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The authors are indebted to Sveinung Skjesol for assistance in the preparation of this paper.
See, among others, Klitgaard (1988), Rose-Ackerman (1978, 1997), and Tanzi (1997). For institutional recognition in a multilateral context see the just released Governance Guidance Note of the IMF (1997).
See, however, Besley and McLaren (1993), Flatters and MacLeod (1995), and Haque and Sahay(1996), who examine incentive effects but without the explicit treatment of bonuses as is done here. Our approach is closer to that of Mokherjee and Png (1995).
In 1991, the NRS was placed under the control of the MFEP, but continues, together with the two revenue departments, to enjoy a high degree of autonomy.
Parallel with the bonus system, an incentive-based mechanism was employed for some years to provide resources to the revenue departments to cover their routine operations. The two departments were allowed to keep a certain percentage of the revenue collected, with the incentive being that if they needed more resources they would aim at a higher level of collections. See Terkper (1994).
Terkper op.cit., mentions additional reasons why the bonus scheme was discontinued including that the practice was never backed by legislation.