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Rate Of Return Regulation: An Indirect Approach


  • Wan Sulaiman Wan Yusoff


This paper proposes an indirect method to the "Rate of Return Regulation" (ROR) or "Cost Based Regulation," by imposing ROR on monopoly firms through tax instruments, i.e., ad-valorem tax and consumption tax. The main objective in undertaking this theoretical study of industrial economics is to investigate and compare the results of direct with indirect methods concerning the social cost of monopoly and monopoly distortions or "overcapitalization." The finding shows that the indirect method not only would not involve an inefficient allocation of resources but it is also much more demanding than the direct method in terms of government's information requirements and even increases the monopoly output higher than the level reached by direct regulation. This is relevant in the implementation of regulated firms especially in the period after privatization.

Suggested Citation

  • Wan Sulaiman Wan Yusoff, 1999. "Rate Of Return Regulation: An Indirect Approach," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 7(2), pages 51-72, December.
  • Handle: RePEc:ije:journl:v:7:y:1999:i:2:p:51-72

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    References listed on IDEAS

    1. Bergmann, Barbara R, 1971. "The Effect on White Incomes of Discrimination in Employment," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 294-313, March-Apr.
    2. Mincer, Jacob & Polachek, Solomon, 1974. "Family Investment in Human Capital: Earnings of Women," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 76-108, Part II, .
    3. Elaine Sorensen, 1993. "Continuous Female Workers: How Different Are They from Other Women?," Eastern Economic Journal, Eastern Economic Association, vol. 19(1), pages 15-32, Winter.
    4. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
    5. Blau, Francine D & Kahn, Lawrence M, 1992. "The Gender Earnings Gap: Learning from International Comparisons," American Economic Review, American Economic Association, vol. 82(2), pages 533-538, May.
    6. Polachek,Solomon W. & Siebert,W. Stanley, 1993. "The Economics of Earnings," Cambridge Books, Cambridge University Press, number 9780521367288, March.
    7. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    8. Joni Hersch, 1991. "Male-Female Differences in Hourly Wages: The Role of Human Capital, Working Conditions, and Housework," ILR Review, Cornell University, ILR School, vol. 44(4), pages 746-759, July.
    9. Greenhalgh, Christine A, 1980. "Male-Female Wage Differentials in Great Britain: Is Marriage an Equal Opportunity?," Economic Journal, Royal Economic Society, vol. 90(363), pages 751-775, December.
    10. Dora L. Costa & Matthew E. Kahn, 2008. "Learning from the Past," NBER Chapters,in: Heroes and Cowards: The Social Face of War National Bureau of Economic Research, Inc.
    11. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
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    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms


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