BUREAUCRACY AND TIME CONSISTENCY*

We construct a model that takes seriously the role of bureaucracy in the characterization of time-consistent policies. We argue that if the possibilities for governments to reduce the size of bureaucracy are limited, bureaucracy can be used as a means for influencing future governments. We show that the political process has implications for the size and growth of bureaucracy. Parties in power may hire bureaucrats of the opposite political color. This is a part of the time-consistent policy. Our model also gives an explanation for the growth of bureaucracy. This is a consequence of the time-consistent policies, i.e. policies that partially tie the hands of future governments. We also show that if public sector production is inefficient, the public sector will be too large in the long run. In the short run it may be too small.