Regulatory competition and rules/principles-based regulation

Pascal Frantz and Norvald Instefjord

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper analyses how regulatory competition affects principles‐based and rules‐based systems of regulation. Competition between regulators creates the possibility of regulatory arbitrage that generates a race to the bottom by regulators that is socially harmful. We derive the welfare effects of such competition and the regulatory response to these effects, in particular, regulatory harmonisation. We find, however, that regulators can adopt harmful regulatory harmonisation. These effects can make coordination efforts in developing global regulation socially desirable. We demonstrate, moreover, that corporate lobbying is not always harmful: it can both encourage and discourage socially desirable regulation.

Keywords: corporate lobbying; principles based regulation; regulatory arbitrage; regulatory harmonization; rules based regulation (search for similar items in EconPapers)
JEL-codes: G28 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2018-07-01
New Economics Papers: this item is included in nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Business Finance and Accounting, 1, July, 2018, 45(7-8), pp. 818 - 838. ISSN: 0306-686X

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:87301

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