Scandinavian Working Papers in Economics

Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)

No 2017:5: The impact of career concerns and cognitive dissonance on bureaucrats’ use of cost-benefit analysis

Johanna Jussila Hammes ()
Additional contact information
Johanna Jussila Hammes: VTI, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

Abstract: Previous research shows that a Cost-Benefit Analysis (CBA) is most often not conducted ahead of decisions about environmental, energy and climate policy in Sweden. Our point of departure is the observation that civil servants can have real authority (Maskin & Tirole, 2004). We proceed to construct a theoretical model that explains why bureaucrats may choose not to conduct a CBA. We show that given the initial policy chosen by an agenda setter, those bureaucrats who choose to stay put working with the policy are those whose policy preferences are closest to the initial policy. Moreover, bureaucrats over time adjust their preferences in the direction of the initial policy. Those bureaucrats who strongly disagree with the initial policy choose to quit instead of taking the cognitive costs associated with the initial policy. A CBA might call the initial policy into question. The civil servants then have an incentive not to conduct a CBA and take on the cognitive costs associated with having to adjust their attitudes in a new direction. Only in the presence of a binding governmental budget constraint may the civil servants have an incentive to conduct a CBA.

Keywords: Bureaucrats; Career concerns; CBA; Cognitive dissonance; Environmental policy; Norms

JEL-codes: D61; D73; H41

20 pages, February 7, 2017

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