Economic Profitability of Regulated vs. Unregulated Industries

This thesis examines whether regulated industries in North America are more or less profitable than unregulated industries. There is extensive literature on the theory of regulation and the possibility that regulated companies "capture" regulators which come to serve their interests, but much less literature on the consequences of regulation. Most empirical studies tested this hypothesis by looking at specifc regulatory events. This thesis looks across 150 different sub-industries, and finds that the economic profits of regulated industries are higher than unregulated industries. This paper also finds that the annual variation in economic profit is lower for regulated industries. Using an ANOVA test, the paper shows that the differences in economic profits related to type of regulation are statistically significant.