A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries
A well-functioning public expenditure management (PEM) system is considered a critical pillar of government efficiency, on par with a low-distortion tax system and efficient tax administration. The paper discusses PEM systems in developing countries using an analytical framework based on principal-agent theory. This simple model can be applied to various PEM systems, and allows for comparisons between institutional settings. To illustrate this, we analyze the benefits derived from the use by the Ministry of Finance (MoF) of two control instruments; ex post audits and ex ante controls, and assess their value in terms of their ability to deter cheating. We derive a set of possible "control regimes" which can be used by the MoF. Although we illustrate the use of the model using developing countries, it is also relevant to developed economies.
|Date of creation:||01 Sep 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dia, M., 1993. "A Governance Approach to Civil Service Reform in Sub- Saharan Africa," Papers 225, World Bank - Technical Papers.
- Gupta, Sanjeev & Verhoeven, Marijn, 2001. "The efficiency of government expenditure: experiences from Africa," Journal of Policy Modeling, Elsevier, vol. 23(4), pages 433-467, May.
- Ian Lienert, 2003. "A Comparison Between Two Public Expenditure Management Systems in Africa," IMF Working Papers 03/2, International Monetary Fund.
- Chand, Sheetal K. & Moene, Karl O., 1999.
"Controlling Fiscal Corruption,"
Elsevier, vol. 27(7), pages 1129-1140, July.
- D. Bouley & J. Fournel & Luc Leruth, 2002. "How do treasury systems operate in sub-Saharan francophone Africa?," OECD Journal on Budgeting, OECD Publishing, vol. 2(4), pages 49-83.
- Strausz, Roland, 2005.
"Timing of Verification Procedures: Monitoring versus Auditing,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
33, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Strausz, Roland, 2006. "Timing of verification procedures: Monitoring versus auditing," Journal of Economic Behavior & Organization, Elsevier, vol. 59(1), pages 89-107, January.
- Roland Strausz, . "Timing of Verification Procedures: Monitoring versus Auditing," Papers 015, Departmental Working Papers.
- Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994.
"Renegotiation Design with Unverifiable Information,"
Econometric Society, vol. 62(2), pages 257-82, March.
- Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Scholarly Articles 12375014, Harvard University Department of Economics.
- Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1994. "Renegotiation design with unverifiable information," ULB Institutional Repository 2013/9591, ULB -- Universite Libre de Bruxelles.
- Faure-Grimaud, Antoine & Laffont, Jean-Jacques & Martimort, David, 1999. "The endogenous transaction costs of delegated auditing," European Economic Review, Elsevier, vol. 43(4-6), pages 1039-1048, April.
- Bolton, Patrick, 1990. "Renegotiation and the dynamics of contract design," European Economic Review, Elsevier, vol. 34(2-3), pages 303-310, May.
- Laffont, Jean-Jacques & Rochet, Jean-Charles, 1997. " Collusion in Organizations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(4), pages 485-95, December.
- Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May.
- Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May.
- Yaya Moussa, 2004. "Public Expenditure Management in Francophone Africa; A Cross-Country Analysis," IMF Working Papers 04/42, International Monetary Fund.
- Eskeland, Gunnar S. & Thiele, Henrik, 1999. "Corruption under moral hazard," Policy Research Working Paper Series 2204, The World Bank.
- Fahad Khalil, 1997. "Auditing Without Commitment," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 629-640, Winter.
- Jack Diamond, 2002. "The Role of Internal Audit in Government Financial Management; An International Perspective," IMF Working Papers 02/94, International Monetary Fund.
- Luc E. Leruth & Dominique Bouley & J. Fournel, 2002. "How Do Treasury Systems Operate in Sub-Saharan Francophone Africa?," IMF Working Papers 02/58, International Monetary Fund.
- Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
- Kessler, Anke S., 2000. "On Monitoring and Collusion in Hierarchies," Journal of Economic Theory, Elsevier, vol. 91(2), pages 280-291, April.
- Ian Lienert, 2003. "A Comparison Between Two Public Expenditure Management Systems in Africa," OECD Journal on Budgeting, OECD Publishing, vol. 3(3), pages 35-66.
- Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:06/204. 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: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.