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Substitution in Regulatory Agencies: FDA Enforcement Alternatives

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  • Olson, Mary

Abstract

This article develops a framework to understand the factors to which regulatory agencies respond and examines how these factors may influence agency decision-making. The model shows how either changing feedback from constituents or changing regulatory costs can alter the trade-offs facing the agency and hence create opportunities for substitution among different agency actions. This framework is used to explain the changing portfolio of FDA enforcement actions between 1972-92. Results indicate that changing constituent and political feedback is the reason for the observed policy change. Specifically, budget reductions and increasing industry demand for product approval led the FDA to reduce monitoring and substitute less resource-intensive enforcement, namely recalls, for more resource-intensive enforcement. Results also show that increasing numbers of adverse drug reaction reports from consumers and physicians enabled the agency to increase the efficiency of its inspections policy and to ultimately reduce its use of inspections. Copyright 1996 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Journal of Law, Economics and Organization.

Volume (Year): 12 (1996)
Issue (Month): 2 (October)
Pages: 376-407

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Handle: RePEc:oup:jleorg:v:12:y:1996:i:2:p:376-407

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Cited by:
  1. Mary K. Olson, 2000. "Regulatory Reform and Bureaucratic Responsiveness to Firms: the Impact of User Fees in the FDA," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 363-395, 06.
  2. Hutchinson, Emma & Kennedy, Peter W., 2008. "State enforcement of federal standards: Implications for interstate pollution," Resource and Energy Economics, Elsevier, vol. 30(3), pages 316-344, August.
  3. Mark Duggan & Fiona Scott Morton, 2004. "The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing," NBER Working Papers 10930, National Bureau of Economic Research, Inc.
  4. Helland, Eric, 1998. "The Revealed Preferences of State EPAs: Stringency, Enforcement, and Substitution," Journal of Environmental Economics and Management, Elsevier, vol. 35(3), pages 242-261, May.
  5. Mary K. Olson, 2002. "Pharmaceutical Policy Change and the Safety of New Drugs," Journal of Law and Economics, University of Chicago Press, vol. 45(S2), pages 615-642.
  6. Olson, Mary K, 1999. "Agency Rulemaking, Political Influences, Regulation, and Industry Compliance," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 573-601, October.

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