Chapter

An Incentive Theory of the Separation of Powers

Jean‐Jacques Laffont

in Incentives and Political Economy

Published in print October 2001 | ISBN: 9780199248681
Published online November 2003 | e-ISBN: 9780191596575 | DOI: http://dx.doi.org/10.1093/0199248680.003.0003

Series: Clarendon Lectures in Economics

 An Incentive Theory of the Separation of Powers

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The design of a complete Constitution is further augmented by focusing on the need for separation of powers to avoid regulatory capture. The economic concepts used are yardstick competition and Bayesian Nash behaviour. A number of models using different assumptions regarding separation between politicians and/or regulatory agencies are explored and an equilibrium involving excessive bribery is found to be robust. Additionally, the social costs of side‐contracting are shown to be limited by the separation of powers.

Keywords: Bayesian Nash equilibrium; bribery; constitutional design; regulatory capture; separation of powers; side‐contracting; social costs; yardstick competition

Chapter.  11462 words.  Illustrated.

Subjects: Microeconomics

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