Measuring Government Performance: Lessons from a Federal Job Training Program

Abstract

This paper studies the provision of incentives in the large federal bureaucracy created under the Job Training Partnership Act of 1982. We find that bureaucrats respond to these incentives by maximizing their private rewards, possibly at the expense of social welfare. We argue that the inability to perfectly measure bureaucratic output is the root of this dysfunctional behavior. In addition, we find that the incentive designers adjust and perfect the incentive system as they receive information about dysfunctional behavior. In light of our findings, we discuss the prospects for successfully implementing in government organizations accountability mechanisms associated with the market sector.

JEL Classification: H0