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Contracts Offered by Bureaucrats

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  • Fahad Khalil
  • Doyoung Kim
  • Jacques Lawarree

Abstract

type="main"> We examine the power of incentives in bureaucracies by studying contracts offered by a bureaucrat to her agent. The bureaucrat operates under a fixed budget, optimally chosen by a funding authority, and she can engage in policy drift, which we define as inversely related to her intrinsic motivation. Interaction between a fixed budget and policy drift results in low-powered incentives. We discuss how the bureaucrat may benefit from stricter accountability as it leads to larger budgets. Low-powered incentives remain even in an alternative centralized setting, where the funding authority contracts directly with the agent using the bureaucrat to monitor output.
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Suggested Citation

  • Fahad Khalil & Doyoung Kim & Jacques Lawarree, 2013. "Contracts Offered by Bureaucrats," Working Papers UWEC-2013-01, University of Washington, Department of Economics.
  • Handle: RePEc:udb:wpaper:uwec-2013-01
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    3. Suraj Prasad & Marcus Tomaino, 2020. "Resources and culture in organizations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(4), pages 854-872, October.

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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