We analyse the current legislation on incentives for public managers in Italy and the most recent developments in the sector. In the light of the main findings of economic theory, we identify the most critical issues affecting the design of an optimal system of incentives.
These are the existence of multi-principle agency problems involving public managers; the difficulty of observing and measuring the output of the public sector; and the excessive limitations on managers’ autonomy arising from the need to respect the rule of law. Along these three lines, we analyse the public management reforms that have been introduced in Italy since the 1990s and evaluate their effectiveness by means of an empirical analysis of the premiums paid to public managers in 2012.
This reveals a substantial flattening of the premiums paid and highlights that only the age of the manager and no other individual characteristics, such as professional experience or specific skills, significantly affects the amount received. We conclude that the ineffectiveness of the current system of incentives for public managers is due mainly to the blanket application of the same rules to all organizations, to inadequately identified objectives, and to excessive limitations on managers’ autonomy.
