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Bureaucratic Minimal Squawk Behavior: Theory and Evidence from Regulatory Agencies

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  • Clare Leaver
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    Abstract

    This paper argues that bureaucrats are susceptible to `minimal squawk` behavior. I develop a simple model in which a desire to avoid criticism can prompt, otherwise public-spirited, bureaucrats to behave inefficiently. Decisions are taken to keep interest groups quiet and mistakes out of the public eye. The policy implications of this behavior are at odds with the received view that agencies should be structured to minimise the threat of `capture`. I test between theories of bureaucratic behaviour using a matched panel of U.S. State Public Utility Commissions and investor-owned electric utilities. The data soundly reject the capture hypothesis and are consistent with the minimal squawk hypothesis: longer PUC terms of office are associated with an increase in the incidence of rate reviews in period of falling input costs and, in turn, lower household electricity bills.

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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper344.pdf
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    Bibliographic Info

    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 344.

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    Date of creation: 01 Aug 2007
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    Handle: RePEc:oxf:wpaper:344

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    Related research

    Keywords: Bureaucratic Behavior; Professional Pride; Career Concerns; Regulatory Capture; Dynamic Panel Data Models;

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    1. P. Joskow, 1974. "Inflation and Environmental Concern: Structural Change in the Process of Public Utility Price Regulation," Working papers 128, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Frisell, Lars & Roszbach, Kasper & spagnolo, giancarlo, 2008. "Governing the Governors: A Clinical Study of Central Banks," Working Paper Series 221, Sveriges Riksbank (Central Bank of Sweden).
    3. Epstein, David & O'Halloran, Sharyn, 1995. "A Theory of Strategic Oversight: Congress, Lobbyists, and the Bureaucracy," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 227-55, October.
    4. Jean-Jacques LAFFONT & Jean TIROLE, 1990. "The Politics of Government Decision-Making : a Theory of Regulatory Capture," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9004, Université de Lausanne, Faculté des HEC, DEEP.
    5. John Fingleton, 2005. "Career Concerns of Bargainers," Journal of Law, Economics and Organization, Oxford University Press, vol. 21(1), pages 179-204, April.
    6. Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June.
    7. Canice Prendergast, 2003. "The Limits of Bureaucratic Efficiency," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 929-958, October.
    8. Besley, Timothy J. & Coate, Stephen, 2000. "Elected Versus Appointed Regulators: Theory And Evidence," CEPR Discussion Papers 2381, C.E.P.R. Discussion Papers.
    9. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-79, June.
    10. Levy, Gilat, 2004. "Anti-herding and strategic consultation," European Economic Review, Elsevier, vol. 48(3), pages 503-525, June.
    11. Hilton, George W, 1972. "The Basic Behavior of Regulatory Commissions," American Economic Review, American Economic Association, vol. 62(2), pages 47-54, May.
    12. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    13. Ernesto Dal Bo & Rafael Di Tella, 2003. "Capture by Threat," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1123-1152, October.
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    Cited by:
    1. Flavio M. Menezes & Christian Roessler, 2010. "Good and Bad Consistency in Regulatory Decisions," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 504-516, December.

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