IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Lobbying and Regulation in a Political Economy: Evidence from the US Cellular Industry

  • Tomaso Duso

This paper develops a political-economy model of price regulation. Firms' lobbying activity for a given regulatory status might generate a simultaneity problem between the effects and the determinants of regulatory decisions. We explicitly model this two way causality, and empirically test our model in the U.S. mobile telecommunications industry. We find support for our approach: Regulatory choice should be considered endogenous. Accounting for the simultaneity bias, we show that regulation, whenever it actually took place, did not reduce significantly cellular tariffs. However, it would have been more effective if applied in those markets which have not been regulated. To explain this finding, we show that firms' lobbying activity on regulatory choice has been successful, so that firms were able to avoid regulation in those markets where it would have been more effective. From the political economy side, we provide evidence that the probability of price regulation was higher, ceteris paribus, when the regulator was elected by politicians, when the state's governor came from the Republican Party, when the government was politically stable, and when the regulation's opportunity costs were low. ZUSAMMENFASSUNG: (Lobbying und Regulierung in einer politischen Ökonomie: Evidenz aus der US-amerikanischen Mobilfunk-Industrie) In diesem Beitrag wird ein polit-ökonomisches Modell der Preisregulierung entwickelt. Es wird explizit berücksichtigt, dass die Unternehmen die Regulierungsentscheidung der Aufsichtsbehörde beeinflussen können, um ihre Interessen zu vertreten, und deswegen kann ein Simultaneitätsproblem zwischen den Determinanten und den Wirkungen der Regulierungsentscheidung entstehen. Anhand von US-amerikanischen Daten für die Mobilfunk-Industrie (1984-1988) kann die Hypothese, dass die Regulierungsentscheidung endogen durch das Verhalten der Unternehmen am Markt mitbestimmt wird, nicht verworfen werden. Bei Berücksichtigung dieser Simultaneität kann gezeigt werden, dass die Regulierung die Mobilfunktarife nicht stark gesenkt hat, wo sie angewandt wurde. Jedoch zeigt das ökonometrische Modell, dass die Regulierung gerade in solchen Märkten effektiver gewesen wäre, die tatsächlich nicht reguliert wurden. Dieses Phänomen lässt sich durch die Theorie des Lobbying erklären. Bewirkt Regulierung große Preissenkungen, so haben die Unternehmen einen großen Anreiz durch Lobbying eine Regulierung der Mobilfunktarife abzuwehren, mit der Wirkung, dass seltener reguliert wird. Sind die Wirkungen der Regulierung hingegen gering, so sind auch die Lobbying-Anreize klein und Regulierung wird häufiger beobachtet. Außerdem zeigt sich, dass die Regulierungswahrscheinlichkeit eines Marktes - ceteris paribus - stieg, wenn die Regulierungsbehörde von Bürgern gewählt wurde, wenn der Gouverneur des Bundesstaats der republikanischen Partei angehörte, wenn die Regierung politisch stabil war und wenn die Opportunitätskosten der Regulierung gering waren.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://skylla.wz-berlin.de/pdf/2001/iv01-03.pdf
Download Restriction: no

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 01-03.

as
in new window

Length: 43 pages
Date of creation: Apr 2001
Date of revision:
Publication status: Published in Public Choice , Vol. 122(3-4), 2005, pp. 251-276.
Handle: RePEc:wzb:wzebiv:fsiv01-03
Contact details of provider: Postal: Reichpietschufer 50, 10785 Berlin, Germany
Phone: (++49)(30) 25491-441
Fax: (++49)(30) 25491-442
Web page: http://www.wzb.eu/mp/wiw/default.en.htm
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  2. Timothy Besley & Stephen Coate, 2003. "Elected Versus Appointed Regulators: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1176-1206, 09.
  3. Teske, Paul E, 1991. " Rent-Seeking in the Deregulatory Environment: State Telecommunications," Public Choice, Springer, vol. 68(1-3), pages 235-43, January.
  4. Potters, J.J.M. & Sloof, R., 1996. "Interest groups : A survey of empirical models that try to assess their influence," Other publications TiSEM ff27d5d8-f584-4386-a1fc-5, Tilburg University, School of Economics and Management.
  5. Pinelopi Koujianou Goldbe & Giovanni Maggi, 1997. "Protection for Sale: An Empirical Investigation," NBER Working Papers 5942, National Bureau of Economic Research, Inc.
  6. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  7. Kaestner, Robert & Kahn, Brenda, 1990. "The Effects of Regulation and Competition on the Price of AT&T Intrastate Telephone Service," Journal of Regulatory Economics, Springer, vol. 2(4), pages 363-77, December.
  8. Kenny, Lawrence W, et al, 1979. "Returns to College Education: An Investigation of Self-Selection Bias Based on the Project Talent Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(3), pages 775-89, October.
  9. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September.
  10. Meghan R. Busse, 2000. "Multimarket Contact and Price Coordination in the Cellular Telephone Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 287-320, 06.
  11. Richard A. Posner, 1974. "Theories of Economic Regulation," NBER Working Papers 0041, National Bureau of Economic Research, Inc.
  12. Posner, Richard A, 1970. "A Statistical Study of Antitrust Enforcement," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 365-419, October.
  13. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
  14. Donald, Stephen G & Sappington, David E M, 1995. "Explaining the Choice among Regulatory Plans in the U.S. Telecommunications Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 237-65, Summer.
  15. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  16. Kridel, Donald J & Sappington, David E M & Weisman, Dennis L, 1996. "The Effects of Incentive Regulation in the Telecommunications Industry: A Survey," Journal of Regulatory Economics, Springer, vol. 9(3), pages 269-306, May.
  17. Jerry A. Hausman, 1997. "Valuing the Effect of Regulation on New Services in Telecommunications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 1-54.
  18. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
  19. Spiller, Pablo T, 1990. "Politicians, Interest Groups, and Regulators: A Multiple-Principals Agency Theory of Regulation, or "Let Them Be Bribed."," Journal of Law and Economics, University of Chicago Press, vol. 33(1), pages 65-101, April.
  20. Duso, Tomaso & Roller, Lars-Hendrik, 2003. "Endogenous deregulation: evidence from OECD countries," Economics Letters, Elsevier, vol. 81(1), pages 67-71, October.
  21. Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics And Politics Of The Relaxation Of Bank Branching Restrictions," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1437-1467, November.
  22. Alfred E. Kahn, 1988. "The Economics of Regulation: Principles and Institutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610523, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wzb:wzebiv:fsiv01-03. 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: (Jennifer Rontganger)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.