The Relevance of the Principal-Agent Model for the Analysis of Public Policies: Do the Objectives Conflict?

By Florian Chatagny and Nils Soguel.

Published by The Social Sciences Collection

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Article: Print $US10.00
Article: Electronic $US5.00

This paper aims to provide empirical support for the use of the principal-agent framework in the analysis of public sector and public policies. After reviewing the different conditions to be met for a relevant analysis of the relationship between population and government using the principal-agent theory, our paper focuses on the assumption of conflicting goals between the principal and the agent. A principal-agent analysis assumes in effect that inefficiencies may arise because principal and agent pursue different goals. Using data collected during an amalgamation project of two Swiss municipalities, we show the existence of a gap between the goals of the population and those of the government. Consequently, inefficiencies as predicted by the principal-agent model may arise during the implementation of a public policy, i.e. an amalgamation project. In a context of direct democracy where policies are regularly subjected to referendum, the conflict of objectives may even lead to a total failure of the policy at the polls.

Keywords: Principal-Agent Model, Conflicting Goals, Local Government, Public Policy, Amalgamation, Direct Democracy

The International Journal of Interdisciplinary Social Sciences, Volume 2, Issue 1, pp.385-392. Article: Print (Spiral Bound). Article: Electronic (PDF File; 514.915KB).

Florian Chatagny

Assistant, Chair of Public Finance, Swiss Graduate School of Public Administration (IDHEAP), IDHEAP, University of Lausanne, Lausanne, Switzerland

Swiss Graduate School of Public Administration (IDHEAP), Chair of Public Finance University of Lausanne, See the following link : http://www.idheap.ch/idheap.nsf/go/fc

Prof. Nils Soguel

Professor, Head of the chair of Public Finance, Chair of Public Finance, Swiss Graduate School of Public Administration (IDHEAP), IDHEAP, University of Lausanne, Lausanne, Switzerland

Swiss Graduate School of Public Administration (IDHEAP), Chair of Public Finance University of Lausanne, See the following link : http://www.idheap.ch/idheap.nsf/go/ns

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