Productivity Improvements in Public Organisations

18 Pages Posted: 22 Jul 2005

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Marten Keil

Heidelberg University - Alfred Weber Institute for Economics

Abstract

In this article we examine the scope a principal in a public organisation has for motivating agents for productivity improvements where standard stick and carrot incentives cannot be used. The principal's only incentive device is a reallocation of budgets and tasks across agents depending on the extent of productivity improvements revealed by each agent. We first show that as long as agents do not collude, the principal can use rotation and tournament schemes to eliminate all slack in the organisation. Second, to break collusion between agents, the principal must use discriminatory tournament schemes. In some cases, however, there is no incentive scheme that can overcome collusion.

Suggested Citation

Gersbach, Hans and Keil, Marten, Productivity Improvements in Public Organisations. Economic Journal, Vol. 115, No. 505, pp. 671-688, July 2005. Available at SSRN: https://ssrn.com/abstract=760514

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Marten Keil

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

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