Checks, Balances, and the Cost of Regulation

Abstract

This article examines the relationship between political veto points, credible commitments, and regulatory compliance costs. Its central purpose is to assess whether different types of political veto points credibly constrain regulatory change and thus lower compliance costs. The authors conceptualize veto points broadly, including legislative oversight, gubernatorial powers, and direct democracy. We analyze state-level environmental compliance costs from 1988 to 1994 as a function of the structure of state political institutions and state political and economic characteristics. The results suggest that a key veto point, the authority for legislators to review bureaucratic behavior, consistently reduces compliance costs.