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Complexity and the Reform Process

Author

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  • Foarta, Dana

    (Stanford U)

  • Morelli, Massimo

    (Bocconi U and IGIER)

Abstract

Decision makers called to evaluate and approve a reform proposed by a politician, a bureaucrat, or an interest group face a double asymmetric information problem: about the competence of the proposer and the consequences of the proposal. Moreover, the ability of decision makers to evaluate proposals depends on the complexity of the legislative environment, itself a product of past reforms. We model the strategic interaction between reformers and decision makers as a function of legislative complexity and study the resulting endogenous complexity and stability of reforms. Reform complexity is non-monotonic in the expected competence of the proposer. Dynamically, complexification-simplification cycles can occur on the equilibrium path. Expected complexity is path dependent when competence of reform proposers is lower, leading to 'complexity traps,' with bad or unnecessary complex reforms, or 'inaction traps,' where reforms are blocked. The results nest and reconcile a number of recent findings in legislative and regulation studies, and provide implications for institutional design.

Suggested Citation

  • Foarta, Dana & Morelli, Massimo, 2020. "Complexity and the Reform Process," Research Papers 3891, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:3891
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    References listed on IDEAS

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    Cited by:

    1. Ash, Elliott & Morelli, Massimo & Vannoni, Matia, 2022. "More Laws, More Growth? Evidence from U.S. States," CEPR Discussion Papers 15629, C.E.P.R. Discussion Papers.
    2. Liqun Liu, 2021. "The Politics of (No) Compromise: Information Acquisition, Policy Discretion, and Reputation," Papers 2111.00522, arXiv.org, revised Apr 2023.
    3. Feng, Zhiyuan & Li, Yali, 2024. "Natural resource curse and fiscal decentralization: Exploring the mediating role of green innovations and market regulations in G-20 economies," Resources Policy, Elsevier, vol. 89(C).

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    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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