Citation

Guasch JL, Hahn RW. World Bank Res. Obs. 1999; 14(1): 137-158.

Copyright

(Copyright © 1999, International Bank for Reconstruction and Development/The World Bank, Publisher Oxford University Press)

DOI

10.1093/wbro/14.1.137

PMID

unavailable

Abstract

The past two decades have witnessed two trends in regulation. First, there has been an unparalleled rise in new regulations related to health, safety, and the environ- ment. Second, there has also been substantial economic deregulation of certain in- dustries in some countries, including airlines, trucking, railroads, financial markets, energy, and telecommunications. At the same time, to complement the objectives of their far-reaching privatization programs, developing countries have begun to exam- ine regulations that keep prices inefficiently high.

The literature on the benefits and costs of regulation demonstrates that this issue can be explored systematically using standard economic analysis. It also shows that regulation can have a significant adverse impact on economic growth. Specifically, regulation aimed at controlling prices and entry into markets that would otherwise be workably competitive is likely to reduce growth and adversely affect the average standard of living. In addition, process regulation can impose a significant cost on the economy. Nonetheless, social regulations may have significant net benefits for the average consumer if designed judiciously.There are several policies developing countries might consider adopting to improve their general approach to regulation. The appropriate regulatory tools and framework will depend on many factors, including bureaucratic expertise, resource availability, political constraints, and economic impacts. There is a general need to enhance the capability for evaluating regulation at the local and national levels.