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Peter Friedrich; Kadri Ukrainski (2012)
Types: Preprint
Subjects: Quango, public office, public enterprise, vertical competition, horizontal competition, entrepreneurship, public management, success measurement
jel: jel:H83, jel:L33, jel:L32, jel:D73
Quangos and public entrepreneurship are closely related. The economic theory of quangos allows us to develop a quango theory and highlight the effects of public entrepreneurship. By considering principal agent relations we show how public entrepreneurship of government and quango influence each other in the framework of vertical competition. Also horizontal competition between a quango and other quangos as well as to private enterprises influences the political entrepreneurship. Reference is made to a duopoly model for a competing quango of version 2. Considering the measurement of success of political entrepreneurship, we find that when it is related to increasing output the output development of the quangos may be used as measure of public entrepreneurship success which is relatively high in case of output maximising management. With other types of management the success turns out lower. If the political success is measured by effects of quango on third parties additional difficulties arise. A model of voters reactions on quango production within a model of public sector shows measurement of public political and public quango entrepreneurship and the budgets which result from these entrepreneurships. As there is no satisfying effect measurement models for quangos, which are empirically verified. Moreover, no social welfare function or a general social indicator function is available. Also social success in the sense of welfare maximisation by benefit-cost measurement through willingness to pay measurement is not applicable. Therefore, the success should be measured at the quango level by application of output oriented criteria. Examples from Germany and Estonia show chances and limits of public entrepreneurship within and through quangos.

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