Empirical evidence on the effectiveness of productivity incentives in the public sector is sparse. However donor enthusiasm is growing for this general approach and certain lessons are emerging.
public sector reform
Public sector reforms often attempt to mimic the “discipline” of the market in order to spur better performance among service providers. Examples include numerous variants of performance based financing for health, where health providers are compensated monetarily for achievement of specified health targets. At the heart of this approach is a standard view of economic agents induced to modify behaviors through pecuniary incentives.