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How delegation improves commitment

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  • Perino, Grischa

Abstract

McCallum (1995, American Economic Review Papers and Proceedings 85 (2), 207-211) conjectures that delegation merely relocates the commitment problem but does not solve it. This holds if optimal ex-ante policies do not change if additional information becomes available. However, with a flexibility-credibility trade-off delegation improves credibility.

Suggested Citation

  • Perino, Grischa, 2010. "How delegation improves commitment," Economics Letters, Elsevier, vol. 106(2), pages 137-139, February.
    • Handle: RePEc:eee:ecolet:v:106:y:2010:i:2:p:137-139
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    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    2. Ludema, Rodney D. & Olofsgard, Anders, 2008. "Delegation versus communication in the organization of government," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 213-235, February.
    3. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-286, March.
    4. Alesina, Alberto & Tabellini, Guido, 2008. "Bureaucrats or politicians? Part II: Multiple policy tasks," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 426-447, April.
    5. Jensen, Henrik, 1997. "Credibility of Optimal Monetary Delegation," American Economic Review, American Economic Association, vol. 87(5), pages 911-920, December.
    6. McCallum, Bennett T, 1995. "Two Fallacies Concerning Central-Bank Independence," American Economic Review, American Economic Association, vol. 85(2), pages 207-211, May.
    7. McCallum, Bennett T., 1997. "Crucial issues concerning central bank independence," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 99-112, June.
    8. Paul Levine & John Stern & Francesc Trillas, 2005. "Utility price regulation and time inconsistency: comparisons with monetary policy," Oxford Economic Papers, Oxford University Press, vol. 57(3), pages 447-478, July.
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    Cited by:

    1. Bernardo Bortolotti & Carlo Cambini & Laura Rondi, 2011. "Regulatory Independence, Ownership and Firm Value: The Role of Political Institutions," RSCAS Working Papers 2011/43, European University Institute.
    2. Cambini, Carlo & Rondi, Laura, 2010. "Regulatory Independence and Political Interference: Evidence from EU Mixed-Ownership Utilities’ Investment and Debt," Institutions and Markets Papers 91002, Fondazione Eni Enrico Mattei (FEEM).
    3. Arvaniti, Maria & Habla, Wolfgang, 2021. "The political economy of negotiating international carbon markets," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    4. Hahn, Volker, 2014. "An argument in favor of long terms for central bankers," Economics Letters, Elsevier, vol. 122(2), pages 132-135.
    5. Habla, Wolfgang & Winkler, Ralph, 2018. "Strategic delegation and international permit markets: Why linking May fail," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 244-250.
    6. Marek Rusnak & Tomas Havranek & Roman Horvath, 2013. "How to Solve the Price Puzzle? A Meta‐Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(1), pages 37-70, February.
    7. Carlo Cambini & Laura Rondi, 2011. "Independence, Investment and Political Interference: Evidence from the European Union," RSCAS Working Papers 2011/42, European University Institute.
    8. Habla, Wolfgang & Winkler, Ralph, 2015. "Strategic Delegation and Non-cooperative International Permit Markets," Working Papers in Economics 636, University of Gothenburg, Department of Economics.
    9. Spycher, Sarah & Winkler, Ralph, 2022. "Strategic delegation in the formation of modest international environmental agreements," European Economic Review, Elsevier, vol. 141(C).
    10. Yukihiro Yazaki, 2014. "Rights and judicial independence," Economics of Governance, Springer, vol. 15(2), pages 179-201, May.
    11. François Cochard & Julie Le Gallo & Laurent Franckx, 2015. "Regulation Of Pollution In The Laboratory: Random Inspections, Ambient Inspections, And Commitment Problems," Bulletin of Economic Research, Wiley Blackwell, vol. 67(S1), pages 40-73, December.
    12. Florian Habermacher & Paul Lehmann, 2020. "Commitment Versus Discretion in Climate and Energy Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(1), pages 39-67, May.

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