract

We study the design of promotions in an organization where agents belong to groups that advance their cause. Examples and applications include political groups, ethnicities, agents motivated by the work in the public sector and corruption. In an overlapping generations model, juniors compete for promotions. Seniors have two kinds of discretion: direct discretion which allows an immediate advancement of their cause and promotion discretion ("patronage") which allows a biasing of the promotion decision in favour of the juniors from their group. We consider two possible goals of the principal, maximizing juniors' efforts and affecting the steady-state composition of the senior level towards the preferred group, and show that patronage may be strictly positive in both of them. We also apply the second setting to the case of corruption.

Suggested Citation

  • Drugov, Mikhail, 2015. "Optimal Patronage," CEPR Discussion Papers 10343, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10343
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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