We often use delegation as a commitment device if a government faces problems of timeinconsistency. McCallum (1995, AER P&P) challenged this practice, claiming that delegation merely relocates the commitment problem but does not solve it. In a model where delegation and specific policies are subject to the same commitment technology it is shown that McCallum’s conjecture holds if optimal ex-ante policies are fixed. However, with a flexibility-credibility trade-off delegation is both desirable and improves credibility. While delegation does not increase commitment per se it makes it more attractive and increases investments in credibility. Delegation can therefore serve as a valid commitment device.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number
0466.
Find related papers by JEL classification: D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: