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has been cited by the following article:

• TITLE: Incentives in Public and Privatized Firms under Incomplete Contracting Situations

  AUTHORS: Takeshi Miyazaki

  KEYWORDS: Incentives in the Public Sector; Incomplete Contracts; Privatization; Ownership Rights

  JOURNAL NAME: Theoretical Economics Letters, Vol.2 No.3, August 2, 2012

  ABSTRACT: It is argued that incentives for employees in the public service agencies will necessarily be weak because of the multiple dimensions of products, multiple principals, incomplete contract, and socializing. Some empirical studies refer to incomplete contracting situations as part of the cause of the diminishing of the public sector. This work investigates the effects of privatization and ownership shares on incentive schemes for employees who work for public or privatized firms under incomplete contracting situations. Two main results are obtained. First, the incentive intensity of public firms decreases as the government has more ownership shares, and the social benefit declines. Second, privatized firms offer their employees higher-powered incentive contracts than do public firms.