Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/30724
Authors: 
Strausz, Roland
Year of Publication: 
2010
Series/Report no.: 
CESifo Working Paper 2953
Abstract: 
This 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. Agreements that fully eliminate it exist when political divergence is small or electoral uncertainty is appropriately skewed. These results follow from a fluctuation effect of regulatory risk that hurts parties and an output-expansion effect that benefits at most one party. Due to commitment problems, regulatory agencies with some degree of political independence are needed to implement pre-electoral agreements.
Subjects: 
regulation
regulatory risk
political economy
electoral uncertainty
independent regulatory agency
JEL: 
D82
Document Type: 
Working Paper

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