Abstract
According to standard economic theory, human beings are expected to work more and better when benefits in the form of lower costs or higher reward increase. Principal–agent theory applied to the theory of the firm relies on this relationship and states that employees should be paid according to how well they perform their tasks. In this framework, monitoring devices are introduced to control employees’ performance and determine salaries. In this paper we construct a principal–agent model to describe the relationship between citizens/voters and elected representatives in which monitoring devices are introduced to control the performance of the latter. We demonstrate that tighter controls may produce better performance but also may produce a reduction in the intrinsic motivations of elected representatives, resulting in a reduction of their work effort. These results are interpreted in the light of the motivation crowding theory.
Highlights
Representative democracies are characterized by a peculiar relationship between politicians and citizens/voters
Despite the fact that the literature relating to human motivation spans many research areas such as anthropology, psychology and sociology, economists by and large have long maintained their own opinion about individual motivation without cross‐references with other disciplines
The economic point of view rests on the fact that human behavior is motivated by external incentives in the form of monetary rewards and/or sanctions [76,77]
Summary
Representative democracies are characterized by a peculiar relationship between politicians and citizens/voters. A large base of literature in political economics argues that the democratic relationship between voters and elected representatives can be affected by a change in the legislative and/or electoral institutions. Can citizens/voters change the structure of the democratic contract to improve the performance of their representatives? If citizens/voters can directly monitor the actions of elected representatives through a variation in the rules governing the system of representation, they can exercise an indirect control through the judicial system [10,11]. We construct a principal–agent model describing the relationship between citizens/voters and their elected representatives In this framework, we analyze whether a change in the control exercised by citizens/voters over the activities undertaken by their representatives in the government affects the performance of the latter.
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