IDEAS home Printed from https://ideas.repec.org/p/roc/wallis/wp34.html
   My bibliography  Save this paper

Credible Communication in Dynastic Government

Author

Listed:
  • Roger Lagunoff

    (Georgetown University)

Abstract

It has been suggested that ``horizontal accountability," i.e., a system of governance where auditing functions lie outside the executive branch, can ensure credible disclosure of information. This paper examines a model of intertemporal information provision in government that suggests a cautious approach to that view. Government consists of a succession of regimes, each ruling for one period before relinquishing power to a successor. Without external auditing, credible communication cannot be sustained. Hence, expenditure policies are suboptimal. Even with external auditing, credible communication requires ideological conflicts between the auditor and the regime. Moreover, because information transmission stops when the auditor's and the regime's biases coincide, effective deterrents even in the ``good" periods (when the auditor's and the regime's biases differ) are difficult to construct. As a result, in standard constructions of equilibrium, efficient policy choices are shown to be unsustainable

Suggested Citation

  • Roger Lagunoff, 2002. "Credible Communication in Dynastic Government," Wallis Working Papers WP34, University of Rochester - Wallis Institute of Political Economy.
  • Handle: RePEc:roc:wallis:wp34
    as

    Download full text from publisher

    File URL: http://www.wallis.rochester.edu/WallisPapers/wallis_34.pdf
    File Function: full text
    Download Restriction: None
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 232-262, Summer.
    2. Per Krusell & Anthony A. Smith, Jr., 2003. "Consumption--Savings Decisions with Quasi--Geometric Discounting," Econometrica, Econometric Society, vol. 71(1), pages 365-375, January.
    3. Battaglini Marco, 2004. "Policy Advice with Imperfectly Informed Experts," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-34, April.
    4. Timothy Besley & Rohini Pande, 1998. "Read My Lips: The Political Economy of Information Transmission," STICERD - Theoretical Economics Paper Series 355, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    5. Geir B. Asheim, 1997. "Individual and Collective Time-Consistency," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 427-443.
    6. R. A. Pollak, 1968. "Consistent Planning," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 201-208.
    7. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
    8. Torsten Persson & Gérard Roland & Guido Tabellini, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1163-1202.
    9. Ben-Porath, Elchanan & Kahneman, Michael, 1996. "Communication in Repeated Games with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 70(2), pages 281-297, August.
    10. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2012. "Communication and Learning," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 419-450.
    11. Rubinstein, A., 2000. "Is it "Economics and Psychology"?: the Case of Hyperbolic Discounting," Papers 00-21, Tel Aviv.
    12. Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August.
    13. Torsten Persson & Lars E. O. Svensson, 1989. "Why a Stubborn Conservative would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 325-345.
    14. Per Krusell & José-Víctor Ríos-Rull, 1996. "Vested Interests in a Positive Theory of Stagnation and Growth," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 301-329.
    15. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 199-217.
    16. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
    17. Roger Lagunoff & Akihiko Matsui, 2004. "Organizations and overlapping generations games: Memory, communication, and altruism," Review of Economic Design, Springer;Society for Economic Design, vol. 8(4), pages 383-411, April.
    18. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
    19. Michihiro Kandori & Hitoshi Matsushima, 1997. "Private observation and Communication and Collusion," Levine's Working Paper Archive 1256, David K. Levine.
    20. Olivier Compte, 1998. "Communication in Repeated Games with Imperfect Private Monitoring," Econometrica, Econometric Society, vol. 66(3), pages 597-626, May.
    21. David Martimort, 1999. "The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 929-947.
    22. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-957, July.
    23. Vijay Krishna & John Morgan, 2001. "A Model of Expertise," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 747-775.
    24. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
    25. Luca Anderlini & Roger Lagunoff, 2006. "Communication in dynastic repeated games: ‘Whitewashes’ and ‘coverups’," Studies in Economic Theory, in: Charalambos D. Aliprantis & Rosa L. Matzkin & Daniel L. McFadden & James C. Moore & Nicholas C. Yann (ed.), Rationality and Equilibrium, pages 21-55, Springer.
    26. Dixit, Avinash K & Grossman, Gene & Gul, Faruk, 1998. "A Theory of Political Compromise," CEPR Discussion Papers 1935, C.E.P.R. Discussion Papers.
    27. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    28. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," American Economic Review, American Economic Association, vol. 94(4), pages 1034-1054, September.
    29. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    30. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
    31. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
    32. Kocherlakota, Narayana R., 1996. "Reconsideration-Proofness: A Refinement for Infinite Horizon Time Inconsistency," Games and Economic Behavior, Elsevier, vol. 15(1), pages 33-54, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lagunoff, Roger, 2009. "Dynamic stability and reform of political institutions," Games and Economic Behavior, Elsevier, vol. 67(2), pages 569-583, November.
    2. Roger Lagunoff (Georgetown University), 2005. "Markov Equilibrium in Models of Dynamic Endogenous Political Institutions," Working Papers gueconwpa~05-05-07, Georgetown University, Department of Economics.
    3. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2012. "Communication and Learning," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 419-450.
    4. Roger Lagunoff, 2004. "The Dynamic Reform of Political Institutions," Econometric Society 2004 Latin American Meetings 47, Econometric Society.
    5. Egorov, Georgy & Sonin, Konstantin, 2005. "The Killing Game: Reputation and Knowledge in Non-Democratic Succession," CEPR Discussion Papers 5092, C.E.P.R. Discussion Papers.
    6. Roger Lagunoff, 2007. "Markov Equilibrium in Models of Dynamic Endogenous Political Institutions," Levine's Bibliography 122247000000000876, UCLA Department of Economics.
    7. Heyes, Anthony & Kapur, Sandeep, 2012. "Community pressure for green behavior," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 427-441.
    8. Roger Lagunoff, 2006. "Dynamic Stability and Reform of Political Institutions," Levine's Bibliography 784828000000000051, UCLA Department of Economics.
    9. Georgy Egorov & Konstantin Sonin, 2005. "The Killing Game: Reputation and Knowledge in Politics of Succession," Game Theory and Information 0505003, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2008. "A “Super” Folk Theorem for dynastic repeated games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(3), pages 357-394, December.
    2. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2004. "The Folk Theorem in Dynastic Repeated Games," Levine's Bibliography 122247000000000577, UCLA Department of Economics.
    3. Feltenstein, Andrew & Lagunoff, Roger, 2005. "International versus domestic auditing of bank solvency," Journal of International Economics, Elsevier, vol. 67(1), pages 73-96, September.
    4. Gersbach, Hans & Liessem, Verena, 2008. "Incentive contracts and elections for politicians with multi-task problems," Journal of Economic Behavior & Organization, Elsevier, vol. 68(2), pages 401-411, November.
    5. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    6. Dulleck, Uwe & Wigger, Berthold U., 2015. "Politicians as experts, electoral control, and fiscal restraints," Journal of Public Economics, Elsevier, vol. 121(C), pages 106-116.
    7. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2007. "Social Memory and Evidence from the Past," Levine's Bibliography 321307000000000850, UCLA Department of Economics.
    8. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2007. "A `Super Folk Theorem' in Dynastic Repeated Games," Levine's Bibliography 321307000000000926, UCLA Department of Economics.
    9. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    10. Miyagawa, Eiichi & Miyahara, Yasuyuki & Sekiguchi, Tadashi, 2008. "The folk theorem for repeated games with observation costs," Journal of Economic Theory, Elsevier, vol. 139(1), pages 192-221, March.
    11. Martimort, David & Semenov, Aggey, 2008. "The informational effects of competition and collusion in legislative politics," Journal of Public Economics, Elsevier, vol. 92(7), pages 1541-1563, July.
    12. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2012. "Communication and Learning," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 419-450.
    13. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.
    14. Obara, Ichiro, 2009. "Folk theorem with communication," Journal of Economic Theory, Elsevier, vol. 144(1), pages 120-134, January.
    15. Tyson, Christopher J., 2008. "Management of a capital stock by Strotz's naive planner," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2214-2239, July.
    16. Yamamoto, Yuichi, 2009. "A limit characterization of belief-free equilibrium payoffs in repeated games," Journal of Economic Theory, Elsevier, vol. 144(2), pages 802-824, March.
    17. Bergemann, Dirk & Valimaki, Juuso, 2002. "Strategic Buyers and Privately Observed Prices," Journal of Economic Theory, Elsevier, vol. 105(2), pages 469-482, August.
    18. Drew Fudenberg & David K. Levine, 2008. "The Nash-threats folk theorem with communication and approximate common knowledge in two player games," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 15, pages 331-343, World Scientific Publishing Co. Pte. Ltd..
    19. Maskin, Eric & Tirole, Jean, 2019. "Pandering and pork-barrel politics," Journal of Public Economics, Elsevier, vol. 176(C), pages 79-93.
    20. Alesina, A. & Passalacqua, A., 2016. "The Political Economy of Government Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2599-2651, Elsevier.

    More about this item

    Keywords

    dynastic government; dynamic policy bias; auditor neutrality; credible communication;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • 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
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:roc:wallis:wp34. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Richard DiSalvo (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.