Recent reforms to the provision of welfare services by the public sector have transferred control rights in production from politicians to managers and simultaneously introduced competition between public sector suppliers. We derive conditions under which a self-interested politician will introduce either competition and/or managerial control for services where quality matters. We show that both competition and managerial control give incentives for greater managerial effort. However the cost of competition is higher taxes and the cost of decentralisation is a loss of political benefits. The politician will introduce these reforms if the political benefits from higher value service outweigh these costs.
|Translated title of the contribution||Competition and decentralisation in government bureaucracies|
|Pages (from-to)||903 - 916|
|Number of pages||14|
|Journal||Journal of Economic Behavior and Organization|
|Publication status||Published - Sep 2008|
Bibliographical notePublisher: Elsevier
Halonen-Akatwijuka, M., & Propper, C. (2008). Competition and decentralisation in government bureaucracies. Journal of Economic Behavior and Organization, 67, 903 - 916. https://doi.org/10.1016/j.jebo.2007.08.009