Working Paper: CEPR ID: DP12081
Authors: Gabriele Gratton; Luigi Guiso; Claudio Michelacci; Massimo Morelli
Abstract: A well functioning bureaucracy can promote prosperity, as Max Weber maintained.But when bureaucracy gets jammed—a Kafkian situation—it causes stagnation. Wepropose a dynamic theory of the interaction between legislation and the efficiency ofbureaucracy. When bureaucracy is inefficient, the effects of politicians’ legislative actsare hard to assess. Incompetent politicians thus have strong incentives of passing lawsto acquire the reputation of skillful reformers. But a plethora of often contradictorylaws can itself lead to a collapse in bureaucratic efficiency. This interaction can spawnboth Weberian and Kafkian steady states. A temporary surge in political instability,which increases the likelihood of a premature end of the legislature, exerts pressurefor reforms, or results in the appointment of short-lived technocratic governmentscan determine a permanent shift towards the nightmare Kafkian steady state. Theaggregate experience of Italy in its transition from the so-called First to the SecondRepublic fits the narrative of the model quite well. Using micro-data for Italian MPs,we also provide evidence consistent with the claim that when political instability ishigh, politicians signal their competence through legislative activism, which leads tothe overproduction of laws and norms.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Political instability (O17) | increased legislative activity (D72) |
| increased legislative activity (D72) | bureaucratic inefficiency (D73) |
| Political instability (O17) | bureaucratic inefficiency (D73) |