Journal of Globalization and Development
Ed. by Stiglitz, Joseph / Emran, M. Shahe / Guzman, Martin / Jayadev, Arjun / Ocampo, José Antonio / Rodrik, Dani
2 Issues per year
Democratic and autocratic rulers alike must use a bureaucracy to implement policy. In each case the optimal policy is a second-best solution to this agency problem, giving the bureaucrat some economic rent for information revelation and effort incentive. This paper argues that autocrats are less willing to sacrifice rents, and therefore accept a worse second-best (here less of a public good) than democrats. It also finds a synergistic matching between a democratic ruler and an altruistic bureaucrat who internalizes the citizens' welfare. This synergy is absent for autocrats, but they can gain by extorting from highly altruistic agencies like NGOs.