Front Matter Page
Fiscal Affairs Department
Authorized for distribution by John Thornton
Contents
I. Introduction
II. The Framework
A. Political Agency Setup
1. Private signal
2. Public signal
3. Institutions
III. Hamilton’s Hypothesis: Learning
A. Equilibrium
1. Period 2 effort
2. Period 1 effort under delegation
3. Period 1 effort without delegation
B. Delegation of Political Power
1. Welfare and the existence of trade-offs between regimes
2. The welfare trade-off
3. Comparative statics
C. Social Welfare and Delegation
IV. Blinder’s Hypothesis: Insulation
A. Public opinion equilibrium
B. Welfare and the existence of trade-offs between regimes
V. Example: Central Bank Independence
VI. Conclusion
Appendix
1. Proof that α – 2β > 0
2. Proof that the coefficient γ3 of
is strictly positive References
Figures
1. Timing
2. Possible Cut-off for Welfare
3. Basic Trade-off in Delegation
4. An Increase in Complexity of the Task Increases Delegation
5. A Decrease in Corruption Increases Delegation
6. Basic Insulation/Mimicking Trade-off