Credible Communication in Dynastic Government

It has been suggested that ``horizontal accountability," i.e., a system of governance where auditing functions lie outside the executive branch, can ensure credible disclosure of information. This paper examines a model of intertemporal information provision in government that suggests a cautious approach to that view. Government consists of a succession of regimes, each ruling for one period before relinquishing power to a successor. Without external auditing, credible communication cannot be sustained. Hence, expenditure policies are suboptimal. Even with external auditing, credible communication requires ideological conflicts between the auditor and the regime. Moreover, because information transmission stops when the auditor's and the regime's biases coincide, effective deterrents even in the ``good" periods (when the auditor's and the regime's biases differ) are difficult to construct. As a result, in standard constructions of equilibrium, efficient policy choices are shown to be unsustainable