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Allocating lawmaking powers: Self-regulation vs government regulation

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  • Grajzl, Peter
  • Murrell, Peter

Abstract

Although a common institutional arrangement, self-regulation as an alternative to direct government regulation has received relatively little attention from economists. This paper uses a framework inspired by property rights theory to analyze the allocation of regulatory authority. In a model of a regulatory process with bargaining, the authority to amend enabling legislation can be either consolidated within the government or extended to producers in a self-regulatory regime. The paper delineates the welfare implications of regulatory regime choice, identifies the conditions that lead a government to delegate or to centralize regulatory authority, and examines whether the government's institutional choice is efficient. Self-regulation is efficient when there is much uncertainty about the results of institutional implementation, when the government is populist, or when society is not polarized. Inefficient use of central regulation is more likely than inefficient use of self-regulation. A range of examples illustrates the model, identifying those features of legal traditions that explain cross-country variation in regulatory regime choice, illuminating the contrast in regulatory practice between the progressive era and the New Deal, and characterizing the mechanisms of intervention used under fascism.
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Suggested Citation

  • Grajzl, Peter & Murrell, Peter, 2007. "Allocating lawmaking powers: Self-regulation vs government regulation," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 520-545, September.
  • Handle: RePEc:eee:jcecon:v:35:y:2007:i:3:p:520-545
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    Citations

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    Cited by:

    1. Dimitrova-Grajzl, Valentina & Grajzl, Peter & Zajc, Katarina, 2014. "Understanding modes of civil case disposition: Evidence from Slovenian courts," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 924-939.
    2. Camille Chaserant & Sophie Harnay, 2013. "The regulation of quality in the market for legal services: Taking the heterogeneity of legal services seriously," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(2), pages 267-291, August.
    3. Grajzl, Peter & Baniak, Andrzej, 2009. "Industry self-regulation, subversion of public institutions, and social control of torts," International Review of Law and Economics, Elsevier, vol. 29(4), pages 360-374, December.
    4. Beattie, Vivien & Fearnley, Stella & Hines, Tony, 2010. "Factors Affecting Audit Quality in the 2007 UK Regulatory Environment: Perceptions of Chief Financial Officers, Audit Committee Chairs and Audit Engagement Partners," SIRE Discussion Papers 2012-29, Scottish Institute for Research in Economics (SIRE).
    5. Bos J.W.B. & Contreras M.G. & Kleimeier S., 2016. "Self-regulation in collaborative environments : the case of the equator principles in banking," Research Memorandum 007, Maastricht University, Graduate School of Business and Economics (GSBE).
    6. Cave, Jonathan & Marsden, Christopher, 2008. "Quis custodiet ipsos custodies in the Internet: self-regulation as a threat and a promise," MPRA Paper 83193, University Library of Munich, Germany.
    7. Grajzl Peter & Dimitrova-Grajzl Valentina, 2009. "The Choice in the Lawmaking Process: Legal Transplants vs. Indigenous Law," Review of Law & Economics, De Gruyter, vol. 5(1), pages 615-660, November.

    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H1 - Public Economics - - Structure and Scope of Government
    • K0 - Law and Economics - - General
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • P5 - Economic Systems - - Comparative Economic Systems

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