Information, Incentives and Commitment : An Empirical Analysis of Contracts between Government and State Enterprises

This article analyzes the experience with performance contracts between developing country governments and the managers of their state owned enterprises. It identifies how problems of information asymmetry, incentives, and commitment can lead to shirking. It applies this conceptual framework to a sample of 12 contracts with monopoly state enterprises in six developing countries and finds that all suffer from serious contracting problems and there is no pattern of improved performance that can be attributed to the contracts