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Dynamic Incentives and the Optimal Delegation of Political Power
Author:
Mr. Eric Le Borgnenull

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and
Mr. Gauti B. Eggertssonnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 091
Language:
English
Publication Date:
01 Apr 2007
DOI:
https://doi.org/10.5089/9781451866551.001
ISBN:
9781451866551
ISSN:
1018-5941
Pages:
35
Keywords:
WP; mover accent
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper proposes a theory to explain why a politician delegates policy tasks to a technocrat in an independent institution. It formalizes the rationales for delegation highlighted by Hamilton (1788) and by Blinder (1998). Delegation trades-off the cost of having a possibly incompetent technocrat with a long-term job contract against the benefit of having a technocrat who (i) invests more effort into the specialized policy task and (ii) is better insulated from the whims of public opinion. One natural application of the theory is in the field of monetary policy where the model provides a new theory of central bank independence.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2007: Issue 091