Application Costs and the Design of Licensing Procedures
Georg von Wangenheim
"Application Costs and the Design of Licensing Procedures",
German Working Papers in Law and Economics:
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License procedures are a common way of enforcing regulation of activities whose effects on social welfare depend on the specificities of the single case. Building permits may serve as an example, but many other licensing procedures follow the same structure. In particular in Germany, the long duration of such procedures and the low predictability of their outcomes have been identified as a major obstacle to economic progress. As a consequence, the German legislators have invoked legislation to accelerate the procedure. This paper investigates how the acceleration approaches affect not only the costs of citizens who already led an application but also how influence decisions on whether to apply and what projects to plan. I will show that acceleration may have unintended side effects which may more than offset the increase in welfare gained by lower application costs. I will also show that deterrence of applications based on illegal project need not be a better alternative: it may be impossible not to deter the legal projects as well.