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Capture or contract? The early years of electric utility regulation

Thomas Lyon () and Nathan Wilson ()

Journal of Regulatory Economics, 2012, vol. 42, issue 3, 225-241

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

Keywords: Regulatory capture; Transaction cost economics; Electric utilities; K2; L5; L9; N4; N7 (search for similar items in EconPapers)
Date: 2012
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