Organisational form and individual motivation: public ownership, privatisation and fat cats

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    Abstract

    We add potential intrinsic motivation to an agency model that is applied on public ownership and privatisation. Conventional agency theory suggests private ownership to be superior if pay under public ownership is not performance-related, but the ranking is otherwise reversed. However, we predict that motivation crowding out (MCO) can cause performance differences to go either way in both cases. Fat-cat salaries occur if public ownership with intrinsic motivation and a fixed wage is followed by privatisation with MCO, performance-related pay and a lower effort. The analysis also identifies factors that affect the performance of a given type of organisation.
    Original languageUndefined/Unknown
    Pages (from-to)267–284
    JournalJournal of Economic Policy Reform
    Volume17
    Issue number3
    DOIs
    Publication statusPublished - 2014
    MoE publication typeA1 Journal article-refereed

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