Political Price Cycles in Regulated Industries: Theory and Evidence
AbstractThis paper develops a model of political regulation in which politicians set the regulated price in order to maximize electoral support by signaling to voters a pro-consumer behavior. Political incentives and welfare constraints interact in the model, yielding an equilibrium in which the real price in a regulated industry may fall in periods immediately preceding an election. The paper also provides empirical support for the theoretical model. Using quarterly data from 32 industrial and developing countries over 1978-2004, we find strong statistical and econometric evidence pointing toward the existence of electoral price cycles in gasoline markets.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 06/260.
Date of creation: 01 Nov 2006
Date of revision:
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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].
- Moita, Rodrigo M. & Paiva, Claudio, 2006. "Political Price Cycles in Regulated Industries: Theory and Evidence," Insper Working Papers wpe_55, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
- 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-2007-01-06 (All new papers)
- NEP-CDM-2007-01-06 (Collective Decision-Making)
- NEP-COM-2007-01-06 (Industrial Competition)
- NEP-ENE-2007-01-06 (Energy Economics)
- NEP-IND-2007-01-06 (Industrial Organization)
- NEP-MAC-2007-01-06 (Macroeconomics)
- NEP-MIC-2007-01-06 (Microeconomics)
- NEP-POL-2007-01-06 (Positive Political Economics)
- NEP-REG-2007-01-06 (Regulation)
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.:
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