Regulation, public interest, and private interest: an empirical investigation of firms in Japan
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By using empirical methodology, this paper investigates to what extent the public interest and the private interest theories, respectively, explain the actual regulatory process. Our estimation findings are as follows: First, on average (whole industry basis), the explanation power of the public interest theory is about 46– 78%, while that of the private interest theory is about 22–54%. Second, the explanatory power of the public interest theory is higher in non-public utility industries, while that of the private interest theory is higher in public utility industries. This suggests that regulations on non-public utility industry are constructed largely with social welfare in mind, as assumed in conventional neoclassical welfare economics, but that those in the public utility industry tend to be captured largely by private groups, as assumed in private interest theory.
KeywordsDeterminants of regulation Corporate ownership Public interest theory Private interest theory
JEL ClassificationL44 L51 L52
The first version of this paper was presented at the Workshop on Corporate Governance in Network Industries on October 29, 2015, at the Vienna University of Economics and Business (WU), WU Campus, Vienna, Austria. We would like to thank the participants at the workshop for valuable comments and questions, especially Prof. Klaus Gugler (Vienna University of Economics and Business), Prof. Anne d’Arcy (Vienna University of Economics and Business), and Prof. Laura Rondi (Politecnico di Torino). We also would like to thank two anonymous referees for comments and questions. This research was funded partly by the JSPS KAKENHI, Grant No. 17K03685.
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