Working Paper No. 784

A Trickle-Down Theory of Incentives with Applications to Privatization and Outsourcing

Published: January 7, 2009Pages: 28Keywords: Make-or-buy decision; Multitask principal-agent problem; OutsourcingJEL-codes: D23; L22; L24

A Trickle-Down Theory of Incentives with Applications to Privatization and Outsourcing Fredrik Andersson


The make-or-buy decision is analyzed in a three-layer principal-management-agent model. There is a cost-saving/quality tradeoff in effort provision. The principal chooses between employing an in-house management and contracting with an independent management; the cost-saving incentives facing the management are, endogenously, weaker in the former case. Cost-saving incentives trickle down to the agent, affecting the cost-saving/quality trade-off. It is shown that weak cost-saving incentives to the management promote quality provision by the agent, and that a more severe quality-control problem between the principal and the management, as well as a higher valuation of quality, make an in-house management more attractive.
 

 

Fredrik Andersson

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Integrating Immigrants into the Nordic Labour Markets

An Overall Perspective

Pages-from-2019-Calmfors-Gassen---Integrating-Immigrants-into-the-Nordic-Labour-Markets.gif

Denmark, Finland, Norway and Sweden face similar problems of integrating large groups of immigrants, especially low-educated ones from outside the EU, into their labour markets. In this volume, edited by Lars Calmfors, IFN, and Nora Sánchez Gassen in cooperation with researchers from across the Nordic Region analyse how labour market integration of immigrants can be promoted. 

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