TY - JOUR
T1 - Screening budgets
AU - Wagner, Alexander F.
AU - Miller, Nolan H.
AU - Zeckhauser, Richard J.
N1 - Funding Information:
We thank Philippe Aghion, Alberto Alesina, George Baker, Oliver Hart, Liz Keating, Martin Weitzman as well as one anonymous referee and the editor for comments. Wagner would like to thank the Austrian Academy of Sciences for support through the APART fellowship.
Copyright:
Copyright 2006 Elsevier B.V., All rights reserved.
PY - 2006/11
Y1 - 2006/11
N2 - How should an organization's center allocate resources to units under its control which are better informed? Even with conscientious productivity reviews, important information will remain asymmetrically held. If units value their own expenditures more than those of their peers, they will seek excess budgets and expenditures. Fortunately, budget authorities can infer productivities from units' expenditure patterns across spending categories and over time. Optimal screening budgets reward more productive units with greater overall budgets. Such screening provides significant welfare gains over traditional fixed or reallocable budgets. Empirical results for a large electricity and infrastructure provider fit an important version of the model.
AB - How should an organization's center allocate resources to units under its control which are better informed? Even with conscientious productivity reviews, important information will remain asymmetrically held. If units value their own expenditures more than those of their peers, they will seek excess budgets and expenditures. Fortunately, budget authorities can infer productivities from units' expenditure patterns across spending categories and over time. Optimal screening budgets reward more productive units with greater overall budgets. Such screening provides significant welfare gains over traditional fixed or reallocable budgets. Empirical results for a large electricity and infrastructure provider fit an important version of the model.
KW - Asymmetric information
KW - Budgeting
KW - Screening
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U2 - 10.1016/j.jebo.2004.12.004
DO - 10.1016/j.jebo.2004.12.004
M3 - Article
AN - SCOPUS:33750166938
SN - 0167-2681
VL - 61
SP - 351
EP - 374
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
IS - 3
ER -