Police Powers, Regulatory Takings and the Efficient Compensation of Domestic and Foreign Investors
AbstractModern international investment agreements have challenged the customary exclusion of public good regulations from being considered government 'takings' subject to compensation rules. Full compensation for regulatory takings can, however, lead to over-investment and excessive entry in risky industries. An alternative is to 'carve-out' apparently efficient regulation from compensation requirements. We design a carve-out/compensation rule that induces efficient regulation and firm-level investment even when the regulator suffers fiscal illusion and has private information about the social benefit from regulation. We also show that a carve-out reduces the subsidy to risky industry implicit in compensation rules, and thus mitigates the entry problem. Copyright © 2009 The Economic Society of Australia.
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Bibliographic InfoArticle provided by The Economic Society of Australia in its journal Economic Record.
Volume (Year): 86 (2010)
Issue (Month): 274 (09)
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Other versions of this item:
- Aisbett, Emma & Karp, Larry & McAusland, Carol, 2008. "Police-powers, regulatory takings and the efficient compensation of domestic and foreign investors," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5x84h5kf, Department of Agricultural & Resource Economics, UC Berkeley.
- Aisbett, Emma & Karp, Larry & McAusland, Carol, 2008. "Police-powers, regulatory takings and the efficient compensation of domestic and foreign investors," CUDARE Working Paper Series 1061, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
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