Contracts Offered by Bureaucrats

46 Pages Posted: 29 Jun 2013

See all articles by Fahad Khalil

Fahad Khalil

University of Washington - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Doyoung Kim

Sogang University - Department of Economics

Jacques P. Lawarree

University of Washington - Department of Economics

Date Written: June 10, 2013

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.

Keywords: Bureaucracy, policy drift, motivated agents, contracts, delegation, collusion

JEL Classification: D73, D82, D86

Suggested Citation

Khalil, Fahad and Kim, Doyoung and Lawarree, Jacques P., Contracts Offered by Bureaucrats (June 10, 2013). CESifo Working Paper Series No. 4511, Available at SSRN: https://ssrn.com/abstract=2286841 or http://dx.doi.org/10.2139/ssrn.2286841

Fahad Khalil (Contact Author)

University of Washington - Department of Economics ( email )

Box 353330
Seattle, WA 98195-3330
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Doyoung Kim

Sogang University - Department of Economics ( email )

Seoul 121-742
Korea, Republic of (South Korea)

Jacques P. Lawarree

University of Washington - Department of Economics ( email )

Box 353330
Seattle, WA 98195-3330
United States

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