Delegation and the Ratchet Effect: Should Regulators Be Pro-Industry?
Delegation to independent bodies whose preference can be different from those of the government has been shown to have beneficial commitment benefits in areas as widely diverse as monetary policy and trade. This paper addresses the case for delegation in the context of a cost-reimbursement procurement problem. Our solution combines several features of the modern regulatory environment: government commitment to a particular regulator, the provision of independence to that regulator, and heterogeneity across regulators available. We find that delegation to an independent industry regulator, whose preferences are more pro-rent than those of the government, can raise welfare by mitigating the ratchet effect.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Oct 1999|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
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.:
- Dillen, M. & Lundholm, M., 1992.
"Dynamic Income Taxation, Redistribution, and the Ratchet Effect,"
1992-3, Uppsala - Working Paper Series.
- Dillen, Mats & Lundholm, Michael, 1996. "Dynamic income taxation, redistribution, and the ratchet effect," Journal of Public Economics, Elsevier, vol. 59(1), pages 69-93, January.
- Armstrong, Mark, 1995.
"Delegation and discretion,"
17069, University Library of Munich, Germany.
- Armstrong, M., 1994. "Delegation and discretion," Discussion Paper Series In Economics And Econometrics 9421, Economics Division, School of Social Sciences, University of Southampton.
- Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, March.
- Konrad, Kai A. & Torsvik, Gaute, 1997. "Dynamic incentives and term limits in bureaucracy regulation," European Journal of Political Economy, Elsevier, vol. 13(2), pages 261-279, May.
- Brown, Pamela Clark & Miller, Jeffrey B & Thornton, James R, 1994. "The Ratchet Effect and the Coordination of Production in the Absence of Rent Extraction," Economica, London School of Economics and Political Science, vol. 61(241), pages 93-114, February.
- Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
- Nahum Melumad & Dilip Mookherjee & Stefan Reichelstein, 1997.
"Contract Complexity, Incentives, and the Value of Delegation,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 6(1), pages 257-289, 06.
- Melamad, N. & Mookherjee, D. & Reichelstein, S., 1996. "Contract Complexity, Incentives and the Value of Delegation," Papers 70, Boston University - Industry Studies Programme.
- Nahum Melamad & Dilip Mookherjee & Stefan Reichelstein, 1996. "Contract Complexity, Incentives and the Value of Delegation," Papers 0070, Boston University - Industry Studies Programme.
- Barro, Robert J. & Gordon, David B., 1983.
"Rules, discretion and reputation in a model of monetary policy,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 101-121.
- Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
- Yao, Dennis A., 1988. "Strategic responses to automobile emissions control: A game-theoretic analysis," Journal of Environmental Economics and Management, Elsevier, vol. 15(4), pages 419-438, December.
- David Collie, 1997. "Delegation and Strategic Trade Policy," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 35-46.
- Dalen, Dag Morten, 1997. "Regulation of Quality and the Ratchet Effect: Does Unverifiability Hurt the Regulator?," Journal of Regulatory Economics, Springer, vol. 11(2), pages 139-55, March.
- Barry W. Ickes & Larry Samuelson, 1987. "Job Transfers and Incentives in Complex Organizations: Thwarting the Ratchet Effect," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 275-286, Summer.
- John M. Litwack, 1993. "Coordination, Incentives, and the Ratchet Effect," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 271-285, Summer.
- Jensen, Henrik, 1997. "Credibility of Optimal Monetary Delegation," American Economic Review, American Economic Association, vol. 87(5), pages 911-20, December.
- Dalen, Dag Morten, 1995. "Efficiency-improving investment and the ratchet effect," European Economic Review, Elsevier, vol. 39(8), pages 1511-1522, October.
- Currie, David & Levine, Paul & Pearlman, Joseph, 1996. "The Choice of 'Conservative' Bankers in Open Economies: Monetary Regime Options for Europe," Economic Journal, Royal Economic Society, vol. 106(435), pages 345-58, March.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2274. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.