A unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission, as opposed to profit, as an organizational goal. Such mission-oriented organizations are frequently staffed by motivated agents who subscribe to the mission. This paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency. Matching economizes on the need for high-powered incentives. It can also, however, entrench bureaucratic conservatism and resistance to innovations. The framework developed in this paper is applied to school competition, incentives in the public sector and in private nonprofits, and the interdependence of incentives and productivity between the private for-profit sector and the mission-oriented sector through occupational choice.
This chapter develops a unified analytical framework, drawing on and extending the existing literature on the subject, for studying the role of property rights in economic development. It addresses two fundamental and related questions concerning the relationship between property rights and economic activity. (i) What are the mechanisms through which property rights affect economic activity? (ii) What are the determinants of property rights? In answering these, it surveys some of the main empirical and theoretical ideas from the extensive literature on the topic. JEL Codes: K11, O17, P14.
This paper explores the feasibility and desirability of Corporate Social Responsibility (CSR). We identify CSR with creation of public goods or curtailment of public bads. Using a model with pro…t-maximizing …rms, the paper shows that there is a direct parallel between CSR and traditional models of private provision of public goods. Indeed, …rms that use CSR will produce public goods at exactly at the same level as predicted by the standard voluntary contribution equilibrium for public goods. We compare CSR with government provision and charitable provision, discussing when CSR by private for-pro…t …rms could have a comparative advantage in dealing with public goods provision.We are grateful to Jim Andreoni, Erlend Berg, Ted Bergstrom, Jordi Blanes, Patrick Francois, Clare Leaver, Rocco Macchiavello, several seminar audiences and especially, an anonymous referee, for helpful feedback. We thank the E.S.R.C. for …nancial support under grant RES-000-23-0717.
The paper analyzes the effect of agricultural tenancy laws offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity. Theoretically, the net impact of tenancy reform is shown to be a combination of two effects: a bargaining power effect and a security of tenure effect. Analysis of evidence on how contracts and productivity changed after a tenancy reform program was implemented in the Indian state of West Bengal in the late 1970s suggests that tenancy reform had a positive effect on agricultural productivity there.We are grateful to the editor, Sherwin Rosen, and three anonymous referees for detailed comments, from which the paper benefited significantly. We are indebted to Maitreya Ghatak for his advice and support at all stages of the project, and especially in conducting the survey. Special thanks are due to Debraj Ray and Esther Duflo, whose valuable suggestions greatly influenced our approach. Thanks are also due to
We look at an economic environment where borrowers have some information about the nature of each other's projects that lenders do not. We show that joint-liability lending contracts, similar to those used by credit cooperatives and group-lending schemes, will induce endogenous peer selection in the formation of groups in a way that the instrument of joint liability can be used as a screening device to exploit this local information. This can improve welfare and repayment rates if standard screening instruments such as collateral are unavailable.This paper analyses a contractual mechanism through which lenders can utilise information borrowers may have about each other, thereby overcoming problems of adverse selection in credit markets. We show that by lending to self-selected groups of borrowers and making them jointly liable for each other's loan repayment, a lender can achieve high repayment rates even when these borrowers cannot offer any collateral.Our work is motivated by contractual methods successfully used by real world lending institutions, such as group-lending programmes and credit cooperatives. These institutions lend to poor borrowers who are not considered creditworthy by conventional lenders. Of these, the dramatic success story of the Grameen Bank of Bangladesh in terms of loan recovery rates combined with a reasonable degree of ®nancial self-suf®ciency has received a lot of attention among economists and policymakers. 1 Indeed, it has become a role model for lending programmes to the poor used by government agencies and non-governmental organisations all over the world. 2
There has been a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services in recent years with an increasing trend toward contracting out to the private sector and "public-private partnerships." This paper analyzes how ownership matters in public good provision. We show that if contracts are incomplete then the ownership of a public good should lie with a party that values the bene ts generated by it relatively more. This is true regardless of whether this party is also the key investor, or other aspects of the technology. I. INTRODUCTIONThe last twenty years have witnessed a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services. As evidence of weaknesses of in-house government provision has accumulated [World Bank 1995], there has been a global trend toward greater involvement of the private sector.1 This has often involved contracting out to both nonpro t organizations and for-pro t rms, while maintaining state ownership. In other cases, ownership of public facilities by the private sector, or more complex forms of arrangements often referred to as "private-public partnerships" have been encouraged. Some economists, such as Shleifer [1998], have questioned whether there is at all a case for state ownership, even if social goals are taken into account, when the opportunities for government contracting are exploited.From the seminal work of Grossman and Hart [1986] and Hart and Moore [1990] (henceforth, GHM), it is now appreciated that incomplete contracting provides a useful foundation for understanding the importance of ownership of rms.2 In this paper we extend these models to consider ownership issues for public * We thank the editor, Edward Glaeser, two anonymous referees , Abhijit Banerjee, Pranab Bardhan, Eli Berman, Maitreya Ghatak, Semanti Ghosh, Oliver Hart, Karla Hoff, Raul Hopkins, Alain de Janvry, Joseph Kabowski, Michael Kremer, Andreas Lehnert, David Lewis, Dilip Mookherjee, John Moore, Abhinay Muthoo, Andrew Newman, Rohini Pande, Priya Ranjan, Debraj Ray, Elizabeth Sadoulet, Rani Spiegler, and numerous seminar participants for helpful comments and suggestions. The usual disclaimer applies.1. For a careful microlevel empirical study of the relative ef ciency of government agencies, for-pro t rms, and nonpro t organizations, see the recent study of U. S. hospitals by Duggan [2000].2. See Hart [1995] for a lucid discussion of the issues. goods. Doing so, we obtain insights about ownership structure that diverge from the standard private goods case. 3 In particular, we show that if the value created by the investments of the parties constitutes a public (i.e., nonrival and nonexcludable) good then the party with the highest valuation should be the owner irrespective of the relative importance of the investments or other aspects of the production technology. 4 We motivate our analysis by the need to understand whether the government or...
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