Regulation and the Ratchet Effect: Should Regulators Be Pro-Industry?

Regulation Initiative Working Paper Series No. 26

Posted: 31 Oct 2002

See all articles by Michelle Bush

Michelle Bush

London Business School

Paul Levine

School of Economics, University of Surrey

Neil Rickman

University of Surrey - Department of Economics

Date Written: March 1999

Abstract

The view that some public authorities should be taken out of the day-to-day democratic process and made 'independent' is now widely accepted. Delegation to independent bodies has been shown to have beneficial commitment benefit in areas as widely diverse as monetary policy, international tade policy, firm level R&D and tax auditing. For industry regulation, however although the case for independent regulators is also widely argued, there has been no comoarable study of the role for delegation. This paper addresses this issue in the context of a cost-reimbursement procurement problem. We find that delegation to an indusrty regulator whose preferences are more pro-rent than those of the government can be welfare enhancing.

Suggested Citation

Bush, Michelle and Levine, Paul L. and Rickman, Neil, Regulation and the Ratchet Effect: Should Regulators Be Pro-Industry? (March 1999). Regulation Initiative Working Paper Series No. 26. Available at SSRN: https://ssrn.com/abstract=321061

Michelle Bush (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
0207 262 5050 (Phone)

Paul L. Levine

School of Economics, University of Surrey ( email )

Guildford
Surrey GU2 7XH
United Kingdom
+44 1483 259 380 Ext. 2773 (Phone)
+44 1483 259 548 (Fax)

Neil Rickman

University of Surrey - Department of Economics ( email )

Guildford
Surrey GU2 7XH
United Kingdom
+44 1483 689 923 (Phone)
+44 1483 689 548 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
464
PlumX Metrics