Independent Auditors, Bias, and Political Agency

This paper analyzes political agency with endogenous information collection and revelation by third-party auditors. While increasing incentives for auditors to provide information straightforwardly improves political control, a small amount of pro-incumbent bias can also be useful for maintaining high levels of control. When the equilibrium level of control is high, most investigations uncover positive information about the incumbent. Since positive information increases reelection rates, mildly pro-incumbent auditors are willing to work harder than unbiased auditors in these equilibria. For moderate levels of control, pro-incumbent auditors are again useful due to their extra effort, even though they may suppress some negative information in equilibrium. Only when market incentives are low, so equilibrium control is weak, are unbiased or anti-incumbent biased auditors better for voters than mildly pro-incumbent auditors.