In this Paper we are going to argue that the extent of market coordination explains variations in the scope of action and degree of independence of Independent Regulatory Agencies (IRAs). By looking at 4 network sectors (electricity, gas, telecom and railway), we argue that this causal relationship is, however, mediated by features of economic governance such as vertical separation and market structure. Mainly, we can hypothesise the following two causal relationships:
1) highly coordinated markets are associated with highly vertically integrated network sectors and conversely liberal markets are associated with highly vertically separated networks;
2) the variation of IRAs’ scope of action and independence results from the combination of vertical integration and the extent of market structure.
By relying on the OECD datasets on sector regulation and regulatory management in network sectors, this paper makes two contributions. By looking at the combined effect of vertical integration and market structure, we analyse the extent of variety in IRAs, relating them to common typologies in the varieties of capitalism literature. By analysing four utility sectors, we are going beyond country-level analysis in order to distinguish between different economic sectors within countries.
