Signaling with Reform: How the Threat of Corruption Prevents Informed Policymaking
78 Pages Posted: 23 Sep 2016 Last revised: 8 Feb 2019
Date Written: February 6, 2019
Lobbying is a potential source of corruption but is also a valuable source of information for policymakers. We analyze a game-theoretic model that shows how the threat of corruption affects the incentives of non-corrupt politicians to enlist the help of lobbyists to make more informed decisions. Politicians face a dilemma because voters cannot always tell whether a politician allows access to lobbyists in order to solicit corruption or to seek information. Thus, a non-corrupt politician may deny access to lobbyists to signal that she is non-corrupt even though doing so impedes her ability to make good policy. This signaling may decrease the welfare of the voters depending on the value of the lost policy information relative to the value of screening out corrupt politicians.
Keywords: Lobbying, Campaigns, Signaling
JEL Classification: C70, D72, D80
Suggested Citation: Suggested Citation