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What's the damage? Environmental regulation with policy‐motivated bureaucrats
Author(s) -
Voss Achim,
Lingens Jörg
Publication year - 2018
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12299
Subject(s) - delegation , economics , environmental policy , principal (computer security) , government (linguistics) , politics , function (biology) , set (abstract data type) , public economics , microeconomics , environmental economics , political science , law , management , computer science , linguistics , philosophy , evolutionary biology , biology , programming language , operating system
In choosing environmental policy, governments rely on information provided by bureaucrats, who may have a political motivation of their own. We analyze the ensuing principal–agent relationship and derive the government's optimal contract. We find that a regulatory agent who is more environmentalist than the government is rewarded for truthfully stating that the environmental impact of the regulated economic activity is low (and vice versa). The bureaucrat has a stronger influence on policy if there is greater uncertainty about the environmental impact, or if the policy choice has a strong weight in his utility function. For some impact values, the bureaucrat is permitted to set his own preferred policy, which is a form of optimal delegation.