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The Costs and Benefits of Regulation: Implications for Developing Countries

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  • Guasch, J Luis
  • Hahn, Robert W

Abstract

The literature on the benefits and costs of regulation demonstrates that this issue can be explored systematically using standard economic analysis. It also shows that regulation can have a significant adverse impact on economic growth. Specifically, regulation aimed at controlling prices and entry into markets that would otherwise be workably competitive is likely to reduce growth and adversely affect the average standard of living. In addition, process regulation can impose a significant cost on the economy. Nonetheless, social regulations may have significant net benefits for the average consumer if designed judiciously. There are several policies developing countries might consider adopting to improve their general approach to regulation. The appropriate regulatory tools and framework will depend on many factors, including bureaucratic expertise, resource availability, political constraints, and economic impacts. There is a general need to enhance the capability for evaluating regulation at the local and national levels. Copyright 1999 by Oxford University Press.

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Bibliographic Info

Article provided by World Bank Group in its journal World Bank Research Observer.

Volume (Year): 14 (1999)
Issue (Month): 1 (February)
Pages: 137-58

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Handle: RePEc:oup:wbrobs:v:14:y:1999:i:1:p:137-58

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References

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  1. Tracy R. Lewis, 1996. "Protecting the Environment When Costs and Benefits Are Privately Known," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 819-847, Winter.
  2. Klein, Michael, 1996. "Competition in network industries," Policy Research Working Paper Series 1591, The World Bank.
  3. Hazilla, Michael & Kopp, Raymond J, 1990. "Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 853-73, August.
  4. Winston, Clifford, 1985. "Conceptual Development in the Economics of Transportation: An Interpretive Survey," Journal of Economic Literature, American Economic Association, vol. 23(1), pages 57-94, March.
  5. Taylor, William E & Taylor, Lester D, 1993. "Postdivestiture Long-Distance Competition in the United States," American Economic Review, American Economic Association, vol. 83(2), pages 185-90, May.
  6. S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
  7. Clifford Winston, 1998. "U.S. Industry Adjustment to Economic Deregulation," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 89-110, Summer.
  8. Good, David H & Roller, Lars-Hendrik & Sickles, Robin C, 1993. "U.S. Airline Deregulation: Implications for European Transport," Economic Journal, Royal Economic Society, vol. 103(419), pages 1028-41, July.
  9. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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  11. Dale W. Jorgenson & Peter J. Wilcoxen, 1990. "Environmental Regulation and U.S. Economic Growth," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 314-340, Summer.
  12. Chisari, Omar & Estache, Antonio & Romero, Carlos, 1999. "Winners and Losers from the Privatization and Regulation of Utilities: Lessons from a General Equilibrium Model of Argentina," World Bank Economic Review, World Bank Group, vol. 13(2), pages 357-78, May.
  13. Jarrell, Gregg A, 1984. "Change at the Exchange: The Causes and Effects of Deregulation," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 273-312, October.
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  15. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-89, September.
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  17. Koedijk, C.G. & Kremers, J., 1996. "Market opening, regulation and growth in Europe," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3108676, Tilburg University.
  18. McMullen, B Starr & Stanley, Linda R, 1988. "The Impact of Deregulation on the Production Structure of the Motor Carrier Industry," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 299-316, April.
  19. Christainsen, Gregory B & Haveman, Robert H, 1981. "Public Regulations and the Slowdown in Productivity Growth," American Economic Review, American Economic Association, vol. 71(2), pages 320-25, May.
  20. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
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Citations

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Cited by:
  1. Cohen, Joseph N, 2010. "Neoliberalism’s relationship with economic growth in the developing world: Was it the power of the market or the resolution of financial crisis?," MPRA Paper 24399, University Library of Munich, Germany.
  2. Robert W. Hahn, 1998. "Policy Watch: Government Analysis of the Benefits and Costs of Regulation," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 201-210, Fall.
  3. Preetum Domah & Pollitt, M.G. & Jon Stern, 2002. "Modelling the Costs of Electricity Regulation: Evidence of Human Resource Constraints in Developing Countries," Cambridge Working Papers in Economics 0229, Faculty of Economics, University of Cambridge.
  4. Jalilian, Hossein & Kirkpatrick, Colin & Parker, David, 2007. "The Impact of Regulation on Economic Growth in Developing Countries: A Cross-Country Analysis," World Development, Elsevier, vol. 35(1), pages 87-103, January.
  5. Kirkpatrick, Colin & Parker, David, 2003. "Regulatory Impact Assessment: Developing Its Potential for Use in Developing Countries," Centre on Regulation and Competition (CRC) Working papers 30646, University of Manchester, Institute for Development Policy and Management (IDPM).
  6. Yin-Fang Zhang & David Parker & Colin Kirkpatrick, 2005. "Assessing the Effects of Privatisation, Competition and Regulation on Economic Performance: The Case of Electricity Sector Reform," SCAPE Policy Research Working Paper Series 0511, National University of Singapore, Department of Economics, SCAPE.
  7. Siddhartha Mitra & Suman Bery & Gupta D B & Reeta Krishna, 2010. "The Nature of Rural Infrastructure: Problems and Prospects," Working Papers id:2357, eSocialSciences.
  8. Lee, Norman, 2002. "Developing and Applying Regulatory Impact Assessment Methodologies in Low and Middle Income Countries," Centre on Regulation and Competition (CRC) Working papers 30691, University of Manchester, Institute for Development Policy and Management (IDPM).
  9. Mellati, Ali, 2008. "Uncertainty and investment in private sector: An analytical argument and a review of the economy of Iran," MPRA Paper 26655, University Library of Munich, Germany.
  10. Minogue, Martin, 2005. "Apples and Oranges: Problems in the Analysis of Comparative Regulatory Governance," Centre on Regulation and Competition (CRC) Working papers 30589, University of Manchester, Institute for Development Policy and Management (IDPM).
  11. Eerma, Diana & Sepp, Jüri, 2007. "Competition policy's role in network industries: Regulation and deregulation in Estonia," Discourses in Social Market Economy 2007-03, OrdnungsPolitisches Portal (OPO).
  12. Zhang, Yin-Fang & Kirkpatrick, Colin & Parker, David, 2002. "Electricity Sector Reform in Developing Countries: An Econometric Assessment of the Effects of Privatisation, Competition and Regulation," Centre on Regulation and Competition (CRC) Working papers 30593, University of Manchester, Institute for Development Policy and Management (IDPM).
  13. Jililian, Hossein & Kirkpatrick, Colin & Parker, David, 2003. "Creating the Conditions for International Business Expansion: The Impact of Regulation on Economic Growth in Developing Countries - A Cross-Country Analysis," Development Economics and Public Policy Working Papers 30554, University of Manchester, Institute for Development Policy and Management (IDPM).
  14. Cohen, Joseph N, 2010. "Neoliberalism’s relationship with economic growth in the developing world: Was it the power of the market or the resolution of financial crisis?," MPRA Paper 24527, University Library of Munich, Germany.
  15. Kirkpatrick, Colin, 2001. "Regulatory Impact Assessment in Developing Countries: Research Issues," Centre on Regulation and Competition (CRC) Working papers 30640, University of Manchester, Institute for Development Policy and Management (IDPM).
  16. Kirkpatrick, Colin & Parker, David & Zhang, Yin-Fang, 2004. "Foreign Direct Investment in Infrastructure in Developing Countries: Does Regulation Make a Difference?," Centre on Regulation and Competition (CRC) Working papers 30703, University of Manchester, Institute for Development Policy and Management (IDPM).
  17. Parker, David & Kirkpatrick, Colin, 2002. "Researching Economic Regulation in Developing Countries: Developing a Methodology for Critical Analysis," Centre on Regulation and Competition (CRC) Working papers 30665, University of Manchester, Institute for Development Policy and Management (IDPM).
  18. Colin Kirkpatrick & David Parker, 2005. "Domestic Regulation and the WTO: The Case of Water Services in Developing Countries," The World Economy, Wiley Blackwell, vol. 28(10), pages 1491-1508, October.
  19. A. R. Kemal, 2002. "Regulatory Framework in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 41(4), pages 319-332.
  20. Minogue, Martin, 2005. "Apples and oranges: problems in the analysis of comparative regulatory governance," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(2-3), pages 195-214, May.

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