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Dependent Controllers and Regulation Policies: Theory and Evidence

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  • Carmine Guerriero

    (University of Cambridge)

Abstract

This paper analyzes the effects of supervisors’ (i.e., regulators and judges) selection rules on regulated prices. A checks and balances’ regulatory review process strengthens the role of the judicial power and election increases the populism of implicitly motivated supervisors. Election arises when the risk related to expropriation of sunk investments and the inter-party distance are lower. Employing U.S. electric power market’s data, the empirical evidence strongly confirms these predictions. Indeed, when treated as endogenous, only the election of administrative law judges and not the one of regulators significantly lowers the level of electricity rates. Moreover a more effective supervision technology shows a marginal negative effect on regulated rates as well.

Suggested Citation

  • Carmine Guerriero, 2006. "Dependent Controllers and Regulation Policies: Theory and Evidence," Working Papers 2006.109, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2006.109
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    References listed on IDEAS

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    Cited by:

    1. Estache, Antonio & Wren-Lewis, Liam, 2010. "What Anti-Corruption Policy Can Learn from Theories of Sector Regulation," CEPR Discussion Papers 8082, C.E.P.R. Discussion Papers.
    2. Carmine Guerriero, 2006. "Endogenous Price Mechanisms,Capture and Accountability Rules: Theory and Evidence," Working Papers 2006.106, Fondazione Eni Enrico Mattei.

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    More about this item

    Keywords

    Election; Agency; Judges; Regulation; Electricity;
    All these keywords.

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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