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Agency Rulemaking, Political Influences, Regulation, and Industry Compliance

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  • Olson, Mary K

Abstract

This article empirically examines the impact of congressional oversight and agency rulemaking on firm compliance behavior in FDA-regulated industries. Congressional oversight hearings provide signals to firms about future changes in regulatory enforcement strategies. Agency rulemaking influences firms' incentives to comply with regulation because firms must invest significant resources to keep up with changing agency policy. This analysis uses three-stage least squares to simultaneously estimate both the numbers of FDA inspections and industry violators between 1972 and 1994. Results show that congressional oversight deters industry noncompliance. The effect of agency rulemaking on noncompliance differs between industries. For instance, an increasing stock of human drug rules has raised compliance among drug firms because newer more, cost-effective rules have replaced older, more costly rules. In contrast, the increasing stock of medical device rules has reduced industry compliance among device firms because these rules have increased the complexity and the scope of regulation. Copyright 1999 by Oxford University Press.

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  • Olson, Mary K, 1999. "Agency Rulemaking, Political Influences, Regulation, and Industry Compliance," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 573-601, October.
    • Handle: RePEc:oup:jleorg:v:15:y:1999:i:3:p:573-601
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    Cited by:

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    2. Abraham, John & Davis, Courtney, 2005. "A comparative analysis of drug safety withdrawals in the UK and the US (1971-1992): Implications for current regulatory thinking and policy," Social Science & Medicine, Elsevier, vol. 61(5), pages 881-892, September.
    3. Tamer Četin & Feridun Yilmaz, 2010. "Transition to the Regulatory State in Turkey: Lessons from Energy," Journal of Economic Issues, Taylor & Francis Journals, vol. 44(2), pages 393-402.
    4. Michael W. Toffel & Jodi L. Short, 2011. "Coming Clean and Cleaning Up: Does Voluntary Self-Reporting Indicate Effective Self-Policing?," Journal of Law and Economics, University of Chicago Press, vol. 54(3), pages 609-649.
    5. Francisco Polidoro & Matt Theeke, 2012. "Getting Competition Down to a Science: The Effects of Technological Competition on Firms' Scientific Publications," Organization Science, INFORMS, vol. 23(4), pages 1135-1153, August.
    6. Dietrich Earnhart, 2004. "Panel Data Analysis of Regulatory Factors Shaping Environmental Performance," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 391-401, February.
    7. Michael, Bryane & Falzon, Joseph & Shamdasani, Ajay, 2015. "A Theory of Financial Services Competition, Compliance and Regulation," EconStor Preprints 107400, ZBW - Leibniz Information Centre for Economics.

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