DP14381 The Allocation of Authority in Organizations: A Field Experiment with Bureaucrats

Author(s): Oriana Bandiera, Michael Best, Adnan Khan, Andrea Prat
Publication Date: February 2020
Keyword(s):
JEL(s): D23, H11, H57, O17, O23
Programme Areas: Public Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14381

We design a field experiment to study how the allocation of authority between frontline procurement officers and their monitors affects performance both directly and through the response to incentives. In collaboration with the government of Punjab, Pakistan, we shift authority from monitors to procurement officers and introduce financial incentives to a sample of 600 procurement officers in 26 districts. We find that autonomy alone reduces prices by 9% without reducing quality and that the effect is stronger when the monitor tends to delay approvals for purchases until the end of the fiscal year. In contrast, the effect of performance pay is muted, except when agents face a monitor who does not delay approvals. The results illustrate that organizational design and anti-corruption policies must balance agency issues at different levels of the hierarchy.