Contracts offered by bureaucrats |
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Authors: | Fahad Khalil Doyoung Kim Jacques Lawarrée |
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Affiliation: | 1. University of Washington;2. Sogang University, , Seoul;3. University of Washington and ECARES, , Brussels |
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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. |
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