Motivations, Monitoring Technologies, and Pay for Performance
Monitoring technologies and pay for performance contracts are becoming popular solutions to improve public services delivery. Their track record is however mixed. To show why this may be the case, this paper develops a principal agent model where a...
| Main Authors: | , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank Group, Washington, DC
2014
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/12/20454325/motivations-monitoring-technologies-pay-performance http://hdl.handle.net/10986/20608 |
| Summary: | Monitoring technologies and pay for
performance contracts are becoming popular solutions to
improve public services delivery. Their track record is
however mixed. To show why this may be the case, this paper
develops a principal agent model where agents'
motivations vary and so does the effectiveness of monitoring
technologies. In such a set-up the model shows that: (i)
monitoring technologies should be introduced only if
agents' motivations are poor; (ii) optimal pay for
performance contracts are nonlinear/non-monotonic in
agents' motivations and monitoring effectiveness; (iii)
investments aimed at improving agents' motivations and
monitoring quality are substitutes when agents are
motivated, complements otherwise; and (iv) if the
agents' "type" is private information, the
more and less motivated agents could be separated through a
menu of pay for performance/non pay for performance
contracts, such that only the less motivated choose the pay
for performance ones. |
|---|