The Economic Consequences of Legislative Oversight: Theory and Evidencefrom the Medical Profession

Shawn Kantor and Patrick Legros

No 4281, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides a positive analysis of how formal, periodic legislative oversight of regulatory agencies can influence market outcomes and the welfare of regulated industries. Whereas previous research has focused on the political distinction between passive and active legislative oversight, this paper shows that there exists an important economic difference between two mechanisms as well. We develop a principal-agent model that describes how a regulatory agent's incentives are influenced if its actions are publicly scrutinized. Our empirical analysis supports our claim that formal oversight leads to measurable economic effects.

Date: 1993-02
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