Monitoring, moral hazard, and turnover

Jacek Rothert

Economic Theory, 2015, vol. 58, issue 2, 355-374

Abstract: I studied the effects of monitoring on political turnover, when the politicians’ early actions affect future economic outcomes. I considered an infinite-horizon environment, where the expectation about the potential successor’s policy is endogenous. As a result, the incentive to replace the incumbent is endogenous. In a stationary Markov equilibrium, the relationship between monitoring and turnover is non-monotone. The model sheds light on dynamic agency problems when the agent’s initial effort has persistent effects, and on the role of reputation in models with endogenous turnover. Copyright Springer-Verlag Berlin Heidelberg (Outside the USA) 2015

Keywords: Learning; Reputation; Political instability; Principal–agent; C73; D82; D83 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s00199-014-0823-1

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