IDEAS home Printed from https://ideas.repec.org/a/kap/regeco/v42y2012i3p225-241.html
   My bibliography  Save this article

Capture or contract? The early years of electric utility regulation

Author

Listed:
  • Thomas Lyon
  • Nathan Wilson

Abstract

Jarrell (J Law Econ 21:269–295, 1978 ) found that electricity prices fell more slowly in states that adopted state regulation before 1917, suggesting that regulators were “captured” by the interests of the regulated electric utilities. An alternative explanation is that state regulation more credibly protected specialized utility assets from regulatory opportunism than did the municipal franchise contracting that preceded it. We test this alternative hypothesis using a panel of data from the U.S. Electrical Censuses of 1902–1937. We find that the shift from municipal franchise contracting to state regulation was associated with a substantial decrease in investment propensity, an outcome supporting the capture hypothesis. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Thomas Lyon & Nathan Wilson, 2012. "Capture or contract? The early years of electric utility regulation," Journal of Regulatory Economics, Springer, vol. 42(3), pages 225-241, December.
    • Handle: RePEc:kap:regeco:v:42:y:2012:i:3:p:225-241
    DOI: 10.1007/s11149-012-9200-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11149-012-9200-9
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11149-012-9200-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas P. Lyon, 1991. "Regulation with 20-20 Hindsight: "Heads I Win, Tails You Lose"?," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 581-595, Winter.
    2. Priest, George L, 1993. "The Origins of Utility Regulation and the "Theories of Regulation" Debate," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 289-323, April.
    3. Shimshack, Jay P. & Ward, Michael B., 2005. "Regulator reputation, enforcement, and environmental compliance," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 519-540, November.
    4. William J. Baumol & Alvin K. Klevorick, 1970. "Input Choices and Rate-of Return Regulation: An Overview of the Discussion," Bell Journal of Economics, The RAND Corporation, vol. 1(2), pages 162-190, Autumn.
    5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    6. Giovanni S. F. Bruno, 2005. "Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals," Stata Journal, StataCorp LP, vol. 5(4), pages 473-500, December.
    7. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, September.
    8. Crocker, Keith J & Masten, Scott E, 1996. "Regulation and Administered Contracts Revisited: Lessons from Transaction-Cost Economics for Public Utility Regulation," Journal of Regulatory Economics, Springer, vol. 9(1), pages 5-39, January.
    9. Jarrell, Gregg A, 1978. "The Demand for State Regulation of the Electric Utility Industry," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 269-295, October.
    10. Joskow, Paul L, 1974. "Inflation and Environmental Concern: Structural Change in the Process of Public Utility Price Regulation," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 291-327, October.
    11. Hausman, William J. & Neufeld, John L., 2002. "The Market for Capital and the Origins of State Regulation of Electric Utilities in the United States," The Journal of Economic History, Cambridge University Press, vol. 62(4), pages 1050-1073, December.
    12. Thomas P. Lyon & John W. Mayo, 2005. "Regulatory Opportunism and Investment Behavior: Evidence from the U.S. Electric Utility Industry," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 628-644, Autumn.
    13. Christopher R. Knittel, 2006. "The Adoption Of State Electricity Regulation: The Role Of Interest Groups," Journal of Industrial Economics, Wiley Blackwell, vol. 54(2), pages 201-222, June.
    14. Peltzman, Sam, 1993. "George Stigler's Contribution to the Economic Analysis of Regulation," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 818-832, October.
    15. Neufeld, John L., 2008. "Corruption, Quasi-Rents, and the Regulation of Electric Utilities," The Journal of Economic History, Cambridge University Press, vol. 68(4), pages 1059-1097, December.
    16. David, Paul A. & Bunn, Julie Ann, 1988. "The economics of gateway technologies and network evolution: Lessons from electricity supply history," Information Economics and Policy, Elsevier, vol. 3(2), pages 165-202.
    17. Miller, Geoffrey P, 1993. "The Origins of Utility Regulation and the "Theories of Regulation" Debate: Comments," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 325-329, April.
    18. Jarrell, Gregg A., 1979. "Pro-producer regulation and accounting for assets : The case of electric utilities," Journal of Accounting and Economics, Elsevier, vol. 1(2), pages 93-116, August.
    19. Werner Troesken, 2006. "Regime Change and Corruption. A History of Public Utility Regulation," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 259-281, National Bureau of Economic Research, Inc.
    20. Victor P. Goldberg, 1976. "Regulation and Administered Contracts," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 426-448, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Continuing debate over the economic origins of electric utility regulation
      by Michael Giberson in Knowledge Problem on 2013-09-24 09:49:37

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hazlett, Thomas W., 2022. "Free speech and the challenge of efficiency," Telecommunications Policy, Elsevier, vol. 46(9).
    2. Jayanath Ananda & Nicholas Pawsey & Tahmid Nayeem, 2022. "Customer‐centric regulation: The case of Victorian urban water sector," Regulation & Governance, John Wiley & Sons, vol. 16(2), pages 536-556, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
    2. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
    3. Kitchens, Carl T. & Jaworski, Taylor, 2017. "Ownership and the price of residential electricity: Evidence from the United States, 1935–1940," Explorations in Economic History, Elsevier, vol. 64(C), pages 53-61.
    4. Birke, Franziska, 2007. "Universaldienstregulierung in der Telekommunikation heute: Herausforderungen, Chancen und Risiken ; ein historischer Ansatz," Discussion Papers 114, University of Freiburg, Institute for Transport Economics and Regional Policy.
    5. Paul G. Mahoney, 2012. "The Public Utility Pyramids," The Journal of Legal Studies, University of Chicago Press, vol. 41(1), pages 37-66.
    6. Eshien Chong & Carine Staropoli & Anne Yvrande-Billon, 2014. "Auction versus Negotiation in Public Procurement: Looking for Empirical Evidence," Post-Print hal-00512813, HAL.
    7. Weisman Dennis L., 2016. "What Do Regulators Value?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-10, October.
    8. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
    9. Larry Blank & John Mayo, 2009. "Endogenous Regulatory Constraints and the Emergence of Hybrid Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(3), pages 233-255, November.
    10. Petrick, Martin & Zier, Patrick, 2012. "Common Agricultural Policy effects on dynamic labour use in agriculture," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 37(6), pages 671-678.
    11. Guthrie, Graeme, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Working Paper Series 18946, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    12. Paul L. Joskow, 2014. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 291-344, National Bureau of Economic Research, Inc.
    13. Sumit K. Majumdar, 2010. "Incentive Compatible Mechanism Design And Firm Growth: Experiences From Telecommunications Sector Regulation," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 81(3), pages 357-387, September.
    14. Bickenbach, Frank, 1999. "Regulierung und Wettbewerb im Bereich der Netzinfrastrukturen: Begründung, Regeln und Institutionen," Kiel Working Papers 910, Kiel Institute for the World Economy (IfW Kiel).
    15. Woo, C.K. & Cheng, Y.S. & Law, A. & Zarnikau, J. & Ho, S.T. & Leung, H.Y., 2015. "Consumer support for a public utilities commission in Hong Kong," Energy Policy, Elsevier, vol. 76(C), pages 87-97.
    16. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
    17. Petrick, Martin & Zier, Patrick, 2010. "Cap Impacts On Labour Use In East German Agriculture," 50th Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93962, German Association of Agricultural Economists (GEWISOLA).
    18. repec:vuw:vuwscr:18946 is not listed on IDEAS
    19. Werner Troesken, 2010. "Competition and Corruption: Lessons from 150 Years of Industrial Governance," Working Paper 426, Department of Economics, University of Pittsburgh, revised Jan 2010.
    20. Majumdar, Sumit K., 2010. "Institutional changes, firm size and wages in the telecommunications sector," Information Economics and Policy, Elsevier, vol. 22(3), pages 201-217, July.
    21. J.A. den Hertog, 2010. "Review of economic theories of regulation," Working Papers 10-18, Utrecht School of Economics.

    More about this item

    Keywords

    Regulatory capture; Transaction cost economics; Electric utilities; K2; L5; L9; N4; N7;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:regeco:v:42:y:2012:i:3:p:225-241. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.