Credibility and the design of regulatory agencies in Brasil
By: MUELLER, Bernardo
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Contributor(s): PEREIRA, Carlos.
Material type: 
ArticlePublisher: São Paulo : Editora 34, jul./set. 2002Revista de Economia Política = Brazilian Journal of Political Economy 22, 3 , p. 65-88Abstract: In this paper we model the process of regulatory agency design, focusing on the role of credibility. The government is constrained in the sense that it must create regulatory institutions that allow it to commit not to administratively expropriate investors. The model explains both the preference of the agency head chosen by the government as well as the optimal level of statutory control. We argue that in Brazil this trade-off between credibility and control of the agencies is key in understanding the specific regulatory institutions that have been chosen. Comparative static results are derived to see how changes in some key variables affect the design of the agencies, providing us with a set of hypotheses for comparing the design of five different agencies created to regulate industries with very different characteristics. Although these agencies were initially created under very similar designs, they are expected to evolve in ways that accord with our theory
In this paper we model the process of regulatory agency design, focusing on the role of credibility. The government is constrained in the sense that it must create regulatory institutions that allow it to commit not to administratively expropriate investors. The model explains both the preference of the agency head chosen by the government as well as the optimal level of statutory control. We argue that in Brazil this trade-off between credibility and control of the agencies is key in understanding the specific regulatory institutions that have been chosen. Comparative static results are derived to see how changes in some key variables affect the design of the agencies, providing us with a set of hypotheses for comparing the design of five different agencies created to regulate industries with very different characteristics. Although these agencies were initially created under very similar designs, they are expected to evolve in ways that accord with our theory
v. 22, n. 3(87)
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