Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/39284
Authors: 
Strausz, Roland
Year of Publication: 
2009
Series/Report no.: 
SFB 649 discussion paper 2009,040
Abstract: 
I investigate the argument that, in a twoparty system with different regulatory objectives, political uncertainty generates regulatory risk. I show that this risk has a fluctuation effect that hurts both parties and an outputexpansion effect that benefits one party. Consequently, at least one party dislikes regulatory risk. Moreover, both political parties gain from eliminating regulatory risk when political divergence is small or the winning probability of the regulatoryriskaverse party is not too large. Because of a commitment problem, direct political bargaining is insufficient to eliminate regulatory risk. Politically independent regulatory agencies solve this commitment problem.
Subjects: 
Regulation
regulatory risk
political economy
independent regulatory agency
JEL: 
D82
Document Type: 
Working Paper

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