The Effect of Regulatory Uncertainty on Investment: Evidence from Renewable Energy Generation

Kira R. Fabrizio

The Journal of Law, Economics, and Organization, 2013, vol. 29, issue 4, 765-798

Abstract: How are firms' investment decisions influenced by potential instability in the regulatory environment? Firms that anticipate regulatory change may alter their responses to current policies, potentially rendering those policies less effective. This article explores the pattern of investments in renewable generation assets in the US electricity industry following the implementation of Renewable Portfolio Standard (RPS) policies. Viewing these investments through the lens of transaction cost economics, the article investigates whether the likelihood of future regulatory change in a state dampened (or spurred) firm responses to RPS policies in that state. I find that firms invested less in new assets in states that had previously passed and repealed legislation to restructure the electricity industry, indicating that perceived regulatory instability reduces new investment and undermines policy goals. (JEL D02, D81, D23, D21, K2) The Author 2012. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
http://hdl.handle.net/10.1093/jleo/ews007 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jleorg:v:29:y:2013:i:4:p:765-798

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Journal of Law, Economics, and Organization is currently edited by Andrea Prat

More articles in The Journal of Law, Economics, and Organization from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().