Bureaucratic beliefs and law enforcement

Why are laws and contracts effectively enforced in some developing countries but shelved, undermined, or sabotaged in others, even when formal institutions are in place? We develop a model to explore the interaction between the ruler, front-line bureaucrats, and civilians. We emphasize that bureaucrats' beliefs play a vital role in determining law enforcement outcomes. Bureaucrats' beliefs about the ruler's type determine their expectations about whether the ruler would launch an investigation when observing law non-enforcement, which then shapes their incentive to enforce laws. The ruler's discretion to pursue personal interests has a signaling value as to his or her type. Our game generates a unique separating equilibrium, wherein ruler types differ in whether to exercise discretion to advance personal interests and the bureaucrats enforce the law if and only if not observing the ruler's discretion. The game also yields two pooling equilibria where different ruler types choose the same strategy. We illustrate the theoretical insights with a comparative discussion of rulers in weak states and in developmental states.