Bureaucratic Identity and the Shape of Public Policy: A Game Theoretic Analysis

This paper aims to investigate the impact of identity driven preferences of bureaucrats on public policy outcomes, when it is assumed that a bureaucratic organization comprises different levels of administration. The paper proposes a theoretical framework to explain policy drift, when identity moderates the principle-agent relation between the legislator and the bureaucratic organization. The model points to the subtle interaction between different administrative levels of bureaucracy and how this interaction shapes the structure and size of budgetary allocations. Conceptually we enrich the public choice tradition of modeling bureaucracies by insights which fall broadly into the study of organizational behavior. Our analysis produces two main results: First, the possibility of an inefficient policy outcome is higher if the identity-based preferences of a high- level bureaucrat diverge from the preferred policy goal of the legislator. Second, bureaucrats with different roles (policymaking or implementation) have different individual goals, and it is the interplay of these different goals which determines the provision of the public good. A key policy implication is that it can be more effective to change or amplify the identity of higher-level bureaucrats and to make their behavior conform to the political goals of the legislator, than to build-up a tight regulatory environment.

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