Delegation of Regulation
Journal article, Peer reviewed
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Date
2020-11-12Metadata
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Original version
Kundu T, Nilssen T. Delegation of Regulation. The Journal of Industrial Economics. 2020;68(3):445-482Abstract
We discuss a government’s incentives to delegate regulation to
bureaucrats. The government faces a trade-off in its delegation
decision: bureaucrats have knowledge of the firms in the industry that
the government does not have, but at the same time, they have other
preferences than the government. The preference bias and the private
information interact to affect the incentives to delegate regulation.
Allowing for constrained delegation, we introduce the concepts of weak
and strict delegation. We find that bureaucratic discretion reduces with
bureaucratic drift, while the effect of increased uncertainty about the
firm’s technology depends on how that uncertainty changes.