Discussion paper

DP15136 Equilibrium Reforms and Endogenous Complexity

Decision makers called to evaluate and approve a reform, proposed by an interest group, a politician, or a bureaucracy, suffer from a double asymmetric information problem: about the competence of the proposer and the consequences of the proposal. Moreover, the ability of decision makers to evaluate proposals depends on the complexity of the legislative environment, itself a product of past reforms. We model the strategic interaction between reformers and decision makers as a function of legislative complexity, and study the dynamics of endogenous complexity and stability of reforms. Complexi cation-simpli cation cycles can occur on the equilibrium path, and expected long-run complexity may be higher when competence of reform proposers is lower. The results apply to regulatory reforms, legislative politics, and institutional design.


Morelli, M and D Foarta (eds) (2020), “DP15136 Equilibrium Reforms and Endogenous Complexity”, CEPR Press Discussion Paper No. 15136. https://cepr.org/publications/dp15136