Landa, Dimitri and Le Bihan, Patrick (2015) Policy Unbundling and Special Interest Politics. IAST working paper, n. 15-32, Toulouse

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Abstract

When is it better to bundle policy-tasks into a single office versus unbundle them
into separate offices? Which institutional arrangement is better for preventing interest group capture? How does transparency of political agent's actions affect the relative merits of both institutional frameworks? We consider a simple career-concerns model of political accountability with variation in complexity across policy areas. We find that when relative policy area complexities are sufficiently high and symmetric, bundling policy areas may lead to higher total effort, selection of more more competent politicians and better resistance to policy capture by special interests than unbundling.
The opposite is true when policy area complexities are sufficiently asymmetric. While the effect of the possibility of interest group capture under unbundling conforms to standard intuitions, we show that under bundling: (1) interest groups may have negative spillover effects across policy areas under bundling; (2) the presence of interest groups may decrease or increase effort under bundling and reverse the welfare ordering of institutions both ways. Transparency of agent's actions may have positive as well as negative consequences for the Principal under bundling, generally decreasing utility discrepancies between multiple equilibria. Further, transparency's overall effect is to increase the relative appeal of unbundling