At Your Own Risk: A Model of Delegation with Ambiguous Guidelines

60 Pages Posted:

See all articles by Jieun Kim

Jieun Kim

University of California, Berkeley

Date Written: December 14, 2020

Abstract

Counter-intuitive to the lessons of principal-agent models, Chinese leaders have often provided local officials with ambiguous policy guidelines that do not clarify the boundaries of discretion. While ambiguity can give local officials flexibility in policy implementation, it can also instill fear of punishment among possible transgressors and encourage preemptive self-censoring. Incorporating both perspectives, I develop a formal model that analyzes a situation in which ambiguity allows flexibility for certain types of local officials while intimidating others. I argue that central leaders use ambiguity as a screening tool to encourage only the competent type of local officials—or those who have policy expertise for producing good outcomes—to choose a gray-area policy at their own risk, while deterring the incompetent type from doing so. I illustrate the model with the case of state-owned enterprise restructuring in China. The argument is broadly applicable to interactions between any upper- and lower-level actors in bureaucratic hierarchy.

Keywords: ambiguity, delegation, bureaucratic hierarchy, Chinese bureaucracy, policy experimentation

Suggested Citation

Kim, Jieun, At Your Own Risk: A Model of Delegation with Ambiguous Guidelines (December 14, 2020). Available at SSRN: https://ssrn.com/abstract=3748230 or http://dx.doi.org/10.2139/ssrn.3748230

Jieun Kim (Contact Author)

University of California, Berkeley

210 Social Sciences Building #1950
Berkeley, CA 94720
United States

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