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Enforcement, Regulation and Development

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  • Laffont, Jean-Jacques

Abstract

After discussing examples of enforcement failures for regulatory contracts in Africa, we develop a regulation model with asymmetric information and imperfect enforcement. Either the regulator succeeds in forcing the regulated firm to fulfill the contract or renegotiation takes place. The probability of renegotiation decreases with the level of enforcement expenditures which is chosen by the regulator. The model suggests that the endogenous level of enforcement decreases with the proneness to corruption, and increases and then decreases with the level of development. Finally, we document this relationship empirically. Copyright 2003, Oxford University Press.
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  • Laffont, Jean-Jacques, 2001. "Enforcement, Regulation and Development," IDEI Working Papers 129, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:664
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    Cited by:

    1. Auriol, Emmanuelle & Blanc, Aymeric, 2009. "Capture and corruption in public utilities: The cases of water and electricity in Sub-Saharan Africa," Utilities Policy, Elsevier, vol. 17(2), pages 203-216, June.
    2. Jean-Jacques Laffont, 2004. "Management of Public Utilities in China," Annals of Economics and Finance, Society for AEF, vol. 5(2), pages 185-210, November.
    3. Bell, Matthew, 2003. "Regulation in developing countries is different: avoiding negotiation, renegotiation and frustration," Energy Policy, Elsevier, vol. 31(4), pages 299-305, March.
    4. Gustavo Ferro & Omar O. Chisari, 2010. "Tópicos de Economía de la Regulación de los Servicios Públicos," Working Papers hal-00473038, HAL.
    5. Emmanuelle Auriol & Pierre M. Picard, 2008. "Infrastructure and Public Utilities Privatization in Developing Countries," The World Bank Economic Review, World Bank, vol. 23(1), pages 77-100, November.
    6. Jellal, Mohamed, 2014. "Modern regulation of firms in developing countries," MPRA Paper 57207, University Library of Munich, Germany.

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