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Perverse Incentives (perverse + incentive)

Distribution by Scientific Domains

Medical Sciences	37%
Business, Economics, Finance and Accounting	37%
Humanities and Social Sciences	25%

Selected Abstracts

Opportunists, Predators and Rogues: The Role of Local State Relations in Shaping Chinese Rural Development

JOURNAL OF AGRARIAN CHANGE, Issue 2 2005
MICHELLE S. MOOD
Chinese rural enterprises have developed in various ways in different parts of the country, giving rise to competing explanations of the variation in terms of the role of structure, historical legacies, norms, bureaucratic controls and agency. A new analysis seeks to resolve these contradictions by placing development in the context of township and village cadres' relationships. Townships can either enforce village compliance with county policy or not, and can promote economic development or not, resulting in bureaucratic controls working where compliance is enforced, and norms and agency guiding development where they are not. Perverse incentives allow compliance without achieving larger goals of economic development, and can trap villages in opportunistic or predatory townships. While structure and historical legacies do constrain development in general, inter-level relationships are key to understanding micro-variations. Village wealth and village elections further empower the village level and give agency greater salience. [source]

Public funding for residential and nursing home care: projection of the potential impact of proposals to change the residential allowance in services for older people

INTERNATIONAL JOURNAL OF GERIATRIC PSYCHIATRY, Issue 3 2003
Paul Clarkson
Abstract Background This paper investigates the potential effects of a policy change in the funding of UK residential care. The White Paper Modernising Social Services (Cm 4169, 1998) outlined plans to change the distribution of the Residential Allowance (RA), payable in support of residents in independent residential or nursing home care, from a component of income support paid direct to establishments to a grant to local authorities. This change was intended to remove the perverse incentive in accessing independent residential care more favourably than local authority care. A further objective was to encourage local authorities to use the grant to support home-based alternatives to residential care. The policy rests on a model in which price signals dictate the choice of care for an older person. By, in effect, raising the price of independent residential and nursing home care, the policy provides an incentive for authorities to seek alternatives to institutional care. Methods Managers from 16 UK social services departments attended a focus group discussion, completed questionnaires and provided information to assist in calculating the potential diversionary effect of the policy. Results Managerial estimates indicated a small diversionary effect of the policy; A potential effect of 0.26 and 0.19 per 1000 older people diverted from residential and nursing care respectively. Conclusions The study indicated that wider organisational factors other than price are likely to play a greater role in deciding whether an older person is admitted to care. Changes in public funding alone do not reflect the complexities involved in decision-making concerning the residential placement of older people. Copyright © 2003 John Wiley & Sons, Ltd. [source]

IMPLEMENTING BEST PRACTICE REGULATION IN A DYNAMIC MARKETPLACE: CONSULTATION AND ACCOUNTABILITY

ECONOMIC PAPERS: A JOURNAL OF APPLIED ECONOMICS AND POLICY, Issue S1 2008
RIC SIMES
The practice of financial regulation in Australia has drifted away from the lighted-handed principles articulated in the Wallis Report. The burden of regulatory compliance has steadily grown. The inconsistency between regulatory principle and practice is explained as the result of perverse incentives facing regulators, an absence of effective consultation with industry regarding the cost burden of regulation, and a failure to properly assess the social benefits and costs of regulatory intervention. The paper argues for the creation of a Bureau of Financial Sector Regulation to improve the accountability of regulators and publish independent social cost,benefit analyses of financial regulation. The paper also calls for a further inquiry into Australia's financial system ten years on from the Wallis Inquiry. [source]

China's health system and its reform: a review of recent studies

HEALTH ECONOMICS, Issue S2 2009
Adam Wagstaff
Abstract This paper provides a survey of the recent empirical research on China's ,old' health system (i.e. prior to the spate of reforms beginning in 2003). It argues that this research has enhanced our understanding of the system prior to 2003, in some cases reinforcing conclusions (e.g. the demand-inducement associated with perverse incentives) while in other cases suggesting a slightly less clear storyline (e.g. the link between insurance and out-of-pocket spending). It also concludes that the research to date points to the importance of careful evaluation of the current reforms, and its potential to modify policies as the rollout proceeds. Finally, it argues that the research on the pre-2003 system suggests that while the recently announced further reforms are a step in the right direction, the hoped-for improvements in China's health system will far more likely occur if the reforms become less timid in certain key areas, namely provider payments and intergovernmental fiscal relations. Copyright © 2009 John Wiley & Sons, Ltd. [source]

European health policy challenges

HEALTH ECONOMICS, Issue S1 2005
Alan Maynard
Abstract Few countries are immune to the international health care ,virus' of reform, with many countries regularly re-cycling changes that shift costs and benefits in ways that are arbitrary, inefficient and offer short term political palliation. Much of this activity has little evidence base and reveals lack of clarity in defining public policy goals, establishing trade-offs and aligning incentive structures with these objectives. Well established failures in health care delivery systems such as variations in medical practice and continuing absence of systematic outcome measurement, have persisted for decades as nations grapple inefficiently with recurring problems of expenditure inflation and waiting times. The lack of emphasis on evidence to inform the efficient management of chronic disease and the reduction of health inequalities is a product of perverse incentives and managerial inertia that maintains the incomes of powerful interest groups. Copyright © 2005 John Wiley & Sons, Ltd. [source]

Learning from failed decisions

PERFORMANCE IMPROVEMENT QUARTERLY, Issue 3 2010
Paul C. Nutt PhD
The consequences and dilemmas posed by learning issues for decision making are discussed. Learning requires both awareness of barriers and a coping strategy. The motives to hold back information essential for learning stem from perverse incentives, obscure outcomes, and the hindsight bias. There is little awareness of perverse incentives that encourage cover-ups and limit discussion. The article shows how cover-ups arise, how to root out perverse incentives, and how to encourage disclosures to understand failure. Cases are used to illustrate perverse incentives and how cover-ups arise. Then actions that encouraged learning as well as ways to deal with obscure outcomes and hindsight biases are offered. [source]

Fiscal Federalism in Australia

PUBLIC ADMINISTRATION, Issue 1 2004
Iain McLean
Australia displays high vertical fiscal imbalance (VFI) for historical and constitutional reasons. It also attempts to achieve the highest degree of horizontal fiscal equalization (HFE) to be found in any democratic federation. The Commonwealth Grants Commission (CGC), a non-partisan body at arm's length from politicians, oversees the regime. A recent report claims that equity, efficiency and transparency would all improve if the regime were abolished. Such a change is politically unachievable, but it raises interesting issues in public finance and public administration, which carry over to other federations and union states. An economically efficient system would: minimize perverse incentives, especially incentives to seek rent; encourage states to grow; discourage suboptimal location decisions; minimize transaction costs. An equitable system would maximize equity between relevantly similar individuals. Aspects of the Australian system that should be copied include the non-partisan agency and the target of HFE between component parts of the country. Aspects that should be discussed and perhaps copied include the very extensive equalization, including the feature of equalizing away the effects of grants for special purposes. Aspects that should probably not be copied include the cumbersome formulae and some of the perverse methods of calculating for ,needs'. All abbreviations and acronyms are spelt out in the Appendix on page 37. [source]

Liquidity risk and the hedging role of options

THE JOURNAL OF FUTURES MARKETS, Issue 8 2006
Kit Pong Wong
This study examines the impact of liquidity risk on the behavior of the competitive firm under price uncertainty in a dynamic two-period setting. The firm has access to unbiased one-period futures and option contracts in each period for hedging purposes. A liquidity constraint is imposed on the firm such that the firm is forced to terminate its risk management program in the second period whenever the net loss due to its first-period hedge position exceeds a predetermined threshold level. The imposition of the liquidity constraint on the firm is shown to create perverse incentives to output. Furthermore, the liquidity constrained firm is shown to purchase optimally the unbiased option contracts in the first period if its utility function is quadratic or prudent. This study thus offers a rationale for the hedging role of options when liquidity risk prevails. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:789,808, 2006 [source]