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Contemporary Microeconomic Foundations for the Structure and Management of the Public Sector WP 12/01

Publication Details

  • Contemporary Microeconomic Foundations for the Structure and Management of the Public Sector
  • Published: 4 May 2012
  • Status: Current
  • Authors: Evans, Lewis; Quigley, Neil; Guthrie, Graeme
  • Pages: (2),vi,69
  • ISBN: 978-0-478-39639-3 (Online)
  • Ref. No: WP 12/01
  • Pub. type: Working Papers
  • JEL Classification: G31; H40; L20; L33
 

Contemporary Microeconomic Foundations for the Structure and Management of the Public Sector

Published 4 May 2012
Page updated 4 Jul 2012

Author: Lewis Evans, Graeme Guthrie and Neil Quigley

Abstract

The new public management of the 1980s was based in part on a range of important new insights about the role of transaction and agency costs arising from contractual incompleteness in defining the boundaries of the firm and the governance relationships within it. In this paper, we consider the literature of the last 25 years which extends our understanding of allocations of ownership rights and the boundaries of the firm as responses to contractual incompleteness. From this perspective, ownership represents an allocation of control rights to those with the potential to make the most important (value-enhancing) relationship-specific investments. We provide an outline of this modern approach to contractual incompleteness, illustrate its application to a range of issues in public and private ownership, investment, governance and decision-making, and provide suggestions about the impact that this approach might have on the scope, structure and management of the public sector in the 21st century.

This Working Paper is available in Adobe PDF and HTML format. Using PDF Files

Contents

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Summary

1 Introduction

2 Microeconomic foundations of state-sector reform in New Zealand after 1984

3 Incomplete contracts, ownership and the boundaries of the firm

4 Real options and investment

5 The ownership of facilities that deliver public services

6 Public vs private delivery of public services

7 Governance

8 Public management: personnel economics in the public sector

9 Coordination between public-sector organisations

10 Conclusions

11 References

twp12-01.pdf (367 KB) pp.vi,1–69

Acknowledgements

The authors acknowledge the assistance they have received from participants in seminars at the Treasury, and referee reports from Peter Bushnell, Ig Horstmann, Kirsten Jensen and Graham Scott.

Disclaimer

The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government.  The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

 

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