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Dynamic reform of public institutions: A model of motivated agents and collective reputation

Justin Valasek

Journal of Public Economics, 2018, vol. 168, issue C, 94-108

Abstract: State capacity is optimized when public institutions are staffed by individuals with public-service motivation. However, when motivated agents value the collective reputation of their place of employment, steady-state equilibria with both high and low aggregate motivation (reputation) in the mission-oriented sector exist. Reforming a low-motivation institution requires a non-monotonic wage path: since the effect of higher wages on motivation is negative for a high-reputation institution, but positive for a low-reputation institution, a transition to a high-reputation steady state requires an initial wage increase to crowd motivated workers in, followed by a wage decrease to crowd non-motivated workers out.

Keywords: Motivated workers; Institutional reform; Public sector (search for similar items in EconPapers)
JEL-codes: D23 D73 L32 (search for similar items in EconPapers)
Date: 2018
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