Political Price Cycles in Regulated Industries: Theory and Evidence

Rodrigo M. S. Moita and Claudio Paiva

American Economic Journal: Economic Policy, 2013, vol. 5, issue 1, 94-121

Abstract: The early work of Stigler (1971) treats the regulatory process as the arbitration of conflicting economic and political interests rather than a pure welfare-maximizing effort. This paper builds on these ideas and models the regulatory process as a game where the industry-lobby, consumers-voters, and a regulator-politician interact to define the regulated price, in alternating electoral and non-electoral periods. The equilibrium that emerges consists of a fully rational political price cycle in a regulated industry. Using monthly data for regulated gasoline and electricity prices from Brazil, we find strong evidence pointing towards the existence of electoral price cycles in both markets. (JEL D72, L51, L71, L78, L94, L98, O14)

JEL-codes: D72 L51 L71 L78 L94 L98 O14 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/pol.5.1.94
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: POLITICAL PRICE CYCLES IN REGULATED INDUSTRIES: THEORY AND EVIDENCE (2006)
Working Paper: Political Price Cycles in Regulated Industries: Theory and Evidence (2006)
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