Bureaucratic Organizations and X-Inefficiency: A Survey of Models

Abstract:     
This paper is a survey of the main microeconomic models which have analysed the problem of X-inefficiency in bureaucratic organisations. Beginning with the seminal model of Niskanen, which assumes productive efficiency in bureaucracies, we analyse subsequent papers which modify the assumptions of the Niskanen model in order to explain X-inefficiency in public agencies. The conclusion of this paper is that in these organisations, incentives can exist which are not consistent with the idea of productive efficiency. For each model studied, we analyse the implications of this behaviour for X-inefficiency.

Keywords: The nature of inefficiency, productive inefficiency, bureaucracy theory

JEL Classifications: D21, D73, H32

Accepted Paper Series