Regaultion and the ratchet effect: shoould regulation be pro-industry?

Economics

Regulation Initiative Working Paper Series

1999

The view that some public authorities should be taken out of the day-to-day democratic processs and made 'independent' is now widely accepted. Deregulation to independent bodies has been shown to have beneficial commitment benefits in areas as widely diverse as monertary policy, international trade policy, firm level R&D and tax auditing. For industry regualtion, however, although the case for independent regulators is also widely argued, there has been no comparable study of the role of degregulation. This paper addresses this issue in the conntext of cost-reimbursement procurement problem. We find that delegation to an industry regulator whose preferences are more pro-rent than those of the government can be welfare enhancing.

Regulation Initiative (closed)

26

Regulation Initiative Working Paper Series

No