A Case for Quantity Regulation

13 Pages Posted: 24 Mar 2001 Last revised: 5 Oct 2001

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2001

Abstract

Contrary to the standard economic advice, many regulations of financial intermediaries, as well as other regulations such as blue laws, fishing rules, zoning restrictions, or pollution controls, take the form of quantity controls rather than taxes. We argue that costs of enforcement are crucial to understanding these choices. When violations of quantity regulations are cheaper to discover than failures to pay taxes, the former can emerge as the optimal instrument for the government, even when it is less attractive in the absence of enforcement costs. This analysis is especially relevant to situations where private enforcement of regulations is crucial.

Suggested Citation

Glaeser, Edward L. and Shleifer, Andrei, A Case for Quantity Regulation (March 2001). NBER Working Paper No. w8184. Available at SSRN: https://ssrn.com/abstract=264438

Edward L. Glaeser (Contact Author)

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Andrei Shleifer

Harvard University - Department of Economics ( email )

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