Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89679
Authors: 
Khalil, Fahad
Kim, Doyoung
Lawarrée, Jacques
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper 4511
Abstract: 
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.
Subjects: 
bureaucracy
fixed budgets
power of incentives
JEL: 
D82
Document Type: 
Working Paper

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