Abstract
This article aims at showing how reputational incentives can be used as a powerful mechanism to address corruption. The method derives from Tirole (2009) relating to the effect of rewards on individuals motivation. The article considers rewards as incentives proposed by the principal in a principal-agent model with information asymmetry related to the agent’s effort. The purpose of this article is to differentiate the types of incentives between monetary ones and reputational ones. We define an additive separable utility function for the agent by distinguishing between the utility related to the monetary incentive and that related to the reputational incentive. And, we determine the indifference curves of the respective utility function and calculate the marginal rates of substitution. The article provides two main results. First, the study indicates that the change in the attractiveness of monetary incentive from an increase in reputational incentive is negative. This result shows a prosocial effect of reputational incentive that reduces the attractiveness of monetary incentive. That shows the powerful impact of reputational mechanisms as incentive that leads to the probity effort of public administration officials. The other result indicates that the change in the attractiveness of reputational incentive from an increase in monetary incentive is negative. This result shows the harmful effect of the monetary incentive that reduces the attractiveness of the reputational incentive and shows that monetary incentives cannot be used to deal with the greed of individuals. These results are reinforced by the positive marginal substitution rates.The article concludes that reputational and publicity mechanisms are powerful motivators that must be taken into account in the design of costless public policies and administration reforms to address corruption of public officials. Furthermore, monetary incentives should not be used as a tool of addressing corruption. Keywords: Reputational Incentives, Principal-Agent, Corruption JEL Codes: A13, D73, D78, D82 DOI : 10.7176/JESD/10-8-11 Publication date : April 30 th 2019
Highlights
A key challenge of every public administration is to looking for effective mechanisms that motivate officials for high performing practices
The mismatch between the civil servant's selfish pay and other preferences and those of the public administration in terms of performance raises serious problems of motivation of public officials. These problems lead to various temptations: less effort, absenteeism, depression, illness and corruption. These challenges remain at the core of economic research with microeconomic tools developed such us the principal-agent model and the incentives that generate behavioral changes for the agents
The article considers a principal-agent model composed of the government as the Principal and the public officials as Agents
Summary
A key challenge of every public administration is to looking for effective mechanisms that motivate officials for high performing practices. The method used in this article is based on the framework of Principal-Agent model aiming to show how powerful the reputational incentives are, as they are modelled to be a mechanism to address corruption. Standard economic approaches to incentives generally assume that incentives such as rewards (monetary www.iiste.org or material) can increase agents' effort and performance, (Becker and Stigler, 1974).
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