TITLE:
An Application of Principal Agent Theory to Contractual Hiring Arrangements within Public Sector Organizations
AUTHORS:
Charlene M. L. Roach
KEYWORDS:
Principal-Agent Theory, Agency Problems, Moral Hazard, Asymmetric Information, Adverse Selection
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.1,
February
3,
2016
ABSTRACT: This
paper critically examines the application of principal agent theory to
contractual hiring arrangements of employees in public sector organizations as
a contemporary alternative recruitment strategy. Globally, developed and
developing nations within the public sector are seeking ways where they can
reduce public expenditure and debt while at the same time attempting to increase
productivity and efficiency gains by using cost containment initiatives. Thus,
private sector methods of outsourcing and contracting are identified as more
economically feasible strategies given global recessions and other budgetary
constraints within these public agencies. Hence, public management and
administration scholars have alluded to the catchy phrase of “doing more with
less” (see [1]). Thus, the paper from a theoretically exploratory perspective
analyzes how principal agent theory can be applied to the hiring of contingent
employees within this sector and the agency problems that may likely arise as a
result of these arrangements and their probable economic implications for the
said sector.