| Summary: | While theories predict interagency regulatory competition, one form of regulatory competition, may generate benefits that outweigh costs, this Dissertation presents a case study on how complexities arising from the institutional setting and the strategic behavior of regulatory agencies undermine meaningful competition. The subject of the case study is the domestic regulation of inbound foreign investment in China.
This Dissertation studies how and why self-expansion behavior, alongside the distorted incentive structures of regulatory agencies, causes predictions made by regulatory competition theorists not to hold true in the context of China's regulation of foreign investment. It identifies one behavior pattern that has not been sufficiently addressed in previous literature: In interagency competition, Chinese agencies strategize to become additive (rather than alternative) to each other, out of a rational cost-benefit calculation. This Dissertation, from an economic analysis perspective, studies the inefficiencies derived from such behavior pattern. An emphasis on duly delegation of authority, utilization of centralized coordination mechanisms, installation of pre-screening process to avoid wasteful overlap up front as well as adequate deterrence measures to reshape agencies' incentive structures, may be helpful in mitigating the inefficiencies. Distinctions are drawn from a few other regulatory competition and regulatory overlap scenarios in the United States.
This Dissertation further argues that in order to design an efficient and effective regulatory competition framework tailored to specific legal and institutional frameworks, certain presumptions about regulatory competition need to be clarified or modified. Jurisdictional competition has implications distinct from interagency regulatory competition. Theoretical modeling needs to sufficiently factor in agencies' tendency to expand bottom-up and their strategic behavior in an overlapping jurisdiction. Interagency regulatory competition in a law enforcement scheme may generate effects different from a permit-granting regulatory regime. To achieve an optimal number of regulatory agencies within a regulatory domain, in lieu of abstaining from intervention and endorsing free competition analogous to private firms' competition in the marketplace, the principal should police and coordinate the competition among regulatory agencies and curb the free entry by agencies into a regulatory regime.
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