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This publication analyses the tension between trust and control in state-financed activities. Three economic perspectives are used that complement each other: behavioural economics, agent theory and the so-called public choice perspective. A policy experiment that tested the effects of a tougher control environment was presented and discussed.
WHEN DO ACTIVITIES need to be followed up through evaluations and external scrutiny – and when can commissions be based on trust? Does an increase in control lead to less inner motivation? This publication analyses the tension between trust and control in state-financed activities. Three economic perspectives are used that complement each other: behavioural economics, agent theory and the so-called public choice perspective. A policy experiment that tested the effects of a tougher control environment was presented and discussed. The study involved slightly more than 120 non-profit organisations which get grants from the state-owned international development authority, Sida.
STRICTER CONTROL ENTAILED LESS IRREGULARITIES. Those organisations that learnt that the scrutiny of the financial reports was to be tightened up did report their expenses with more care, had a lower share of unmotivated costs and returned funds to a larger extent.
THE CONTROL DID NOT DECREASE THE INNER MOTIVATION. In those organisations that were subject to more detailed scrutiny, there was an increase in both self-experienced and observed fulfilment of objectives. This indicates that the control did not have any negative effect on the motivation of the employees.
THE LEGITIMACY OF THE CONTROL IS IMPORTANT. It is probably of great importance that those who are subject to scrutiny perceive the control to be legitimate for it not to have a negative effect on the inner motivation or undermine the professionalism of the employees.
AUTHOR Niklas Bengtsson has a PhD in Economics and works at Uppsala University. E-mail: niklas.bengtsson@nek.uu.se.