Regulating American Industries: Markets, Politics, and the Institutional Determinants of Fire Insurance Regulation

TLDR

The article evaluates three theoretical frameworks for state regulation—capture theory, interest group analyses, and neoinstitutional research—and uses the results to develop a theory of how political and institutional conditions shape industry governance options. The study employs state‑level event history analyses of fire insurance rate regulation from 1906 to 1930. The analysis shows that regulation was not driven solely by firms’ interests but was more likely when anti‑company forces challenged big business and when institutional conditions—legitimacy crises, court and professional endorsements, and state administrative capacities—were present, mediating the influence of markets and politics.

Abstract

This article assesses three approaches to state regulation: capture theory, interest group analyses, and neoinstitutional research. State‐level event history analyses of fire insurance rate regulation from 1906 to 1930 are used. Contrary to capture theory, regulation was not driven simply by firms' interests in market control. Instead, consistent with interest group analyses, regulation was more likely when anticompany forces—farmers and small businesses—could challenge big business politically. Further, as neoinstitutional research suggests, regulation was more likely when industry governance evoked legitimacy crises, when courts and professions endorsed regulation and its underlying models, and when states developed system‐wide administrative capacities. Institutional conditions also mediated the effects of markets and politics on regulation. Using these findings, we develop a theory of how political and institutional conditions shape industries' governance options.