Equilibrium Reforms and Endogenous Complexity

Massimo Morelli (massimo.morelli@unibocconi.it) and Dana Foarta

No 15136, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Information; Regulatory complexity; Competence; Interest groups; Politicians; Bureaucracy; Checks and balances; Incremental reforms (search for similar items in EconPapers)
JEL-codes: D73 G28 H83 L51 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-gth, nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Complexity and the Reform Process (2020)
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