Measuring the formal independence of regulatory agencies

Abstract

While the literature on delegation has discussed at length the benefits of creating independent regulatory agencies (IRAs), not much attention has been paid to the conceptualization and operationalization of agency independence. In this study, we argue that existing attempts to operationalize the formal political independence of IRAs suffer from a number of conceptual and methodological flaws. To address these, we define what we understand by independence, and in particular formal independence from politics. Using new data gathered from 175 IRAs worldwide, we model formal independence as a latent trait. We find that some items commonly used to measure independence – notably, the method used to appoint agency executives and the scope of the agency's competences – are unrelated to formal independence. We close by showing that our revised measure partially changes conclusions about the determinants and consequences of formal independence.