Rule Versus Discretion: Regulatory Uncertainty, Firm Investment, and the Ally Principle

Previous studies of the bureaucracy have focused on the internal relationship between politicians (principals) and bureaucrats (agents). External regulated actors, such as firms, have generally been ignored. But firms strategically respond to their regulatory environment and regulatory uncertainty can deter investment. We examine how concerns about firms' strategic behavior affect the optimal internal organization of the bureaucracy. When regulatory uncertainty is about how much firms will be regulated, the ally principle applies: the principal delegates to an agent with similar preferences as hers. When regulatory uncertainty is about whether firms will be regulated, the ally principle fails to hold: the principal prefers an inefficient rule-based regulatory framework or, if possible, to delegate to an agent with preferences distinct from hers to encourage firm investment. We uncover novel endogenous limits to delegation since the principal faces a commitment problem not to replace a biased agent after the firm investment

Mass purges: top-down accountability in autocracy

This paper proposes a novel theoretical framework to study the features of mass purges in authoritarian regimes. We contend that mass purges are an instrument of top-down accountability meant to motivate and screen a multitude of agents (e.g., single-party members, state bureaucrats). We show that the set of purged agents is well delineated in mild purges, whereas no performance indicator is a guarantee of safety in violent purges. The proportion of purged agents is non-monotonic in the intensity of violence. For the autocrat, increasing the intensity of violence always raises performance, but it improves the selection of subordinates only if violence is low to begin with. Hence, even absent de jure checks, the autocrat is de facto constrained by her subordinates' strategic behavior. We use historical (including the Soviet purges and the Cultural Revolution) and recent (the Erdogan purge) events to illustrate our key theoretical findings

Rule versus discretion: regulatory uncertainty, firm investment, and bureaucratic organization

As markets evolve, new regulatory concerns emerge. In response, policy makers institute new requirements for private businesses. Because they impose costs and generate uncertainty, these requirements may deter firm investment. To reduce regulatory uncertainty and favor investment, a principal can choose a rule-based regulatory framework. However, unlike discretion, rules do not adapt to circumstances and are thus inefficient. Using a micro-founded model, we uncover circumstances under which the ex ante certainty provided by a rule dominates the ex post efficiency provided by delegation to an unbiased agent. We also establish when delegating to a biased agent is optimal for a policy maker. Our main results highlight that the anticipated economic responses of firms can indirectly influence the organization of the bureaucracy. As such, any attempt to evaluate firms’ direct influence in the rule-making process—through lobbying or information disclosure—needs to establish the proper counterfactual that accounts for the indirect effects this article identifies

The Lobbyist’s Dilemma: Gatekeeping and the Profit Motive

We consider a model of lobbying in which an interest group can directly solicit a policy favor from a politician, or transmit her request through an external lobbyist on a fee-for-service basis. The lobbyist’s value derives from her ability to investigate and screen clients according to the political merits of their request. However, her ability to extract that value in the form of profits is also dependent on the equilibrium credibility of her messages to the politician. Inspired by recent empirical results, we use the model to examine the effect of connections between the lobbyist and the politician, their ideological alignment, and the informational environment on the profitability of lobbyists, the price of lobbying services, and the welfare politicians

Replication data for: Testing Core Predictions of Spatial Models: Platform Moderation and Challenger Success

A large class of spatial models of elections converges upon a single prediction: a candidate’s vote share increases in the congruence between her platform and the median voter’s preferences. Though considerable empirical research provides support for this prediction, these studies have not adequately identified the effects of platform positioning net of other factors. In this paper, we study the impact of challenger moderation on vote shares using data from 444 U.S. House elections from 1996-2006 in which successive challengers competed against a common incumbent. Our findings are largely null. We uncover no evidence that challengers increase their vote shares by adopting more moderate platform positions. This finding is robust across a wide range of model specifications and subsets of districts

Replication Data for: "Bounding Partisan Approval Rates Under Endogenous Partisanship: Why High Presidential Partisan Approval May Not Be What It Seems"

Data construction and analysis files for "Bounding Partisan Approval Rates Under Endogenous Partisanship: Why High Presidential Partisan Approval May Not Be What It Seems