The Agency Problem of Empire: British Mechanisms for Constraining Governor Behavior

Significant work has been done focusing on the extensive agency problems in companies. However, little has been said about identical problems in the governance of empire. This article extends the work of Carlos, which examines the agency problem within British chartered companies, and investigates the mechanisms the British Colonial Office put in place to mitigate the serious agency problem inherent in their use of governors who were incredibly distant, both geographically and in terms of communication time. This article uses a novel data set of governor salary from 1864 through 1911 as well as the exogenous extension of the telegraph network to examine whether an efficiency wage was employed or whether a specific form of residual claimancy was preferred. In the end, it is found that the central strategy employed was one of residual claimancy.

Find article at International Society for New Institutional Economics.