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Phasing of Deregulation: Normative versus Positive Objectives

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  • Wirl, Franz

Abstract

Deregulation is traditionally endorsed by economists but meets either little reception by politicians or is substantially weakened within the political process. Many papers discuss this aspect, primarily from a rent-seeking aspect. This paper emphasizes the dynamics of deregulation when consumers have sunk costs on the basis of a past regulatory regime. The paper proves first that deregulation should be radical rather than transitory within a conventional, normative framework, even if the consumers act naively and have to bear substantial adjustment costs. As a contrast, a positive model of a vote maximizing politician is introduced that explains why and when actual deregulation proceeds gradually. However, a politician should deregulate at an excessively radical rate at the beginning, if voters have a short memory and/or if demand adjusts sufficiently fast. Copyright 1991 by Kluwer Academic Publishers

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  • Wirl, Franz, 1991. "Phasing of Deregulation: Normative versus Positive Objectives," Journal of Regulatory Economics, Springer, vol. 3(1), pages 89-106, March.
    • Handle: RePEc:kap:regeco:v:3:y:1991:i:1:p:89-106
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    Cited by:

    1. Franz Wirl, 1994. "Efficient introduction of Pigovian taxes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(6), pages 535-544, December.
    2. Moghaddam, Hussein & Wirl, Franz, 2018. "Determinants of oil price subsidies in oil and gas exporting countries," Energy Policy, Elsevier, vol. 122(C), pages 409-420.

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