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- Title
Monitoring, moral hazard, and turnover.
- Authors
Rothert, Jacek
- Abstract
I studied the effects of monitoring on political turnover, when the politicians' early actions affect future economic outcomes. I considered an infinite-horizon environment, where the expectation about the potential successor's policy is endogenous. As a result, the incentive to replace the incumbent is endogenous. In a stationary Markov equilibrium, the relationship between monitoring and turnover is non-monotone. The model sheds light on dynamic agency problems when the agent's initial effort has persistent effects, and on the role of reputation in models with endogenous turnover.
- Subjects
BUSINESS turnover; MORAL hazard; POLITICAL stability; MARKOV processes; PROBLEM solving
- Publication
Economic Theory, 2015, Vol 58, Issue 2, p355
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-014-0823-1