Legislatures differ in their institutional capacity to draft and enact policy. While strong legislatures can increase the congruence of policy outcomes to the electorate's preferences, they can also inject uncertainty into markets with their ability to alter the political economic landscape. We argue that this uncertainty will manifest in a state's ability to borrow and hypothesize a negative relationship between legislative capacity and credit-worthiness. Using ratings of general obligation bonds issued by the American states over nearly two decades and data on the institutional capacity of state legislative assemblies, we find support for the claim that having a legislature that is better equipped to affect policy change increases credit risk evaluations. The results we present broaden our understanding of the importance of legislative institutions, the determinants of credit risk, and the economic implications of democratic responsiveness.

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The lion's share of policy in the United States is made by administrative agencies. Agencies not only make policy choices, they must also implement policy effectively. Oversight institutions play an integral role in the policymaking process by monitoring, through review of agency policy actions, both policymaking tasks. Through analysis of a formal model I develop a theory of policymaking between agencies and courts and show that review can impact agency effort choices even when bureaucratic subversion is not a concern. At times the court has no impact on this effort and the agency is unconstrained. However, when the agency's effort dictates whether or not the court defers to the agency's actions judicial review does affect effort decisions. In this setting, review can either strengthen or, counter-intuitively, weaken agency effort incentives. Implications for executive and congressional oversight are discussed in light of these results.

Ex post review is a common feature of policymaking institutions. We consider an environment in which an expert agent makes a policy recommendation, which can then be accepted or rejected by an overseer whose policy goals differ from those of the agent. The theory suggests that both behavior and optimal institutional design are sensitive to several factors, including actors' preference alignment, the importance of the policy decision, and the uncertainty about the correct policy choice. We characterize the types of situations in which ex post review creates incentives for the agent to make pathological policy choices. In these situations, ex post review can reduce accountability of the agent to overseer wishes and ultimately provide incentives to set aside review entirely. The theory also offers testable predictions about policy recommendations and the overseer's acceptance or rejection of these recommendations.

Lobbying is a potential source of corruption but is also a valuable source of information for policy-makers. We analyze a game-theoretic model that shows how the threat of corruption affects the incentives of noncorrupt politicians to enlist the help of lobbyists to make more informed decisions. Politicians face a dilemma because voters cannot always tell whether a politician allows access to lobbyists to solicit corruption or to seek information. Thus, a noncorrupt politician may deny access to lobbyists to signal that she is noncorrupt even though doing so impedes her ability to make good policy. This signaling may decrease the welfare of the voters depending on the value of the lost policy information relative to the value of screening out corrupt politicians.