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Political polarization, term length and too much delegation

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Abstract

What is the strategic incentive for governments and societies to delegate decision making to independent agents? I develop a framework taking into account preference uncertainty and the term length of independent agents in an environment with electoral and preference uncertainty and political polarization. Governments and societies face a trade-off concerning the predictability of decisions and the adaptability of to changing preferences. I find that governments, in general, tend to delegate too much and for too long from the point of view of society.

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Notes

  1. The argument most often made for delegation to central banks is the time-consistency problem (Rogoff 1985). I abstract from this particular aspect because it is arguably less relevant for other delegation decisions, such as to courts. Delegation to independent central banks has also been advocated to reduce policy cycles (Alesina and Gatti 1995).

  2. Another way to endogenize election probabilities would be to allow parties to take societal preference changes to a different degree into account with \(\phi ^{i}\). Again, convergence of parties’ behavior would result.

  3. As Lohmann (1992) shows, an agent fearing to be overruled adjusts his policy so that overriding does not occur in equilibrium.

  4. Epstein et al. (1998) show how supreme court judges have changed their positions during time in office. The same argument has been made for central bankers who became more conservative than expected once in office (Lohmann 1992).

  5. Obviously, when \(\alpha =0\), every policy maker would simply set his preferred policy, leading to a utility level of zero.

  6. There may also be an agency problem between government and bureaucracy and bureaucracy’s preferences may deviate from the government’s (Alesina and Tabellini 2007). For the government’s choice to delegate or not, however, it is only important which of the two systems can be better controlled and I therefore normalize the control problem under non-delegation to zero.

  7. In how far society can actually make this decision is discussed below.

  8. Quintyn (2009) discusses a recent trend of government delegating certain areas to independent regulatory agencies without any apparent direct involvement of voters.

  9. This need of course not be the case. If the median voter is located between two ideologically committed parties to the right and the left (see Milesi-Ferretti 1995), it could well be that an independent agent is closer to the median’s position than parties are.

  10. This reflects a more general result by Gollwitzer and Quintyn (2010) who show that independent agencies are rarely found in cases in which they would be expected most on theoretical grounds.

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Acknowledgements

For helpful comments I thank two anonymous referees, Michael Neugart and participants in presentations at the Universities of Aachen, Basel, Darmstadt, Jena, Lille, Marburg, and Zurich.

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Authors and Affiliations

  1. Department of Economics, University of Siegen, 57068, Siegen, Germany

    Carsten Hefeker

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Correspondence to Carsten Hefeker.

Appendix

Appendix

1.1 Specification of expected utilites of party i

$$\begin{aligned}&E\left[ u_{1}^{a}\left| ND\right. \right] =-\int _{-\delta }^{\delta } \frac{1}{2\delta }\left( \frac{x^{a}+\phi s}{1+\alpha }-x^{a}-\phi s\right) ^{2}ds-\int _{-\delta }^{\delta }\frac{1}{2\delta }\left( \frac{x^{a}+\phi s}{ 1+\alpha }\right) ^{2}ds\\&E\left[ u_{2}^{a}\left| ND\right. \right] =-p\left( \int _{-\delta }^{\delta }\frac{1}{2\delta }\left( \frac{x^{b}+\phi s}{1+\alpha } -x^{a}-\phi s\right) ^{2}ds-\int _{-\delta }^{\delta }\frac{1}{2\delta } \left( \frac{x^{b}+\phi s}{1+\alpha }\right) ^{2}ds\right) \\&\quad -\left( 1-p\right) \left( \int _{-\delta }^{\delta }\frac{1}{2\delta }\left( \frac{x^{a}+\phi s}{1+\alpha }-x^{a}-\phi s\right) ^{2}ds-\int _{-\delta }^{\delta }\frac{1}{2\delta }\left( \frac{x^{a}+\phi s}{1+\alpha }\right) ^{2}ds\right) \\&E\left[ u_{1}^{a}\left| D_{S}\right. \right] =-\int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{2\delta }\left( \frac{ x_{a}^{D}+\varepsilon }{1+\alpha }-x^{a}-\phi s\right) ^{2}dsd\varepsilon -\int _{-\mu }^{\mu }\frac{1}{2\mu }\left( \frac{x_{a}^{D}+\varepsilon }{ 1+\alpha }\right) ^{2}d\varepsilon \\&E\left[ u_{2}^{a}\left| D_{S}\right. \right] =-p\,\left( \int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{2\delta }\left( \frac{x_{b}^{D}+\varepsilon +\phi s}{1+\alpha }-x^{a}-\phi s\right) ^{2}dsd\varepsilon \right. \\&\quad \left. +\int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{ 2\mu }\frac{1}{2\delta }\left( \frac{x_{b}^{D}+\varepsilon +\phi s}{1+\alpha }\right) ^{2}dsd\varepsilon \right) \\&\quad -\left( 1-p\right) \left( \int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{ 1}{2\mu }\frac{1}{2\delta }\left( \frac{x_{a}^{D}+\varepsilon +\phi s}{ 1+\alpha }-x^{a}-\phi s\right) ^{2}dsd\varepsilon \right. \\&\quad \left. +\int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{2\delta }\left( \frac{ x_{a}^{D}+\varepsilon +\phi s}{1+\alpha }\right) ^{2}dsd\varepsilon \right) \\&E\left[ u_{1}^{i}\left| D_{L}\right. \right] =-\int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{2\delta }\left( \frac{ x_{a}^{D}+\varepsilon }{1+\alpha }-x^{a}-\phi s\right) ^{2}dsd\varepsilon -\int _{-\mu }^{\mu }\frac{1}{2\mu }\left( \frac{x_{a}^{D}+\varepsilon }{ 1+\alpha }\right) ^{2}d\varepsilon \\&E\left[ u_{2}^{i}\left| D_{L}\right. \right] =-\int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{2\delta }\left( \frac{ x_{a}^{D}+\varepsilon }{1+\alpha }-x^{a}-\phi s\right) ^{2}dsd\varepsilon -\int _{-\mu }^{\mu }\frac{1}{2\mu }\left( \frac{x_{a}^{D}+\varepsilon }{ 1+\alpha }\right) ^{2}d\varepsilon \end{aligned}$$

1.2 Specification of expected utilites of society

$$\begin{aligned}E\left[ u_{t}^{V}\left| ND\right. \right] &=-\left( 1-p\right) \left( \int _{-\delta }^{\delta }\frac{1}{2\delta }\left( \frac{x^{a}+\phi s}{ 1+\alpha }-x^{V}-s\right) ^{2}ds\right. \\&\quad \left. +\int _{-\delta }^{\delta }\frac{1}{2\delta } \left( \frac{x^{a}+\phi s}{1+\alpha }\right) ^{2}ds\right) \\&\quad -p\int _{-\delta }^{\delta }\left( \frac{1}{2\delta }\left( \frac{x^{b}+\phi s}{1+\alpha }-x^{V}-s\right) ^{2}ds\right. \\&\quad \left. +\int _{-\delta }^{\delta }\frac{1}{ 2\delta }\left( \frac{x^{b}+\phi s}{1+\alpha }\right) ^{2}ds\right) \\&E\left[ u_{1}^{V}\left| D_{S}\right. \right] =-\left( 1-p\right) \,\left( \int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{ 2\delta }\left( \frac{x_{a}^{D}+\varepsilon }{1+\alpha }-x^{V}-s\right) ^{2}dsd\varepsilon \right. \\&\quad \left. +\int _{-\mu }^{\mu }\frac{1}{2\mu }\left( \frac{ x_{a}^{D}+\varepsilon }{1+\alpha }\right) ^{2}d\varepsilon \right) \\&\quad -p\,\left( \int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1 }{2\delta }\left( \frac{x_{b}^{D}+\varepsilon }{1+\alpha }-x^{V}-s\right) ^{2}dsd\varepsilon +\int _{-\mu }^{\mu }\frac{1}{2\mu }\left( \frac{ x_{b}^{D}+\varepsilon }{1+\alpha }\right) ^{2}d\varepsilon \right) \\&E\left[ u_{2}^{V}\left| D_{S}\right. \right] =-\left( 1-p\right) \left( \int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{ 2\delta }\left( \frac{x_{a}^{D}+\varepsilon +\phi s}{1+\alpha } -x^{V}-s\right) ^{2}dsd\varepsilon \right. \\&\quad \left. +\int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{2\delta }\left( \frac{x_{a}^{D}+ \varepsilon +\phi s}{1+\alpha }\right) ^{2}dsd\varepsilon \right) \\&\quad -p\,\left( \int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1 }{2\delta }\left( \frac{x_{b}^{D}+\varepsilon +\phi s}{1+\alpha } -x^{V}-s\right) ^{2}dsd\varepsilon \right. \\&\quad \left. +\int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{2\delta }\left( \frac{x_{b}^{D}+ \varepsilon +\phi s}{1+\alpha }\right) ^{2}dsd\varepsilon \right) .\\&E\left[ u_{t}^{V}\left| D_{L}\right. \right] =-\left( 1-p\right) \left( \int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1}{ 2\delta }\left( \frac{x_{a}^{D}+\varepsilon }{1+\alpha }-x^{V}-s\right) ^{2}dsd\varepsilon \right. \\&\quad \left. +\int _{-\mu }^{\mu }\frac{1}{2\mu }\left( \frac{ x_{a}^{D}+\varepsilon }{1+\alpha }\right) ^{2}d\varepsilon \right) \\&\quad -p\,\left( \int _{-\mu }^{\mu }\int _{-\delta }^{\delta }\frac{1}{2\mu }\frac{1 }{2\delta }\left( \frac{x_{b}^{D}+\varepsilon }{1+\alpha }-x^{V}-s\right) ^{2}dsd\varepsilon \right. \\&\quad \left. +\int _{-\mu }^{\mu }\frac{1}{2\mu }\left( \frac{ x_{b}^{D}+\varepsilon }{1+\alpha }\right) ^{2}d\varepsilon \right) \end{aligned}$$

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Hefeker, C. Political polarization, term length and too much delegation. Const Polit Econ 30, 50–69 (2019). https://doi.org/10.1007/s10602-018-9265-2

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