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Behind the Revolving Door: A New View of Public Utility Regulation

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  • David J. Salant

Abstract

Regulatory officials frequently work for firms they regulate after they leave office. This revolving door has been the subject of much scrutiny owing to the natural suspicion of corruption. In a time-dependent supergame, I take a strategic look behind the revolving door and find it can lead to improved performance of regulated industries. When firm managers and regulators have finite and concurrent terms, investment incentives are minimal. Staggered terms and revolving doors can result in improved performance of regulated firms when each side's actions at each date are contingent on past outcomes.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 26 (1995)
Issue (Month): 3 (Autumn)
Pages: 362-377

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Handle: RePEc:rje:randje:v:26:y:1995:i:autumn:p:362-377

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Cited by:
  1. Snyder Jr., James M. & Ting, Michael M., 2008. "Interest groups and the electoral control of politicians," Journal of Public Economics, Elsevier, Elsevier, vol. 92(3-4), pages 482-500, April.
  2. Theo Offerman & Jan PottersHarry A.A. Verbon & Harry A.A. Verbon, 1999. "Cooperation in an Overlapping Generations Experiment," Tinbergen Institute Discussion Papers, Tinbergen Institute 99-019/1, Tinbergen Institute.
  3. Brito, Duarte & Pereira, Pedro & Vareda, João, 2011. "Investment, dynamic consistency and the sectoral regulator's obective," 8th Asia-Pacific Regional ITS Conference, Taipei 2011: Convergence in the Digital Age, International Telecommunications Society (ITS) 52341, International Telecommunications Society (ITS).
  4. Antonio Estache & Liam Wren-Lewis, 2010. "What Anti-Corruption Policy Can Learn from Theories of Sector Regulation," Working Papers ECARES, ULB -- Universite Libre de Bruxelles ECARES 2010-033, ULB -- Universite Libre de Bruxelles.
  5. Grace, Martin F. & Phillips, Richard D., 2008. "Regulator performance, regulatory environment and outcomes: An examination of insurance regulator career incentives on state insurance markets," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(1), pages 116-133, January.
  6. Mark Armstrong & David Sappington, 2005. "Regulation, Competition and Liberalization," Industrial Organization, EconWPA 0505011, EconWPA, revised 07 Oct 2005.
  7. Lucca, David O. & Seru, Amit & Trebbi, Francesco, 2014. "The revolving door and worker flows in banking regulation," Staff Reports, Federal Reserve Bank of New York 678, Federal Reserve Bank of New York.
  8. Mukul Majumdar & Seung Yoo, 2012. "Strategic analysis of influence peddling," International Journal of Game Theory, Springer, Springer, vol. 41(4), pages 737-762, November.
  9. Francesc Trillas & Miguel Angel Montoya, 2008. "The degree of commitment to regulator independence: measurement and impact," Hacienda Pública Española, IEF, IEF, vol. 185(2), pages 89-114, July.
  10. Estache, Antonio & Martimort, David, 1999. "Politics, transaction costs, and the design of regulatory institutions," Policy Research Working Paper Series, The World Bank 2073, The World Bank.
  11. Evans, Joanne & Levine, Paul & Trillas, Francesc, 2008. "Lobbies, delegation and the under-investment problem in regulation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(1), pages 17-40, January.
  12. Eric Helland & Michael Sykuta, 2002. "Regulation and the Evolution of Corporate Boards: Monitoring, Advising or Window Dressing?," Claremont Colleges Working Papers, Claremont Colleges 2002-27, Claremont Colleges.
  13. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 44(4), pages 925-972, December.
  14. Elise S. Brezis, 2012. "Promiscuous Elites and Economic Development," Working Papers, Bar-Ilan University, Department of Economics 2012-09, Bar-Ilan University, Department of Economics.
  15. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES, ULB -- Universite Libre de Bruxelles 2008_018, ULB -- Universite Libre de Bruxelles.
  16. Godfrey Charles-Cadogan & John A. Cole, 2013. "Bankruptcy Risk Induced by Career Concerns of Regulators," Papers, arXiv.org 1312.7346, arXiv.org.
  17. Wallner, Klaus, 2002. "Implicit contracts between regulator and industry: protection and deregulation in Japanese casualty insurance," Japan and the World Economy, Elsevier, Elsevier, vol. 14(4), pages 379-400, December.

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