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Regulatory Schemes and Political Capture in a Local Public Sector

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  • Gagnepain, Philippe
  • Ivaldi, Marc

Abstract

We consider a framework of contractual interactions between urban transport authorities and transport operators. We estimate simultaneously the choice of contract by the authorities and the effect of regulation on the cost reducing activity of the operators. We test whether regulatory schemes currently implemented in the industry are the observable items of a more general menu of second best contracts. We suggest that the generation process of the data we have in hand is better explained by the political aspects of regulation. Moreover, the cost reducing effort of the operators is greater under fixed-price regimes, compared to the cost-plus case.

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  • Gagnepain, Philippe & Ivaldi, Marc, 2010. "Regulatory Schemes and Political Capture in a Local Public Sector," TSE Working Papers 10-158, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:22667
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    1. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
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