Transparency and political moral hazard

This paper analyzes the effects of asymmetric information on the public control of politicians in a world where the politicians’ pre-election promises are not credible. We study a model with identical politicians and a representative voter whose interests conflict with those of the politicians’. The voter’s decision to reelect the politician depends on both observable policies of the politician and the outcome of the unobservable policies. In equilibrium, either optimal decisions for the voter are not taken by the politician or if taken, the politician would extract more rent. In the latter case, politicians are also replaced more frequently.