Working Paper: CEPR ID: DP16562
Authors: Massimo Morelli; Dana Foarta
Abstract: Reform processes commonly involve professional bureaucrats drafting policies to be adopted by political decision makers. Conflicts of interest between these two groups may give rise to pandering in policymaking. We expand the standard pandering setup in two directions. First, we allow for policies to differ in their complexity. Second, we model the dynamic consequences of reforms, where a complex (simple) policy complexifies (simplifies) the legislative environment in which subsequent policies are drafted. We show that pandering motivates inefficient complex policies, which beget complexity in the legislative environment. We derive conditions under which the complexity build-up is bounded. Stabilization around an intermediate level of complexity is achieved under high uncertainty around the type of policy reform suited to current conditions and around the bureaucracy's capacity to implement it. When complex reforms are expected to be the right ones but bureaucratic capacity is uncertain, the legislative environment may enter a trap of ever increasing complexity.
Keywords: dynamic; pandering; regulatory complexity; bureaucratic capacity; incremental reforms; policy cycles
JEL Codes: D73; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bureaucratic pandering (D73) | Adoption of inefficient complex policies (D78) |
| Adoption of inefficient complex policies (D78) | Complication of the legislative environment (D72) |
| Complication of the legislative environment (D72) | Cycle of increasing complexity (E32) |
| Bureaucratic proposals (D73) | Political decision-maker evaluations (D79) |
| Decision-maker's uncertainty about bureaucrat's capacity (D73) | Likelihood of adopting complex reforms (D72) |
| Complex reforms adopted (H19) | Layers of complexity added to future policymaking (D78) |
| Layers of complexity added to future policymaking (D78) | Kafkaesque trap of ever-increasing complexity (D73) |