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American Economic Review: Vol. 99 No. 3 (June 2009)

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Bureaucratic Minimal Squawk Behavior: Theory and Evidence from Regulatory Agencies

Article Citation

Leaver, Clare. 2009. "Bureaucratic Minimal Squawk Behavior: Theory and Evidence from Regulatory Agencies." American Economic Review, 99(3): 572-607.

DOI: 10.1257/aer.99.3.572

Abstract

This paper develops a model in which a desire to avoid criticism prompts otherwise public-spirited bureaucrats to behave inefficiently. Decisions are taken to keep interest groups quiet and to keep mistakes out of the public eye. The policy implications of this "minimal squawk" behavior are at odds with the view that agencies should be structured to minimize the threat of "capture." An empirical test using data from US State Public Utility Commissions rejects the capture hypothesis and is consistent with the squawk hypothesis: longer PUC terms of office are associated with a higher incidence of rate reviews and lower household electricity bills. (JEL D73, L51, L97, L98)

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Authors

Leaver, Clare (Queen's College, U Oxford)

JEL Classifications

D73: Bureaucracy; Administrative Processes in Public Organizations; Corruption
L51: Economics of Regulation
L97: Utilities: General
L98: Industry Studies: Utilities and Transportation: Government Policy


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