Agency problems in the public sector: the role of mediators between central administration of city hall and executive bodies

Abstract

This article aims to identify the effects of mid-level bureaucrat’s allocation in the intermediation of relations between the main authority of a city’s executive branch and the city’s secretariat, considering the principal-agent relationship in public administration. The study interviewed analysts responsible for goal and project management who mediate the agency relationship between the Chief of Staff and the executive bodies implementing projects put forward by Rio de Janeiro’s City Hall, in order to examine the effects of the analysts’ intermediation in terms of reducing agency problems. The agency problems referred to in the article are due to public administration’s hierarchical structure, resulting from the differences in motivation and goals of the actors, information asymmetries, risk propensity and different planning horizon. Results show this intermediation is positive to reduce agency problems, impacting in terms of difference in motivation and information asymmetries.

Keywords:
agency problem; city management; information asymmetry; public administration; mid-level bureaucrats.