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A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries

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  • Luc Leruth
  • Elisabeth Paul

Abstract

A well-functioning public expenditure management system is considered a critical pillar of government efficiency. This article discusses PEM systems in developing countries using an analytical framework based on principal-agent theory. This simple model can be applied to various PEM systems and allows for comparisons between institutional settings. To illustrate this, the authors analyse the benefits derived from the use by the ministry of finance of ex post audits and ex ante controls, and assess their value in terms of their ability to deter cheating. The authors derive a set of possible “control regimes” which can be used by the ministry of finance.

Suggested Citation

  • Luc Leruth & Elisabeth Paul, 2007. "A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries," OECD Journal on Budgeting, OECD Publishing, vol. 7(3), pages 1-29.
    • Handle: RePEc:oec:govkaa:5l4f5sf3jdvb
    DOI: 10.1787/budget-v7-art16-en
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    Cited by:

    1. Kabiru Isa Dandago, 2018. "Transparency and Accountability in Public Financial Management: A Stewardship Account at Kano State Ministry of Finance, Nigeria," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(2), pages 76-89, April.

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