Performance Incentives and Bureaucratic Behavior: Evidence from a Federal Bureaucracy

Abstract

This paper examines the effects of performance incentives in a federal job training program for the poor. I find that job training bureaucrats respond to incentives in ways that are consistent with a simple model of bureaucratic behavior. Additionally I am able to test whether attempts by the program's incentive designers to improve the precision of performance measures in the late 1980s increased or decreased efficiency. My ability to relate precisely formulated, agent-level incentives to precisely measured agent-level performance outcomes, activities, and productivity sets this paper apart from most other empirical studies of incentives in organizations. I discuss my results in the context of the greater incentive literature, as well as the literature on incentives in job training programs.