Regulatory Quality in EU Network Industries: Evidence on Telecommunications, Gas, Electricity and Rail Transport

Ugur, Mehmet. (2007) Regulatory Quality in EU Network Industries: Evidence on Telecommunications, Gas, Electricity and Rail Transport. In: UNSPECIFIED, Montreal, Canada. (Unpublished)

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Abstract

Over the last decade, market opening in EU network industries has been accompanied by the emergence of an EU-level regulatory framework. The theoretical literature on regulation predicts regulatory capture, which is due to information asymmetries, agency problems and high levels of transaction costs. Regulatory capture, in turn, is conducive to sub-optimal levels of prices, investment, environmental protection, and affordability/accessibility. Given this background, this article aims to examine the quality of regulation in EU network industries, with a view to assess the optimality of the European regulatory framework that combines both national- and EU-level regulation. The data is obtained from EU Commission sources, reports of European regulators, and the Market Opening Milestones database of Copenhagen Economics. The paper examines both ex ante and ex post indicators of regulatory quality in EU network industries. The ex ante assessment is based on indicators of regulatory competence and institutional strength derived from existing legislation. The ex post assessment is based on indicators such as market structure, prices, and customer switching, etc. that are affected by the quality of the regulatory framework. The paper also elaborates on the interaction between national- and EU-level regulation, and the implications of the two-tier system for the overall regulatory quality in network industries.

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