Title

Setting Efficient Incentives for Agricultural Research: Lessons from Principal-Agent Theory

Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

11-2000

Journal or Book Title

American Journal of Agricultural Economics

Volume

82

Issue

4

First Page or Article ID Number

828

Last Page

841

DOI

10.1111/0002-9092.00084

Abstract

A conceptual analysis of important issues in the organization and management of academic research is presented. Principal-agent theory is applied to derive optimal compensation schemes for scientists when they differ in ability, risk aversion, cost of effort, and reservation utility, and to show the optimal trade-off between institutional risk and scientists' abilities. Implications for an efficient organization of research are derived, including how scientists' incentives should be structured to elicit optimal research efforts and direction, whether research direction should be centralized or decentralized, and whether the organization of research should be through external competitive grantsor program and institutional funding.

JEL Classification

Q16

Comments

This is a staff paper of an article from American Journal of Agricultural Economics 82 (2000): 828, doi: 10.1111/0002-9092.00084.