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On Butterflies and Frankenstein: A Dynamic Theory of Regulation

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  • Johan F.M.Swinnen
  • Thijs Vandemoortele

Abstract

There are major differences in regulation among various countries. A particular case is the difference between the EU and US in regulating biotechnology.We develop a formal and dynamic model of government decision-making on regulation. We show that minor differences in consumer preferences can lead to important and persistent regulatory differences, and that temporary shocks to preferences can have long-lasting effects. This hysteresis in regulatory differences is shown to be caused by producer protectionist motives. We argue that this model may contribute to explain the difference between EU and US biotechnology regulation.

Suggested Citation

  • Johan F.M.Swinnen & Thijs Vandemoortele, 2011. "On Butterflies and Frankenstein: A Dynamic Theory of Regulation," LICOS Discussion Papers 27611, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  • Handle: RePEc:lic:licosd:27611
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    File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp276.pdf
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    1. Why are Europe and the US so different in terms of regulation?
      by Economic Logician in Economic Logic on 2011-04-05 19:06:00

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