‘Independent regulators versus the Rogowski-Kayser effect on consumer prices’

The CCP’s Autumn seminar series continues on Friday 25th November with the return of Chris Hanretty (CCP and PSI) who will be presenting his research on ‘Independent regulators versus the Rogowski-Kayser effect on consumer prices‘. An abstract for his seminar can be found below.

Abstract

Work by Ronald Rogowski and Mark Kayser has suggested that consumer prices will be higher in systems of proportional representation, compared to systems with more majoritarian electoral systems, and that this is due to the differing marginal contributions of citizen-consumers’ votes and producers’ votes and campaign contributions in such systems, which in turn affect the chosen level of regulation in a Stigler-Peltzman model of regulation. However, the increasing delegation of regulatory competence to independent sectoral authorities suggests that this Kayser-Rogowski effect should be undermined by independent regulators as politicians are simply cut out of the picture.

I test this hypothesis using information on the ratio of residential to industrial prices for electricity in 33 IEA member countries for all years following market liberalization. I find that (a) the main Kayser-Rogowski effect is born out; that (b) there is no countervailing effect of independent regulators per se when using the full-sample; but that (c) there is a countervailing effect of independent regulators in a sample restricted to Western Europe for which we have information about the de facto independence of regulators.

Further reading: Ronald Rogowski and Mark Andreas Kayser, ‘Majoritarian Electoral Systems and Consumer Power: Price-Level Evidence from the OECD Countries‘ (2002) 46(3) American Journal of Political Science 526-539.

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