Li, David D.: A Theory of the Reform of Bureaucratic Institutions
World Conference Econometric Society, 2000, Seattle

Susanto Basu, University of Michigan
David D. Li, Hong Kong University of Science and Technology
A Theory of the Reform of Bureaucratic Institutions
Session: C-11-13  Tuesday 15 August 2000  by Li, David D.
By bureaucratic institutions or bureaucracy, we mean the rules and regulations that are implemented by government agencies. Burdensome bureaucratic institutions are leading obstacles to economic development and therefore the target of economic reform of many countries in today's world. In this paper, we provide a theoretical framework to analyze the reform of bureaucratic institutions. The analysis shows the key to the reform is to properly incentivize the incumbent generation of bureaucrats, whose cooperation is needed to reform the bureaucracy. However, a simple buy out strategy of reform may not always work. Under certain conditions, a delegation strategy that grants incumbent bureaucrats the decision rights to initiate and to reap the benefit of reform can be successful.
Submitted paper full-text in .pdf

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