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Incentives and their dynamics in public sector performance management systems

Author

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  • Carolyn J. Heinrich

    (Professor and Director, La Follette School of Public Affairs, University of Wisconsin-Madison)

  • Gerald Marschke

    (Associate Professor, Department of Public Administration and Policy and Department of Economics, State University of New York at Albany, Faculty Research Fellow at NBER, and Research Fellow at IZA)

Abstract

We use the principal-agent model as a focal theoretical frame for synthesizing what we know, both theoretically and empirically, about the design and dynamics of the implementation of performance management systems in the public sector. In this context, we review the growing body of evidence about how performance measurement and incentive systems function in practice and how individuals and organizations respond and adapt to them over time, drawing primarily on examples from performance measurement systems in public education and social welfare programs. We also describe a dynamic framework for performance measurement systems that takes into account strategic behavior of individuals over time, learning about production functions and individual responses, accountability pressures, and the use of information about the relationship of measured performance to value added. Implications are discussed and recommendations derived for improving public sector performance measurement systems. © 2010 by the Association for Public Policy Analysis and Management.

Suggested Citation

  • Carolyn J. Heinrich & Gerald Marschke, 2010. "Incentives and their dynamics in public sector performance management systems," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(1), pages 183-208.
    • Handle: RePEc:wly:jpamgt:v:29:y:2010:i:1:p:183-208
    DOI: 10.1002/pam.20484
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    3. Donald Moynihan & Ivor Beazley, 2016. "Toward Next-Generation Performance Budgeting," World Bank Publications - Books, The World Bank Group, number 25297.
    4. Dietrichson, Jens, 2013. "Coordination Incentives, Performance Measurement and Resource Allocation in Public Sector Organizations," Working Papers 2013:26, Lund University, Department of Economics.
    5. Pirog, Maureen & Gerrish, Ed, 2015. "Impact of the Child Support Performance and Incentive Act on child support order establishment," Children and Youth Services Review, Elsevier, vol. 58(C), pages 104-117.
    6. Jun Li, 2022. "Value‐Based Payments in Health Care: Evidence from a Nationwide Randomized Experiment in the Home Health Sector," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(4), pages 1090-1117, September.
    7. Kroll, Alexander & Vogel, Dominik, 2021. "Why Public Employees Manipulate Performance Data: Prosocial Impact, Job Stress, and Red Tape," SocArXiv eyjh3, Center for Open Science.
    8. Julianna M. Butler & Scott M. Gilpatric & Christian A. Vossler, 2017. "Motivating Workers through Task Assignment: A Dynamic Model of Up-and-Down Competition for Status," Working Papers 2017-03, University of Tennessee, Department of Economics.
    9. Kato, Takao & Kauhanen, Antti & Salmi, Julia, 2013. "Empirical Evidence on the Dynamics of Incentive Plans," ETLA Working Papers 20, The Research Institute of the Finnish Economy.
    10. Seokbeom Kwon & Kazuyuki Motohashi & Kenta Ikeuchi, 2022. "Chasing two hares at once? Effect of joint institutional change for promoting commercial use of university knowledge and scientific research," The Journal of Technology Transfer, Springer, vol. 47(4), pages 1242-1272, August.
    11. Andrea Francesconi & Enrico Guarini & Francesca Magli, 2020. "Distorsioni nel sistema di accountability delle Universit?: analisi di un caso," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2020(1), pages 59-86.
    12. Hicks, Diana, 2012. "Performance-based university research funding systems," Research Policy, Elsevier, vol. 41(2), pages 251-261.
    13. Marlo M. Vernon & C. Makenzie Danley & Frances M. Yang, 2021. "Developing a measure of innovation from research in higher education data," Scientometrics, Springer;Akadémiai Kiadó, vol. 126(5), pages 3919-3928, May.
    14. Kirsten Bregn, 2013. "Detrimental Effects of Performance-Related Pay in the Public Sector? On the Need for a Broader Theoretical Perspective," Public Organization Review, Springer, vol. 13(1), pages 21-35, March.
    15. Ghulam Qambar & Shahid Mehmood & Nosheen Kanwal, 2021. "Promotion Oriented Research Culture: Understanding Scholars’ Deficiencies In Research Proficiency," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(3), pages 135-143.
    16. James J. Heckman & Carolyn J. Heinrich & Pascal Courty & Gerald Marschke & Jeffrey Smith (ed.), 2011. "The Performance of Performance Standards," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number tpps.
    17. Lucy Kok & Caren Tempelman & Pierre Koning & Lennart Kroon & Caroline Berden, 2017. "Do Incentives for Municipalities Reduce the Welfare Caseload? Evaluation of a Welfare Reform in the Netherlands," De Economist, Springer, vol. 165(1), pages 23-42, March.
    18. Pierre Koning & C.J. Heinrich, 2009. "Cream-skimming, parking and other intended and unintended effects of performance-based contracting in social welfare services," CPB Discussion Paper 134, CPB Netherlands Bureau for Economic Policy Analysis.
    19. Gregory F. Branch & Eric A. Hanushek & Steven G. Rivkin, 2012. "Estimating the Effect of Leaders on Public Sector Productivity: The Case of School Principals," NBER Working Papers 17803, National Bureau of Economic Research, Inc.
    20. Marlo M. Vernon & Frances M. Yang, 2023. "Use of Latent Profile Analysis to Model the Translation of University Research into Health Practice and Policy: Exploration of Proposed Metrics," Research in Higher Education, Springer;Association for Institutional Research, vol. 64(7), pages 1058-1070, November.
    21. Homrighausen, Pia, 2014. "Differential pricing and private provider performance," IAB-Discussion Paper 201425, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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