Working Paper: CEPR ID: DP4093
Authors: Pedro L. Marn; Richard Sicotte
Abstract: Recent economic theories have investigated the susceptibility of diverse public bureaucratic structures to capture by private industry. In particular, Laffont and Martimort (1999) propose that the separation of regulatory powers will reduce the threat of capture. We analyse investor reaction to a reorganization of the United States maritime bureaucracy that created two separate agencies to carry out the duties previously assigned to a single entity. We find strong evidence that investors interpreted the agency split as detrimental to ocean carriers, supporting the theory advanced by Laffont and Martimort. We also find some evidence that net exporting industries benefited from separation.
Keywords: capture; regulation; shipping industry
JEL Codes: H1; K2; L5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Separation of regulatory powers in the U.S. maritime bureaucracy (L98) | Stricter regulatory oversight (G18) |
| Separation of regulatory powers in the U.S. maritime bureaucracy (L98) | Lower freight rates for net exporting industries (F14) |
| Lower freight rates for net exporting industries (F14) | Benefits for net exporting industries (F14) |
| Separation of regulatory powers in the U.S. maritime bureaucracy (L98) | Negative stock returns for ocean carriers (L92) |
| Stricter regulatory oversight (G18) | Negative stock returns for ocean carriers (L92) |