Working Paper: CEPR ID: DP15136
Authors: Massimo Morelli; Dana Foarta
Abstract: Decision makers called to evaluate and approve a reform, proposed by an interest group, a politician, or a bureaucracy, suffer from a double asymmetric information problem: about the competence of the proposer and the consequences of the proposal. Moreover, the ability of decision makers to evaluate proposals depends on the complexity of the legislative environment, itself a product of past reforms. We model the strategic interaction between reformers and decision makers as a function of legislative complexity, and study the dynamics of endogenous complexity and stability of reforms. Complexi cation-simpli cation cycles can occur on the equilibrium path, and expected long-run complexity may be higher when competence of reform proposers is lower. The results apply to regulatory reforms, legislative politics, and institutional design.
Keywords: information; regulatory complexity; competence; interest groups; politicians; bureaucracy; checks and balances; incremental reforms
JEL Codes: D73; G28; H83; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| proposer's competence (D83) | decision maker's approval of reforms (D78) |
| higher expected long-run complexity (C69) | lower competence of reform proposers (D72) |
| simpler reforms adopted (H19) | less complex legislative environment (D72) |
| decision maker's beliefs about the state of the world (D80) | likelihood of adopting a reform (D79) |