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High-powered incentives and communication failure

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  • Mishra,Ajit Kumar
  • Sarangi,Sudipta

Abstract

This paper uses a donor-provider-agent framework to study the role of provider incentives for the delivery of developmental goods like aid, credit, or technology transfer to the poor. The paper considers a situation where credible communication by the provider is the key to successful delivery. The study shows that the use of high-powered incentives can lead to breakdown of communication between providers and agents, leading to undesirable outcomes. The paper studies the interplay between incentives and communication in the presence of typical and motivated providers and finds that in certain situations incentivization leads to worse outcomes.

Suggested Citation

  • Mishra,Ajit Kumar & Sarangi,Sudipta, 2015. "High-powered incentives and communication failure," Policy Research Working Paper Series 7345, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7345
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    References listed on IDEAS

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    More about this item

    Keywords

    Education for the Knowledge Economy; Economic Theory&Research; Labor Policies; Technology Industry; ICT Policy and Strategies;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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