Abstract

In this paper a positive theory of internal bureaucratic decision-making is presented. A model is formulated to explain why some decisions within a public bureaucracy are decentralized, while others are not. The explanation, using the notions of principal-agent theory, involves such factors as different access to information and different objectives of central and decentral actors. An empirical test of the model is carried out using data on decisions of local government in the Netherlands on capacity reductions in hospitals.

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