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Productivity Improvements in Public Organizations

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  • Gersbach, Hans
  • Keil, Marten

Abstract

In this Paper we examine the possibilities a principal in a public organization has to motivate agents for productivity improvements where standard stick and carrot incentives cannot be used. The principal’s only incentive device is a reallocation of budgets and tasks across agents depending on the extent of productivity improvements revealed by each agent. We first show that as long as agents do not collude, the principal can use rotation and tournament schemes to eliminate all slack in the organization. Second, to break collusion between agents, the principal must use discriminatory tournament schemes. In some cases, however, there does not exist an incentive scheme to overcome collusion.

Suggested Citation

  • Gersbach, Hans & Keil, Marten, 2004. "Productivity Improvements in Public Organizations," CEPR Discussion Papers 4469, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4469
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    Cited by:

    1. Rainer Bartel, 2007. "Der öffentliche Sektor in der Defensive," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 33(2), pages 199-230.
    2. Hahn, Volker, 2011. "Sequential aggregation of verifiable information," Journal of Public Economics, Elsevier, vol. 95(11), pages 1447-1454.

    More about this item

    Keywords

    collusion; incentive schemes; public organizations; tournament and rotation schemes;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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