Are We Better Off If Our Politicians Have More Information?

Abstract

This paper studies a model of public policy with heterogenous citizens/voters and two public goods: One (roads) is chosen directly by an elected policymaker, and the other (pollution) depends stochastically on the amount of roads. Both a one-country and a two-country version of the model are analyzed, the latter displaying externalities across the countries which creates incentives for free riding and strategic delegation. The welfare effects of providing the policymaker with information about the relationship between roads and pollution are investigated, and it is shown that more information hurts some - sometimes even all - citizens. In particular, the absence of an institution for information gathering can serve as a commitment device for a country, helping it avoid the free-riding problem. Implications for the welfare effects of "informational lobbying" are discussed.

Keywords: public information acquisition, value of information, welfare, interest groups, informational lobbying, strategic delegation

JEL Classification: D69, D78, D89