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What's the damage? Environmental regulation with policy‐motivated bureaucrats

Author

Listed:
  • Achim Voss
  • Jörg Lingens

Abstract

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.

Suggested Citation

  • Achim Voss & Jörg Lingens, 2018. "What's the damage? Environmental regulation with policy‐motivated bureaucrats," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(4), pages 613-633, August.
    • Handle: RePEc:bla:jpbect:v:20:y:2018:i:4:p:613-633
    DOI: 10.1111/jpet.12299
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    Cited by:

    1. Wang, Dan & Wang, Jiancheng & Hao, Peng & Ren, Qiyu, 2024. "A powerful local government's optimal discretion in simple menu contract of monopoly regulation," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 280-300.
    2. Yang, Xiaohui & Yan, Ji & Tian, Kun & Yu, Zihao & Yu Li, Rebecca & Xia, Senmao, 2021. "Centralization or decentralization? the impact of different distributions of authority on China's environmental regulation," Technological Forecasting and Social Change, Elsevier, vol. 173(C).

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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