The Political Economy of Regulation: Origins, Distortions, and the Case for Deregulation

Tomás Marotta (), Tomás Pacheco (), Abigail Riquelme (), Martín Rossi () and Federico Sturzenegger ()
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Tomás Marotta: Universidad de San Andrés
Tomás Pacheco: Universidad de San Andrés
Abigail Riquelme: Universidad de San Andrés
Martín Rossi: Universidad de San Andrés
Federico Sturzenegger: Universidad de San Andrés

No 175, Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: We examine how well-intentioned regulations often produce adverse economic and institutional consequences. While regulation can address market failures, it frequently evolves into a tool for rent-seeking, exclusion, or symbolic overreach. Using case studies from Argentina’s deregulation process, we show how rigid or discretionary rules can reduce competition, increase prices, and distort incentives. Beyond these partial-equilibrium effects, we examine whether deregulation can generate broader, economy-wide impacts through institutional channels. Argentina’s economy-wide deregulation provides a unique setting to assess these systemic effects. We document a marked post-reform decline in corruption indicators relative to comparable countries, consistent with the idea that simplifying rules and reducing regulatory discretion can lower rent-extraction opportunities and improve institutional performance at scale. Taken together, the findings underscore the need for responsible deregulation: a reform agenda focused on removing unjustified barriers, curbing discretion, and restoring state capacity through evidence-based, transparent, and regularly reviewed regulatory frameworks.

Pages: 36 pages
Date: 2025-12, Revised 2025-12
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https://webacademicos.udesa.edu.ar/pub/econ/doc175.pdf First version, December 2025 (application/pdf)

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