Reconsideration of Averch-Johnson Argument

Seiichi Katayama and Fumio Abe
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Seiichi Katayama: Kobe University
Fumio Abe: Kagawa University

Kobe Economic & Business Review, 1997, vol. 41, 25-39

Abstract: The purpose of this paper is to reconsider the essence of Averch-Johnson (A-J) argument. We show that the critical points in the argument are firstly how to choose variable adjusting to the regulatory constraint, and how the level of regulation is assigned. If the so-called A-J effect of overcapitalization is an essence of the regulatory constraint argument, a simple one factor model is enough to show it in a static model. However in a simple dynamic model, overcapitalization is not necessarily true with some form of adjustment method.

Keywords: Rate of return regulation; Averch-Jphnson effect; Overcapitalization (search for similar items in EconPapers)
JEL-codes: D42 L51 (search for similar items in EconPapers)
Date: 1997
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