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Regime Change and Corruption. A History of Public Utility Regulation



Regime Change and Corruption. A History of Public Utility Regulation This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: Corruption and Reform: Lessons from America's Economic History Volume Author/Editor: Edward L. Glaeser and Claudia Goldin, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-29957-0 Volume URL: Conference Date: July 30-31, 2004 Publication Date: March 2006 Title: Regime Change and Corruption. A History of Public Utility Regulation Author: Werner Troesken URL: 259 8.1 Introduction The history of public utility regulation in the United States has an odd circular quality. During the late nineteenth century, gas and electric com- panies were subject to limited regulatory oversight; by the early twentieth century, they were subject to burdensome municipal regulation; and by 1940, most gas and electric companies were subject to state and federal reg- ulation (Stigler and Friedland 1962; Troesken 1996). Yet during the 1980s and 1990s, the regulatory bodies that had built up over the previous 100 years were abrogated, and gas and electric companies began operating in regulatory environments akin to those that had existed in the 1880s and 1890s (Joskow 1989). Similarly, in the American water industry, the gover- nance regime progressed from private provision with limited municipal oversight during the nineteenth century to widespread municipal owner- ship by the mid-twentieth century (Baker 1897; Troesken 1999). During the 1970s and 1980s, municipally owned water companies were privatized by the score and returned to the governance regime that had prevailed during the nineteenth century, with private provision and limited municipal over- sight (Galiani, Gertler, and Schargrodsky 2003; Vitale 2001). What explains the circularity of public utility regulation? At least three possibilities suggest themselves.

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