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Allocating Law-Making Powers: Self-Regulation vs. Government Regulation

  • Peter Grajzl


    (Department of Economics, Central European University)

  • Peter Murrell


    (Department of Economics, University of Maryland)

Although a common institutional arrangement, self-regulation as an alternative to direct government regulation has received relatively little attention from economists. This paper uses a framework inspired by property rights theory to analyze the allocation of regulatory authority. In a model of a regulatory process with bargaining, the authority to amend enabling legislation can be either consolidated within the government or extended to producers in a self-regulatory regime. The paper delineates the welfare implications of regulatory regime choice, identifies the conditions that lead a government to delegate or to centralize regulatory authority, and examines whether the government's institutional choice is efficient. Self-regulation is efficient when there is much uncertainty about the results of institutional implementation, when the government is populist, or when society is not polarized. Inefficient use of central regulation is more likely than inefficient use of self-regulation. A range of examples illustrates the model, identifying those features of legal traditions that explain cross-country variation in regulatory regime choice, illuminating the contrast in regulatory practice between the progressive era and the New Deal, and characterizing the mechanisms of intervention used under fascism.

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Paper provided by University of Maryland, Department of Economics in its series Electronic Working Papers with number 05-002.

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Length: 39 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:umd:umdeco:05-002
Contact details of provider: Postal: Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
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Order Information: Postal: Ms. Elizabeth Martinez, Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742

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