Economic Impacts of Regulation
Regulation is a written instrument that contains rules with the force of law (Ogus, 2004). Regulation as a process involves monitoring and enforcing rules, established through primary or delegated legislation. Regulation usually creates, constrains or limits a right. In addition, regulation creates and limits a duty besides allocating responsibilities (Ogus, 2004). Regulation may take several forms depending on its application. These includes legal restrictions made by the government, contractual obligations, which binds several parties together, self-regulations by industries, third party regulation, co-regulation, market regulation, certification and accreditation
Regulation made by a state tries to produce outcomes that might not occur (Ogus, 2004). In addition, it attempts to prevent or produce outcomes in various places to what might occur. Through this, regulation becomes an implementation object of policy statements. Examples of regulation include controls on prices, market entries, wages, pollution effects, employment of particular people within certain industries, development approval, the military forces and services and production standards for particular goods (High, 2001).
Public services usually encounter conflicts between procedures of maximizing profits and people's interests on these services. Therefore, most of the governments have various forms of control or regulation for the purpose of managing these possible conflicts (High, 2001). This regulation ensures deliverance of appropriate and proper service. The regulation does this without discouraging the proper functioning as well as development of the business. For instance, regulation in most countries controls the sale of prescription drugs and alcohol (Amato & Laudati, 2001). It also controls key sectors in the economy such as a food business, public transport, and provision of personal and residential care, film and TV. In addition to these, the regulation controls monopolies and the financial sector of the country (High, 2001). With regards to this, the objective of this paper is to identify the impacts of regulation on various sectors of the economy.
Literature Review
A wide variety of literature review indicates that regulation frequently has significant impacts on the economy. However, it is not possible to generalize prepositions about the impacts of economic regulation (High, 2001). The literature review indicates that the nature, as well as the magnitude regulatory impacts, varies significantly depending on the structure of the process of regulation.
The impacts of regulation on the economy usually differ substantially from the predictions of public interest model. This model presumes that the intension of regulations is to ameliorate imperfections in the market and enhancing efficiency in the market. The same review indicates that the impacts regulations on prices in a regulated market having several competing firms are more complex. In some industries such as airline and insurance, introduction of entry and price regulation is for the purpose of protecting incumbents for competition (Grabowski, 2009).
Economic Analysis
The economic impacts of regulation depend on various factors (Ogus, 2004). These include the motivation for regulation, the structure of the regulatory process, the nature of instruments of regulation, the economic characteristics of the industry, and the political and legal environment of the regulation (Loayza, Serven, Oviedo, & World Bank, 2005). Given the significant variations in these institutional, as well as economic characteristics, the possible impacts of regulation are likely to significantly differ across time and industry
Extensive research on the impacts of regulation on economy proceeds from various points-of-view. At one extreme is the prescriptive research that focuses on introduction time of the regulation as well as the optimal form of regulation. At the other extreme is the descriptive perspective research which focuses on legal, economic, political and bureaucratic...
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