Accountability in Government and Regulatory Policies: Theory and Evidence

42 Pages Posted: 11 Sep 2008 Last revised: 22 Jan 2016

See all articles by Carmine Guerriero

Carmine Guerriero

Department of Economics, University of Bologna

Multiple version iconThere are 4 versions of this paper

Date Written: July 9, 2011

Abstract

A key market institution is the degree of accountability to which the officials involved in regulation are exposed. While elected officials strive for re-election, appointed ones are career-concerned. Provided that the effort exerted to uncover the firm's unknown cost is sufficiently effective in swaying votes, elected officials produce more information than appointed ones do. As a result, when the demand is inelastic, appointment induces wider allocative distortions and higher profits which, in turn, yield stronger incentives to invest. Hence, appointment will prevail on election when investment inducement is sufficiently relevant and shareholders are sufficiently more powerful than consumers. Data on electricity rates and costs, and the methods of selecting regulators and appellate judges for a panel of forty-seven U.S. states confirm these predictions.

Keywords: Election; Regulation; Judges; Electricity

JEL Classification: H11; K40; L51; Q40

Suggested Citation

Guerriero, Carmine, Accountability in Government and Regulatory Policies: Theory and Evidence (July 9, 2011). FEEM Working Paper No. 55.2008, Available at SSRN: https://ssrn.com/abstract=1158450 or http://dx.doi.org/10.2139/ssrn.1158450

Carmine Guerriero (Contact Author)

Department of Economics, University of Bologna ( email )

Strada Maggiore 45
Bologna, 40125
Italy

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