Emmanuelle Auriol

Career Concerns in Teams

We investigate how changes in the commitment power of a principal affect cooperation among agents who work in a team. When the principal and her agents are symmetrically uncertain about the agents’ innate abilities, workers have career concerns. Then, unless the principal can commit herself to long‐term wage contracts, an implicit sabotage incentive emerges. Agents become reluctant to help their teammates. Anticipating this risk, and in order to induce the desired level of cooperation, the principal offers more collectively oriented incentive schemes. Temporary workers, though, are not affected by the sabotage effect, and their incentives are more individually oriented.

Government outsourcing: public contracting with private monopoly

The paper studies the impact of government budget constraint in a pure adverse selection problem of monopoly regulation. The government maximizes total surplus but incurs some cost of public funds a la Laffont and Tirole (1993). An alternative to regulation is proposed in which firms are free to enter the market and to choose their price and output levels. However the government can contract ex-post with the private firms. This ex-post contracting set-up allows more flexibility than traditional regulation where governments commit to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties.

Infrastructure and Public Utilities Privatization in Developing Countries

The paper analyses governments’ trade-off between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consumers. In developing countries, tight budget constraints imply that privatization may be optimal for low profitability segments. For highly profitable public utilities, the combination of allocative inefficiency and critical budgetary conditions may favour public ownership. Finally, once a market segment gives room for more than one firm, governments prefer to regulate the industry. In the absence of a credible regulatory agency, regulation is achieved through public ownership.

The marginal cost of public funds in Africa

The authors use a computable general equilibrium model to estimate the marginal cost of public funds (MCF) for taxes on domestic goods, exports, imports, capital, and labor in 38 African countries. The resulting MCF estimates provide directions for tax reform in Africa. The authors investigate the MCFs of hypothetical taxes in the informal sector and the impact of administrative costs. Finally, they investigate the relationship between MCF dispersion and measures of tax system inefficiency.

Privatizations in Developing Countries and the Government's Budget Constraint

In this paper, we study the impact of governments budget constraint on the optimal industrial policy in industries with increasing returns to scale. We show that privatization is preferred to regulation for intermediate values of the shadow cost of public funds (i.e., the Lagrange multiplier of the governments budget constraint). However, the advantage of privatization is likely to disappear once the product market allows the entry of more than one firm.

The Costs and Benefits of Symbolic Differentiation in the Work Place

We introduce, in a multiple agents moral hazard setting, a status variable which reflects an agents claim to social recognition in her work. Status is a scarce resource so that increasing an agents status requires that another agents status is decreased. High status agents are more willing to exert effort in exchange for monetary compensations while well-paid agents care more about recognition so that they would exert a higher effort in exchange for a higher status. We obtain results coherent with actual management practices and management experts recommendations such as: (i) status and income should be complements; (ii) egalitarianism is desirable in a static context; (iii) in a long-term work relationship, promotions are more effective than direct monetary incentives.

An Economic Analysis of Debarment

With a view to reducing the consequences of corruption in public procurement, many governments have introduced debarment of suppliers found guilty of corruption and some other forms of crime. This paper explores the market effects of debarment on public procurement. Debarment is found to make little difference in markets with high competition, while in markets with low competition it may deter corruption as long as firms value public procurement contracts in the future and there is a certain risk of being detected in corruption. On the other hand, debarment - when it works - has an anti-competitive effect, and this effect will contribute to facilitate collusion between suppliers. Debarment may work as a tool against collusion, but only if targeting one firm at the time (such as a ring-leader or the specific beneficiary when the collusion is detected) - and not all the members of a cartel. If designed with an understanding of the market mechanisms at play, debarment can deter both collusion and corruption, thus improving the results of public procurement. If so, most current debarment regimes need modification.

The Explosive Combination of Religious Decentralisation and Autocracy: the Case of Islam

The relationship between religion and politics is explored from a theoretical standpoint. Religious clerics can be seduced by an autocrat and political stability is at stake. The autocrats decisions consist of two measures susceptible of antagonising religious clerics: adopting secular reforms and unduly appropriating part of national wealth, which generally are complement. Compared to centralized religions, decentralized religions, such as Islam, tend to discourage secular reforms and corruption but those effects are not guaranteed if the autocrat accepts political instability. The main hypotheses and the central results of the theory are illustrated with regime case studies that refer to contemporary times.

Nonprofits In The Field: An Economic Analysis Of Peer Monitoring And Sabotage

Two types of intrinsically motivated workers are considered: good workers care about the mission of an organization, whereas bad workers derive pleasure from destructive behavior. Compared to the case with only good workers, the mission-oriented sector has to resort to higher monitoring to deal with the threat of sabotage. When standard monitoring is not possible, peer monitoring might deter bad workers from entering the nonprofit sector but reduces output due to free riding and because workers require higher compensation to work in teams. Nonprofits implement peer monitoring only if the expected damage that bad workers can inflict is larger than the loss of productivity due to teamwork. For senior staff with high reservation utility, they turn a blind eye on serious sabotage if the likelihood of hiring a bad worker is perceived as small. But they almost systematically implement peer monitoring for junior staff.

Liberal regulation: privatization of natural monopolies with adverse selection

This paper studies the effect of soft-budget constraints in a pure adverse selection model of monopoly regulation. We consider a government maximizing total surplus but incurring some cost of public funds A la Laffont Tirole (1993). We propose a regulatory set-up in which firms are free to enter natural monopoly markets and to choose their price and output levels as in the laisser-faire. In addition, the government proposes ex-post contracts to the private firms. We show that this regulatory set-up allows governments to avoid re-funding moneyloosing firms and that welfare is larger than under traditional regulationwhere governments commits to both investment and operation cash-flows.