Discretionary Authority and Prioritizing in Government Agencies

Tinbergen Institute Discussion Paper 15-058/VII

48 Pages Posted: 21 May 2015

See all articles by Maarten Pieter Schinkel

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Lukáš Tóth

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE)

Jan Tuinstra

University of Amsterdam - Department of Quantitative Economics (KE); Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: May 19, 2015

Abstract

Government agencies typically have a certain freedom to choose among different possible courses of action. This paper studies agency decision-making on priorities in a principal-agent framework with multi-tasking. The agency head (the principal) has discretion over part of the agency's budget to incentivize his staff (agents) in the pick-up of cases. The head is concerned with society's benefits from the agency's overall performance, but also with the organization's public image as formed from its case record and various non-case specific activities. Based on their talent and the contracts offered by the head, staff officials choose which type of task to pursue: complex major, yet difficult to complete cases with an uncertain outcome, or basic minor and simple cases with a much higher probability of success. The size of the agency's discretionary budget influences not only the scale, but also the type of tasks it will engage in. Social welfare is non-monotonic and discontinuous in the agency's budget. Small changes in the budget may cause extensive restructuring from major to minor tasks, or vice versa. A budget cut can improve welfare more than extra budget would, even if resources are below the welfare-maximizing level. For lower binding budgets, the head continues to suboptimally incentivize work on complex tasks, when the agency should have shifted down to simpler tasks. Yet a reluctant head may need to be nudged with more resources to pursue productive cases. In determining the discretionary space of the agency head, government can limit the extraction of resources, but thereby also benefits less from the head's expertise. Antitrust authorities serve as one illustration of policy implications for institutional design.

Keywords: Government agency, discretion, budget, enforcement priorities, antitrust

JEL Classification: D02, H11, L44, M52

Suggested Citation

Schinkel, Maarten Pieter and Tóth, Lukáš and Tuinstra, Jan, Discretionary Authority and Prioritizing in Government Agencies (May 19, 2015). Tinbergen Institute Discussion Paper 15-058/VII. Available at SSRN: https://ssrn.com/abstract=2607868 or http://dx.doi.org/10.2139/ssrn.2607868

Maarten Pieter Schinkel (Contact Author)

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Lukáš Tóth

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

Jan Tuinstra

University of Amsterdam - Department of Quantitative Economics (KE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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