Are We Better Off If Our Politicians Have More Information?

Abstract

This Paper studies a model of public policy with heterogeneous citizens/voters and two public goods: one (roads) is chosen directly by an elected policy-maker, and the other (pollution) depends stochastically on the amount of roads. Both a one-country and a two-country version of the model are analysed, the latter displaying externalities across the countries, which creates incentives for free-riding and strategic delegation. The welfare effects of providing the policy-maker 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 opportunity not to build an institution for information gathering can serve as a commitment device for a country, although with the unfortunate effect of making the overall outcome even worse. 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: D78