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

Arbeitspapier

Many environmental-policy problems are characterized by complexity and uncertainty. Government's choice concerning these policies commonly relies on information provided by a bureaucracy. Environmental bureaucrats often have a political motivation of their own, so they might be tempted to misreport environmental effects in order to influence policy. This transforms a problem of uncertainty into one of asymmetric information. We analyze the ensuing principal-agent relationship and derive the government's optimal contract, which conditions policy and rewards on reported environmental effects. We find that agents who are more environmentalist than the government are rewarded for admitting that the environmental impact is low (and vice versa). With higher uncertainty, the bureaucrat has a stronger influence on policy. For some values of the environmental impact, the bureau is permitted to set its own preferred policy (optimal delegation).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CAWM Discussion Paper ; No. 67

Classification and Topics

• Classification: Wirtschaft ; Bureaucracy; Administrative Processes in Public Organizations; Corruption ; Asymmetric and Private Information; Mechanism Design ; Optimization Techniques; Programming Models; Dynamic Analysis ; Pollution Control Adoption and Costs; Distributional Effects; Employment Effects ; Environmental Economics: Government Policy
• Subject: Environmental Policy ; Political Economy ; Delegation ; Bureaucracy ; Regulatory Agency ; Mechanism Design ; Type-dependent Participation Constraint ; Pure State Constraints in Optimal Control

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Voß, Achim ; Lingens, Jörg
• Event: Veröffentlichung
• (who): Westfälische Wilhelms-Universität Münster, Centrum für Angewandte Wirtschaftsforschung (CAWM)
• (where): Münster
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/95873
• Last update: 10.03.2025, 11:43 AM CET