The empirics of regulatory reforms proxied by categorical variables: recent findings and methodological issues

Bastianin, Andrea and Castelnovo, Paolo and Florio, Massimo (2017): The empirics of regulatory reforms proxied by categorical variables: recent findings and methodological issues.

Abstract

Some regulatory reforms do not change just a specific signal that can be represented by a quantitative continuous variable, such as a tax rate, a price cap, or an emission threshold. The standard theory of reform in applied welfare economics (going back to contributions by e.g. Ramsey, Samuelson and Guesnerie) asks the question: What is the marginal effect on social welfare of changing a policy signal? However, reforms such as privatization, unbundling or liberalization of network industries are often described by ‘packages’ shifting a policy framework. It is increasingly frequent in the empirical evaluation of such reforms to use categorical variables, often in polytomous form, for instance describing unbundling steps (vertical integration, accounting, functional, legal, ownership separation) on a discrete numerical scale, such as those proposed by the OECD and other international bodies. We review recent econometric literature evaluating regulatory reforms using such variables (40 papers) and we discuss some methodological issues arising in this context.

• Item Type: MPRA Paper
• Language: English
• Keywords: econometrics; policy evaluation; network industries; reforms
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C20 - General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C54 - Quantitative Policy Modeling; D - Microeconomics > D0 - General > D04 - Microeconomic Policy: Formulation, Implementation, and Evaluation; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L98 - Government Policy

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