IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/1773.html
   My bibliography  Save this paper

The costs and benefits of regulation : implications for developing countries

Author

Listed:
  • Guasch, J. Luis
  • Hahn, Robert W.

Abstract

The past two decades have seen an unparalleled rise in new health, safety, and environmental regulation in industrial countries. At the same time, insome countries there has been substantial economic deregulation of several industries (including airlines, railroads, trucking, energy, telecommunications, and financial markets). Developing countries are engaged in deregulating some sector of the economy and devising new regulatory frameworks for others. After reviewing the literature, the authors provide an overview of the costs and benefits of regulation throughout the world, highlight the potential gains from reform of regulation and deregulation in both industrial and developing countries, draw lessons from experience with government regulation, and suggest how to improve regulation in developing countries. They find that it is possible to explore systematically the cost and benefits of regulatory activities using standard economic analysis. They conclude that regulation - especially regulation aimed at controlling prices and entry into markets that would otherwise be workably competitive - can limit growth and significantly reduce economic welfare. Although unnecessary process regulation can hurt the economy, social regulations may significantly benefit the average consumer. But some regulations do not meet goals effectively and may sometimes reduce living standards. Developing countries can consider several regulatory policies, tools, and frameworks to improve their approach to regulation. What they choose will depend on available administrative expertise and resources, as well as political constraints and economic impacts. Generally, local and national capabilities for evaluating regulation need to improved. Regulation is not generally undesirable, but it often has undesirable economic consequences, which result in part from political forces to redistribute wealth. These forces can be mitigated by more sharply evaluating in consequences and tradeoffs of proposed regulations.

Suggested Citation

  • Guasch, J. Luis & Hahn, Robert W., 1997. "The costs and benefits of regulation : implications for developing countries," Policy Research Working Paper Series 1773, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1773
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1997/06/01/000009265_3971126124256/Rendered/PDF/multi_page.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Tracy R. Lewis, 1996. "Protecting the Environment When Costs and Benefits Are Privately Known," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 819-847, Winter.
    2. Klein, Michael, 1996. "Competition in network industries," Policy Research Working Paper Series 1591, The World Bank.
    3. Hazilla, Michael & Kopp, Raymond J, 1990. "Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 853-873, August.
    4. Good, David H & Roller, Lars-Hendrik & Sickles, Robin C, 1993. "U.S. Airline Deregulation: Implications for European Transport," Economic Journal, Royal Economic Society, vol. 103(419), pages 1028-1041, July.
    5. repec:aei:rpbook:24578 is not listed on IDEAS
    6. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    7. Jarrell, Gregg A, 1984. "Change at the Exchange: The Causes and Effects of Deregulation," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 273-312, October.
    8. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-1289, September.
    9. Chisari, Omar & Estache, Antonio & Romero, Carlos, 1999. "Winners and Losers from the Privatization and Regulation of Utilities: Lessons from a General Equilibrium Model of Argentina," World Bank Economic Review, World Bank Group, vol. 13(2), pages 357-378, May.
    10. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
    11. Robert W. Hahn & Robert E. Litan, 1997. "Improving Regulatory Accountability," Books, American Enterprise Institute, number 52026.
    12. Taylor, William E & Taylor, Lester D, 1993. "Postdivestiture Long-Distance Competition in the United States," American Economic Review, American Economic Association, vol. 83(2), pages 185-190, May.
    13. S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
    14. Clifford Winston, 1998. "U.S. Industry Adjustment to Economic Deregulation," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 89-110, Summer.
    15. Braeutigam, Ronald R & Noll, Roger G, 1984. "The Regulation of Surface Freight Transportation: The Welfare Effects Revisited," The Review of Economics and Statistics, MIT Press, pages 80-87.
    16. McMullen, B Starr & Stanley, Linda R, 1988. "The Impact of Deregulation on the Production Structure of the Motor Carrier Industry," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 299-316, April.
    17. Christainsen, Gregory B & Haveman, Robert H, 1981. "Public Regulations and the Slowdown in Productivity Growth," American Economic Review, American Economic Association, vol. 71(2), pages 320-325, May.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1773. 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: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.