Testing Regulatory Consistency

Robert Breunig, Flavio Menzies

    Research output: Contribution to journalArticle

    Abstract

    We undertake an analysis of regulatory consistency using a database of publicly available regulatory decisions in Australia. We propose a simple exploratory model which allows us to test for regulatory consistency across jurisdictions and industries without detailed knowledge of the regulatory process. We compare two measures using our approach-the weighted average cost of capital (WACC) and the proportion of firms' revenue requirement claims disallowed by the regulator. Our comparison suggests that the WACC is a very poor measure of regulatory consistency. Moreover, our empirical results may be interpreted as indicating that a range of measures ought to be considered when assessing regulatory consistency. Our results also provide an empirical foundation for theoretical modeling of regulatory processes.
    Original languageEnglish
    Pages (from-to)60-74
    JournalContemporary Economic Policy
    Volume30
    Issue number1
    DOIs
    Publication statusPublished - 2012

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