Political Price Cycles in Regulated Industries: Theory and Evidence
AbstractThe early work of Stigler (1971) treats the regulatory process as the arbitration of conflicting economic and political interests rather than a pure welfare-maximizing effort. This paper builds on these ideas and models the regulatory process as a game where the industry-lobby, consumers-voters, and a regulator-politician interact to define the regulated price, in alternating electoral and non-electoral periods. The equilibrium that emerges consists of a fully rational political price cycle in a regulated industry. Using monthly data for regulated gasoline and electricity prices from Brazil, we find strong evidence pointing towards the existence of electoral price cycles in both markets. (JEL D72, L51, L71, L78, L94, L98, O14)
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Insper Working Paper, Insper Instituto de Ensino e Pesquisa in its series Insper Working Papers with number wpe_55.
Date of creation: Oct 2006
Date of revision:
Other versions of this item:
- Rodrigo M. S. Moita & Claudio Paiva, 2013. "Political Price Cycles in Regulated Industries: Theory and Evidence," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 94-121, February.
- Rodrigo Menon S. Moita & Claudio Paiva, 2006. "Political Price Cycles In Regulated Industries: Theory And Evidence," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 126, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- L78 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Government Policy
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
- O - Economic Development, Technological Change, and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-01 (All new papers)
- NEP-DEV-2006-12-01 (Development)
- NEP-INT-2006-12-01 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bishop, John Hillman, 1989. "Is the Test Score Decline Responsible for the Productivity Growth Decline?," American Economic Review, American Economic Association, vol. 79(1), pages 178-97, March.
- O'Neill, June, 1990. "The Role of Human Capital in Earnings Differences between Black and White Men," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 25-45, Fall.
- Stephen Coate & Timothy Besley, 2000.
"Elected versus Appointed Regulators: Theory and Evidence,"
NBER Working Papers
7579, National Bureau of Economic Research, Inc.
- Timothy Besley & Stephen Coate, 2003. "Elected Versus Appointed Regulators: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1176-1206, 09.
- Besley, Timothy J. & Coate, Stephen, 2000. "Elected Versus Appointed Regulators: Theory And Evidence," CEPR Discussion Papers 2381, C.E.P.R. Discussion Papers.
- Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
- Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
- Gordon B. Dahl, 2002.
"Mobility and the Return to Education: Testing a Roy Model with Multiple Markets,"
Econometric Society, vol. 70(6), pages 2367-2420, November.
- Gordon Dahl, 1997. "Mobility and the Returns to Education: Testing A Roy Model With Multiple Markets," Working Papers 760, Princeton University, Department of Economics, Industrial Relations Section..
- Gordon B. Dahl, 2002. "Mobility and the Return to Education: Testing a Roy Model with Multiple Markets," RCER Working Papers 488, University of Rochester - Center for Economic Research (RCER).
- Rogoff, Kenneth, 1990.
"Equilibrium Political Budget Cycles,"
American Economic Review,
American Economic Association, vol. 80(1), pages 21-36, March.
- Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
- Kevin M. Murphy & Sam Peltzman, 2004. "School Performance and the Youth Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 299-328, April.
- Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May.
- Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- Peltzman, Sam, 1993. "George Stigler's Contribution to the Economic Analysis of Regulation," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 818-32, October.
- Rogoff, Kenneth & Sibert, Anne, 1988.
"Elections and Macroeconomic Policy Cycles,"
Review of Economic Studies,
Wiley Blackwell, vol. 55(1), pages 1-16, January.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
- Steven G. Rivkin, 1995. "Black/White Differences in Schooling and Employment," Journal of Human Resources, University of Wisconsin Press, vol. 30(4), pages 826-852.
- Spiller, Pablo T, 1990. "Politicians, Interest Groups, and Regulators: A Multiple-Principals Agency Theory of Regulation, or "Let Them Be Bribed."," Journal of Law and Economics, University of Chicago Press, vol. 33(1), pages 65-101, April.
- Claudio Paiva & Rodrigo Moita, 2006. "Political Price Cycles in Regulated Industries," IMF Working Papers 06/260, International Monetary Fund.
- Ioannis N. Kessides, 2004. "Reforming Infrastructure : Privatization, Regulation, and Competition," World Bank Publications, The World Bank, number 13525, October.
- Paiva, Claudio A. C., 1996. "Electoral price cycles in regulated industries," World Development, Elsevier, vol. 24(10), pages 1673-1680, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Naercio Menezes).
If references are entirely missing, you can add them using this form.