Cronyism in Business, Public Sector and Politics

Galina Zudenkova ()

Working Papers from Universitat Rovira i Virgili, Department of Economics

Abstract: This paper contrasts the incentives for cronyism in business, the public sector and politics within an agency problem model with moral hazard. The analysis is focused on the institutional differences between private, public and political organizations. In business, when facing a residual claimant contract, a chief manager ends up with a relatively moderate rst-best level of cronyism within a …firm. The institutional framework of the public sector does not allow explicit contracting, which leads to a more severe cronyism problem within public organizations. Finally, it is shown that the nature of political appointments (such that the subordinate's reappointment is conditioned on the chief's re-election) together with implicit contracting makes political cronyism the most extreme case. JEL classifi…cation: D72, D73, D86. Keywords: Cronyism; Meritocracy; Manager; Bureaucrat; Politician.

Keywords: Clientelisme; Burocràcia; Polítics; 32 - Política (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cta and nep-pol
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http://hdl.handle.net/2072/151814

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Working Paper: Cronyism in Business, Public Sector and Politics (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:urv:wpaper:2072/151814

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