Lobbying and the Optimality of Delegation : Learning from Political Institutions

This paper investigates the choice between delegation and centralization within political institutions in the presence of lobbying. Our legislature is composed of two bodies: the floor and an informational committee. The floor has the (formal) power to choose the policy to be implemented whereas the committee has the expertise to learn the payoff pattern of the feasible policies which is ex ante unknown. The floor also decides the allocation of the political authority by choosing between two alternative legislative rules: open versus closed rule. We show that, in presence of lobbying, the effectiveness of delegation (closed rule) as an incentive device towards the committee is noticeably reduced while the costs for the floor are higher. As a result, we show that, under some general conditions, centralization dominates delegation