DP3884 Are we Better Off if our Politicians Have More Information?

Author(s): Johan N. M. Lagerlöf
Publication Date: May 2003
Keyword(s): informational lobbying, interest groups, public information acquisition, strategic delegation, value of information, welfare
JEL(s): D78
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3884

This Paper studies a model of public policy with heterogeneous citizens/voters and two public goods: one (roads) is chosen directly by an elected policy-maker, and the other (pollution) depends stochastically on the amount of roads. Both a one-country and a two-country version of the model are analysed, the latter displaying externalities across the countries, which creates incentives for free-riding and strategic delegation. The welfare effects of providing the policy-maker with information about the relationship between roads and pollution are investigated, and it is shown that more information hurts some ? sometimes even all ? citizens. In particular, the opportunity not to build an institution for information gathering can serve as a commitment device for a country, although with the unfortunate effect of making the overall outcome even worse. Implications for the welfare effects of ?informational lobbying? are discussed.