nep-reg New Economics Papers
on Regulation
Issue of 2005‒01‒02
ten papers chosen by
Christian Calmes
Université du Québec en Outaouais, Canada

  1. Price squeezes in a regulatory environment By Bouckaert Jan; Verboven Frank
  2. White Hats or Don Quixotes? Human Rights Vigilantes in the Global Economy By Kimberly Ann Elliott; Richard Freeman
  3. Employment Regulations through the Eyes of Employers: Do they Matter and How Do Firms Respond to Them? By Gaelle Pierre; Stefano Scarpetta
  4. Incentives for Sabotage in Vertically Related Industries By David Mandy; David E. M. Sappington
  5. Product market reforms and productivity: a review of the theoretical and empirical literature on the transmission channels By Gaëtan Nicodème; Jacques-Bernard Sauner-Leroy
  6. Unions, Performance-Related Pay and Procedural Justice: the Case of Classroom Teachers By Richard Belfield; David Marsden
  7. Why So Much Centralization? A Model of Primitive Centripetal Accumulation By Jean-Paul Faguet
  8. Dumping in Developing and Transition Economies By José Luis Moraga-González; Jean-Marie Viaene
  9. Virtual Capacity and Tacit Collusion By Christian Schultz
  10. Murky Waters: The Law and Economics of Salvaging Historic Shipwrecks By Paul Hallwood; Thomas J. Miceli

  1. By: Bouckaert Jan; Verboven Frank
    Abstract: Regulators have recently shown an increased sensitivity to the issue of price squeezes, especially telecom regulators in European countries. This paper analyzes the relevance and the scope of price squeeze tests as proposed by practitioners and economists, taking the existing regulatory environment as fixed. Based on the degree of existing regulation (full, partial or no) we distinguish between three types of price squeezes: regulatory squeezes, predatory squeezes, and squeezes as foreclosure. We argue that the scope of price squeeze tests is limited to predatory price squeeze tests, to be used in combination with other pieces of evidence as collected in standard predation cases. We propose a predatory squeeze test that respects previously made regulatory choices, in contrast with earlier proposed tests by European practitioners and economists. We extend the framework to ask at which aggregation level predatory price squeeze tests ought to be applied, a much-debated issue in telecommunications.
    Date: 2003–04
  2. By: Kimberly Ann Elliott; Richard Freeman
    Abstract: With the continuing expansion of global economic integration, labor standards in developingcountries have become a hot button issue. One result has been a proliferation of efforts to usethe market to put pressure directly on multinational corporations to improve wages andworking conditions in their overseas operations and to insist that their suppliers do so as well.This paper analyzes the dynamics of these efforts in terms of a 'market for standards' in whichconsumers, stimulated by human rights activists, demand that corporations improve workingconditions in supplier factories. The paper presents evidence that such a consumer demandexists and analyzes the incentives corporations face to respond to it. It examines the nature ofthe critical intermediary role played by activists in stimulating consumer demands andassesses the outcomes in the major anti-sweatshop campaigns of the 1990s. The paper alsoaddresses the limitations of such consumer-based campaigns and the concern expressed bysome that these activist campaigns may do more harm than good, by deterring investment inand trade with poor countries. It concludes with an overall assessment of when ¿doing good¿actually does good.
    Date: 2004–05
  3. By: Gaelle Pierre; Stefano Scarpetta
    Abstract: Pierre and Scarpetta present evidence on how employers perceive labor regulations and react when these are perceived to constrain the operation of their firm. They draw from harmonized surveys of (up to) 17,000 firms around the world and compare employers’ responses with actual labor legislation. The authors find that employers’ concerns about labor regulations are closely matched by the relative stringency of de jure labor laws. Countries that have, from an international perspective, tight labor regulations tend to have higher proportions of employers reporting these regulations as severe constraints. But not all firms are affected in the same way by onerous labor regulations. Medium sized firms are those whose business and prospects for growth are most negatively affected. Similarly, innovating firms are disproportionally affected by tight labor regulations. There is also clear evidence in the data that firms facing tight regulations invest more in training and make greater use of temporary employment. Small firms mainly rely on temporary employment, while medium and large firms, as well as innovating firms, tend to rely more on on-the-job training if labor regulations make hiring and firing very costly. This paper—a product of the Division, Human Development Network—is part of a larger effort in the network to understand the effect of employment regulations on firm's performance.
    Keywords: Labor & Employment
    Date: 2004–12–30
  4. By: David Mandy (Department of Economics, University of Missouri-Columbia); David E. M. Sappington
    Abstract: We show that the incentives a vertically integrated supplier may have to disadvantage or "sabotage" the activities of downstream rivals vary with both the type of sabotage and the nature of downstream competition. Cost-increasing sabotage is typically profitable under both Cournot and Bertrand competition. In contrast, demand-reducing sabotage is often profitable under Cournot competition, but unprofitable under Bertrand competition. Incentives for sabotage can vary non-monotonically with the degree of product differentiation.
    JEL: C1
    Date: 2004–12–16
  5. By: Gaëtan Nicodème (Solvay Business School & European Commission); Jacques-Bernard Sauner-Leroy (Banque de France)
    Abstract: Product market reforms are structural reforms of microeconomic type that aim at improving the functioning of product markets by increasing competition amongst producers of goods and services. Theoretical models suggest that regulation and reforms which liberalise or improve the functioning of markets can positively affect productivity through three different channels, namely a reallocation of scarce resources (allocative efficiency), an improvement in the utilisation of the production factors by firms (productive efficiency) and an incentive for firms to innovate to move to the modern technology frontier (dynamic efficiency). This paper reviews the theoretical and empirical literature on these three channels.
    Keywords: Productivity Product market reforms competition entry innovation
    JEL: O P
    Date: 2004–12–23
  6. By: Richard Belfield; David Marsden
    Abstract: Performance-related pay (PRP) and performance management (PM) are now a part of the organizationallandscape that unions face in the UK's public services. While PRP and PM threaten the scope of traditionalunion bargaining activities, they simultaneously offer a new role to unions as providers of 'procedural justiceservices' to both union members and employers. We explore the case of the introduction of these systems forclassroom teachers in England and Wales as a means of testing this idea. Our survey evidence shows thatclassroom teachers experiencing the introduction of PRP have expressed a strong demand for such services fromthe teachers' unions. Further, analysis of the PRP implementation process for classroom teachers indicates thatthe teachers' unions have progressively assumed a 'procedural justice role' since its introduction. Union actionin this regard has led to substantial modification over time of classroom teachers' PRP and PM. These changeshave addressed many of the concerns of teachers, have created a new institutional role for the relevant unions,and may permit the systems to avoid the operational difficulties they have experienced elsewhere in the UK'spublic services.
    Keywords: Unions, Procedural Justice, Performance-Related Pay, Teachers
    JEL: J33 J51
    Date: 2004–11
  7. By: Jean-Paul Faguet
    Abstract: With strong conceptual arguments in its favor, decentralization is a popular and growing policy trend across the world. And yet dozens of empirical studies have failed to find convincing evidence that past reforms have worked. This begs two questions: 1)Why does decentralization produce indifferent results? and 2) Why is there so much centralization in the first place? The paper develops a simple model of a legislature in which municipal representatives bargain with central government agents over the allocation of public resources. By locating central government in a particular geographic space ¿ the ¿capital¿ ¿ and invoking self-interest on the part of its residents, I can answer both questions. I introduce the concept of residual power, which underpins the model and determines the flow of resources to districts. There is so much centralization because residual power is located in the capital, whose residents directly benefit from weak local governments.
    Keywords: Centralization, decentralization, local public goods, local government, municipal government, legislative bargaining, capture.
    Date: 2004–06
  8. By: José Luis Moraga-González; Jean-Marie Viaene
    Abstract: We build a simple theoretical model to understand why developing and transition economies have increasingly applied anti-dumping laws. To that end, we investigate the strategic incentives of oligopolistic exporting firms to undertake dumping in these economies. We show that dumping may be due to cross-country differences in income, to the extent of tariff protection and to the exchange rate depreciations observed recently. Dumping may arise even if consumers exhaust all arbitrage possibilities.
    Keywords: dumping, exchange rate, optimal trade policy, product quality
    JEL: F12 F13 P31
    Date: 2004
  9. By: Christian Schultz (Institute of Economics, University of Copenhagen)
    Abstract: In several European merger cases competition authorities have demanded that the merging firm auctions of virtual capacity. The buyer of virtual capacity receives an option on an amount of output at a pre-specified price, typically equal to marginal cost. This output is sold in the market in competition with the merging firm. The paper compares sale of physical and virtual capacity by the merging firm and shows that virtual capacity makes tacit collusion easier. The reason is that the auction price on virtual capacity increases, when the merging firm reduces production in order to increase the output price. This reduces its temptation to deviate.
    Keywords: virtual capacity; tacit collusion; anti-trust; mergers; competition policy
    JEL: L40 L41 D44
    Date: 2004–12
  10. By: Paul Hallwood (University of Connecticut); Thomas J. Miceli (University of Connecticut)
    Abstract: The salvage of historic shipwrecks involves a debate between salvors, who wish to maximize profit, and archeologists, who wish to preserve historical value. Traditionally, salvage of shipwrecks has been governed by admiralty law, but the Abandoned Shipwreck Act of 1987 transferred title of historically important wrecks in U.S. waters to the state in whose waters the wreck is found, thereby abrogating admiralty law. This paper examines incentives to locate and salvage historic wrecks under traditional admiralty law and proposes an efficient reward scheme. It then re-considers current U.S. and international law in light of the results.
    Keywords: Historic shipwrecks, Law of salvage, Admiralty law, Archeological value.
    JEL: K1 K33
    Date: 2004–12

This nep-reg issue is ©2005 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.