Centralized decision making against informed lobbying∗

We re-address the trade-off between centralized and decentralized decision making of local policies when policy makers are subject to capture. In particular, we consider the case where lobbies have private information about their ability to influence. We find a new informational effect in the political game under centralized structures that gives the policy maker additional bargaining power against lobbies. Thus, when compared to decentralization, centralization reduces capture, and is more likely to be welfare enhancing in the presence of information asymmetries. Then, we apply the model to the classical problem of local public good provision and to identify the incentives towards customs unions agreements.