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Accountability in government and regulatory policies: Theory and evidence

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  • Guerriero, Carmine

Abstract

A key market institution is the degree of accountability to which the officials involved in regulation are exposed. While elected officials strive for re-election, appointed ones are career-concerned. Provided that the effort exerted to uncover the firm’s unknown cost is sufficiently effective in swaying votes, elected officials produce more information than appointed ones do. As a result, when the demand is inelastic, appointment induces wider allocative distortions and higher profits which, in turn, yield stronger incentives to invest. Hence, appointment will prevail on election when investment inducement is sufficiently relevant and shareholders are sufficiently more powerful than consumers. Data on electricity rates and costs, and the methods of selecting regulators and appellate judges for a panel of forty-seven US states confirm these predictions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 39 (2011)
Issue (Month): 4 ()
Pages: 453-469

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Handle: RePEc:eee:jcecon:v:39:y:2011:i:4:p:453-469

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Web page: http://www.elsevier.com/locate/inca/622864

Related research

Keywords: Election; Regulation; Judges; Electricity;

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References

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Citations

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Cited by:
  1. Bortolotti, Bernardo & Cambini, Carlo & Rondi, Laura, 2012. "Reluctant Regulation," MPRA Paper 48073, University Library of Munich, Germany.
  2. Carmine Guerriero, 2008. "The Political Economy of Incentive Regulation: Theory and Evidence from US States," Working Papers 2008.34, Fondazione Eni Enrico Mattei.
  3. Gugler, Klaus & Rammerstorfer, Margarethe & Schmitt, Stephan, 2013. "Ownership unbundling and investment in electricity markets — A cross country study," Energy Economics, Elsevier, vol. 40(C), pages 702-713.

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