Optimal Patronage

36 Pages Posted: 23 Jan 2015

See all articles by Mikhail Drugov

Mikhail Drugov

Centre for Economic Policy Research (CEPR); New Economic School (NES)

Date Written: January 2015

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

JEL Classification: D73, H41, J45, J70

Suggested Citation

Drugov, Mikhail, Optimal Patronage (January 2015). CEPR Discussion Paper No. DP10343, Available at SSRN: https://ssrn.com/abstract=2554417

Mikhail Drugov (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

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