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Title:The Political Economy of Regulatory Risk PDF Logo
Authors:Strausz, Roland
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Asymmetric Information and Risk C8-V3
Abstract:The paper investigates political uncertainty as a source of regulatory risk. It shows that political parties have incentives to reduce regulatory risk actively: Mutually beneficial pre-electoral agreements that reduce regulatory risk always exist and fully eliminate it when political divergence is small or electoral uncertainty is appropriately skewed. These results follow from a fluctuation effect of regulatory risk that hurts both parties and an output-expansion effect that benefits at most one party. Due to commitment problems, politically independent regulatory agencies are needed to implement pre-electoral agreements. Optimal delegation may require only partial rather than full political independence.
Subjects:regulation
regulatory risk
political economy
electoral uncertainty
independent regulatory agency
JEL:D82
L51
L12
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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