Optimal Patronage

Mikhail Drugov

No 10343, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the design of promotions in an organization where agents belong to groups that advance their cause. Examples and applications include political groups, ethnicities, agents motivated by the work in the public sector and corruption. In an overlapping generations model, juniors compete for promotions. Seniors have two kinds of discretion: direct discretion which allows an immediate advancement of their cause and promotion discretion ("patronage") which allows a biasing of the promotion decision in favour of the juniors from their group. We consider two possible goals of the principal, maximizing juniors' efforts and affecting the steady-state composition of the senior level towards the preferred group, and show that patronage may be strictly positive in both of them. We also apply the second setting to the case of corruption.

Keywords: Bureaucracy; Contest; Corruption; Motivated agents; Patronage; Promotion (search for similar items in EconPapers)
JEL-codes: D73 H41 J45 J70 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-cdm and nep-mic
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