The Political Economy of Incentive Regulation: Theory and Evidence from US States
AbstractThe determinants of incentive regulation are a key issue in industrial policy. I study an asymmetric information model of incentive rules selection by a political principal endowed with an information-gathering technology whose efficiency increases with the effort exerted by two accountable supervisors (a regulator and a judge). This set up captures the institutions of several international markets. The model predicts that reforms toward higher powered rules are more likely the more inefficient (efficient) is the production (information-gathering) technology, the less tight is political competition and the greater are pro-consumer supervisors’ incentives. This prediction is consistent with evidence based on US electric power market data.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2008.34.
Date of creation: Apr 2008
Date of revision:
Incentive Schemes; Accountability Rules; Regulatory Capture;
Other versions of this item:
- Guerriero, Carmine, 2013. "The political economy of incentive regulation: Theory and evidence from US states," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 91-107.
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- K2 - Law and Economics - - Regulation and Business Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-06 (All new papers)
- NEP-CDM-2008-08-06 (Collective Decision-Making)
- NEP-CTA-2008-08-06 (Contract Theory & Applications)
- NEP-LAW-2008-08-06 (Law & Economics)
- NEP-MIC-2008-08-06 (Microeconomics)
- NEP-POL-2008-08-06 (Positive Political Economics)
- NEP-REG-2008-08-06 (Regulation)
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- Boggio, Margherita, 2011. "Municipal capitalism, regulatory federalism and politics," MPRA Paper 46244, University Library of Munich, Germany.
- Boggio, Margherita, 2011. "From Reluctant Privatization to Municipal Capitalism: an Overview on Ownership, Political Connections and Decentralization," MPRA Paper 46232, University Library of Munich, Germany.
- Guerriero, Carmine, 2011. "Accountability in government and regulatory policies: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 453-469.
- Niklas Potrafke, 2010. "Does government ideology influence deregulation of product markets? Empirical evidence from OECD countries," Public Choice, Springer, vol. 143(1), pages 135-155, April.
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