The Construction Of Industry Identification Model For State Capture In Transition Economies And Its Application Research

Joel S. Hellman & Daniel Kaufmann etc. conducted empirical researches on 22 countries in East Europe and the former Soviet Union on state capture in transition economies, and put forward the theory of state capture in transition economies. Russian scholars, with the theory and the actual domestic situation, analyzed the issues such as causes of state capture, the mutual influence between state capture and FDI, and identification of captor, etc. However, in China, which regarded as a transition economy, few studies have been made in the field of state capture. This paper, based on the capture theory, Pareto Optimality, Olson's theory of interest group and triangle fuzzy number, studies the creation of equilibrium model of regulation policies in transition economies, the creation and practicability of industry identification model for state capture in transition economies, and the measurements Chinese government should undertake in its regulation system.Firstly, based on Peltzman's graph of the regulator's equilibrium, the paper builds the equilibrium model of regulation policies in transition economies, and attests that the preference of policy makers are due to the insufficiency of vote and the rent-seeking activities of officers. Considering that the Peltzman's graph of the regulator's equilibrium did not contain the states whose legal system is still incomplete, the paper, introducing constraint factors ofα(vote) andβ(bribery) to the graph, taking price policy as the representative of regulation policies, and based on the principles of utility maximization pursued by regulators and profit maximization pursued by enterprises, gets the equilibrium point of regulation policies, which is the tangent point of indifference curve of regulators' utility and profit curve of enterprises. The conclusion is, in transition economy, regulators will set high regulation price in order to seek more bribery if the constraint power of vote is weak; to the contrary, the constraint power of vote is strong, then influence of bribery becomes weak, and regulators will set low regulation price. Similarly, regulator will risk the danger to ignore the vote and make high price policy in favor of enterprises. Thus, state capture in transition economies will lead to regulation policies favorable to enterprises.Secondly, the paper builds the industry quantitative identification model for state capture in transition economies based on triangle fuzzy number, then constructs a qualitative identification model, and analyzes the taxi market of Beijing pattern with the model. The paper discovers that serious state capture problem exists in the taxi market of Beijing pattern. Based on the definition of state capture (Joel Hellman, et al.) and the indicators measuring the state capture, this paper builds the industry identification model, which includes four main factors: the system environment of transition economy, regulation policies in favor of enterprises, monopoly profit caused by the regulation policies and decreasing the total surplus of the society, and the power-for-money deal between bureaucracy and enterprises. Then, based on the model, and taking the taxi market of Hefei in Anhui province as an example, with the data collected by the survey of cost-profit of the taxi drivers, the paper analyzes the profit shift and the decrease in total surplus caused by three main regulation policies, to argue that there is a state capture existing in the taxi market in Hefei, and makes a further conclusion that most taxi markets adopting Beijing pattern in China are suffered from problem of state capture.Finally, the paper analyzes the factors which may cause state capture existing in current regulation system in Chinese government from the aspects of establishment and delimitation of regulation power, the setups of regulation organizations, and the operation of regulation power. In the final part, from the three phases of administrative supervision, i.e. pre-supervision, process supervision, and post-supervision, the paper puts forward systematic countermeasures to avoid and prevent state capture problems. The countermeasures include: autonomous legislation of People's Representative Conference and the State Council, abating the industrial regulation, and establishing standardized and just operational procedure of regulation power. The paper especially stresses the constitution of anti-monopoly law and the establishment of special execution institution, argues that obvious enterprise-preferential regulation policies should be strictly supervised, and any state capture issues discovered should be submitted to the court. If any state capture is proved to exist, corresponding officers and captors' should be investigated on their responsibilities. In addition to these measures, the government also should set up management and budget office to supervise the whole process of regulation-making, establish scientific and effective assessment system, balance the interests and the influence on regulative legislation of interest groups, and improve the public hearing system, etc.