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Credibility and the design of regulatory agencies in Brazil

Author

Listed:
  • Bernardo Mueller
  • Carlos Pereira

Abstract

In this paper we model the process of regulatory agency design, focusing on the role of credibility. The government is constrained in the sense that it must create regulatory institutions that allow it to commit to not administratively expropriate investors. The model explains both the preference of the agency head chosen by the government as well as the optimal level of statutory control. We argue that in Brazil this trade-off between credibility and control of the agencies is key to understanding the specific regulatory institutions that have been chosen. Comparative static results are derived to examine how changes in some key variables affect the design of the agencies, providing us with a set of hypotheses for comparing the design of five different agencies created to regulate industries with very different characteristics. Although these agencies were initially created under very similar designs, they are expected to evolve in ways that accord with our theory. JEL Classification: L5; K2; D82.

Suggested Citation

  • Bernardo Mueller & Carlos Pereira, 2002. "Credibility and the design of regulatory agencies in Brazil," Brazilian Journal of Political Economy, Center of Political Economy, vol. 22(3), pages 449-472.
    • Handle: RePEc:ekm:repojs:v:22:y:2002:i:3:p:449-472:id:945
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    File URL: https://centrodeeconomiapolitica.org.br/repojs/index.php/journal/article/view/945/2153
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    Citations

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    Cited by:

    1. Florent Frasson-Quenoz & Aldo Olano Alor & Erli Margarita Marín-Aranguren & Francisco Daniel Trejos-Mateus & Martha Isabel Gómez Lee & Gisela da Silva Guevara & Martha Ardila & Javier Garay & Pío Garc, 2018. "Teorías sobre las relaciones internacionales. Perspectivas y lecturas desde América latina," Books, Universidad Externado de Colombia, Facultad de Finanzas, Gobierno y Relaciones Internacionales, number 128, August.
    2. Paulo Correa & Marcus Melo & Bernardo Mueller & Carlos Pereira, 2019. "Political interference and regulatory resilience in Brazil," Regulation & Governance, John Wiley & Sons, vol. 13(4), pages 540-560, December.
    3. Andrea C. Bianculli, 2013. "The Brazilian Association of Regulatory Agencies: Integrating levels, consolidating identities in the regulatory state in the south," Regulation & Governance, John Wiley & Sons, vol. 7(4), pages 547-559, December.
    4. repec:gig:joupla:v:2:y:2010:i:1:p:3-30 is not listed on IDEAS
    5. Narzetti, Daniel Antonio & Marques, Rui Cunha, 2021. "Isomorphic mimicry and the effectiveness of water-sector reforms in Brazil," Utilities Policy, Elsevier, vol. 70(C).
    6. Mariana Mota Prado, 2012. "Implementing independent regulatory agencies in Brazil: The contrasting experiences in the electricity and telecommunications sectors," Regulation & Governance, John Wiley & Sons, vol. 6(3), pages 300-326, September.
    7. Correa, Paulo & Melo, Marcus & Mueller, Bernardo & Pereira, Carlos, 2008. "Regulatory governance in Brazilian infrastructure industries," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 202-216, May.
    8. De Paula, Germano Mendes & Avellar, Ana Paula, 2008. "Reforms and infrastructure regulation in Brazil: The experience of ANTT and ANTAQ," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 237-251, May.
    9. Portman, Michelle E., 2014. "Regulatory capture by default: Offshore exploratory drilling for oil and gas," Energy Policy, Elsevier, vol. 65(C), pages 37-47.

    More about this item

    Keywords

    Regulation; credibility; regulatory agencies; asymmetric information;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • K2 - Law and Economics - - Regulation and Business Law
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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