Working Paper: CEPR ID: DP3884
Authors: Johan Lagerlf
Abstract: This Paper studies a model of public policy with heterogeneous citizens/voters and two public goods: one (roads) is chosen directly by an elected policy-maker, and the other (pollution) depends stochastically on the amount of roads. Both a one-country and a two-country version of the model are analysed, the latter displaying externalities across the countries, which creates incentives for free-riding and strategic delegation. The welfare effects of providing the policy-maker with information about the relationship between roads and pollution are investigated, and it is shown that more information hurts some ? sometimes even all ? citizens. In particular, the opportunity not to build an institution for information gathering can serve as a commitment device for a country, although with the unfortunate effect of making the overall outcome even worse. Implications for the welfare effects of ?informational lobbying? are discussed.
Keywords: informational lobbying; interest groups; public information acquisition; strategic delegation; value of information; welfare
JEL Codes: D69; D78; D89
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| providing the policymaker with more information about the relationship between roads and pollution (R48) | hurts some citizens (H84) |
| more information increases ex ante uncertainty (D89) | adversely affects citizens with concave utility functions (D11) |
| higher quality signal about the relationship between roads and pollution (R41) | more variability in the policymaker's decision-making process regarding road construction (R42) |
| more variability in the policymaker's decision-making process regarding road construction (R42) | reduces ex post uncertainty (D81) |
| more variability in the policymaker's decision-making process regarding road construction (R42) | results in a net negative effect on the welfare of citizens who prioritize pollution less than roads (D62) |
| majority of citizens in one country prefer their own policymaker to remain uninformed if the other country's policymaker is informed (F52) | anticipates increase in ex ante uncertainty (D84) |
| strategic delegation problem (C78) | citizens may prefer to limit information access to avoid adverse welfare outcomes (D89) |