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on Regulation |
| By: | Norman V. Loayza (World Bank); Ana Maria Oviedo; Luis Serven |
| Abstract: | Regulation is purportedly enacted to serve specific social purposes. In reality, however, it follows a more complex political economy process, where legitimate social goals are mixed with the objectives of particular interest groups. Whatever its justification and objectives, regulation can have potentially significant macroeconomic consequences by helping or hampering the dynamics of economic restructuring and resource reallocation that underlie the growth process. Loayza, Oviedo, and Servén provide an empirical analysis of the macroeconomic impact of regulation. They first characterize the stylized facts on regulation across the world using a set of newly constructed, comprehensive indicators of regulation in a large number of countries in the 1990s. Using these indicators, the authors study the effects of regulation on economic growth and macroeconomic volatility using cross-country regression analysis. In particular, they consider whether the effects of regulation are affected by the country’s level of institutional development. Finally, their analysis controls for the likely endogeneity of regulation with respect to macroeconomic performance. The authors conclude that a heavier regulatory burden reduces growth and increases volatility, although these effects are smaller the higher the quality of the overall institutional framework. This paper—a product of the Growth and Investment Team, Development Research Group—is part of a larger effort in the group to understand the process of economic reform. |
| Keywords: | Governance; Labor & Employment; Macroecon & Growth; Private Sector Development |
| Date: | 2005–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3469&r=reg |
| By: | Gert Brunekreeft; Sven Twelemann |
| Abstract: | The German energy industries will be subjected to regulation of network access enforced by a sector-specific regulator. Whereas the gas industry broke the regime of negotiated third party access, in electricity nTPA ‘worked’, although it clearly resulted in a margin squeeze. The government currently discusses whether to use rate-of-return or incentive regulation, to allow ex-ante approval of charges, and the length of the regulatory lag. Close examination suggests that generation capacity still is adequate, but in the longer term there is reason to be alert. The regulatory changes and emission trading system can both contribute to retain supply security by increasing investment. |
| Keywords: | regulation, competition, emission trading, gas, electricity |
| JEL: | L42 L43 L94 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0501&r=reg |
| By: | Lorenz Blume (Department of Economics, University of Kassel); Stefan Voigt (Department of Economics, University of Kassel and ICER, Torino) |
| Abstract: | Economists are often skeptical concerning the economic effects of various forms of human rights: it has been argued that basic human rights can make the legal system less efficient but also that extensive social rights are incompatible with market economies. It is argued here that basic human rights are a precondition for other kinds of rights such as property and civil rights and that they are thus efficiency-enhancing. Four different groups of rights are identified. It is asked what effects they have on welfare and growth. The transmission channels through which the different rights affect welfare and growth are identified by estimating their effects on investment in both physical and human capital and overall productivity. Basic human rights have indeed a positive effect on investment, but do not seem to contribute to productivity. Social or emancipatory rights, in turn, are not conducive to investment in physical capital but do contribute to productivity improvements. None of the four groups of rights ever has a significant negative effect on any of the economic variables here included. |
| JEL: | H41 H73 K10 O11 O57 P14 P51 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:kas:wpaper:66/04&r=reg |
| By: | Stefan Voigt (Department of Economics, University of Kassel and ICER, Torino); Michael Ebeling (Department of Economics, University of Kassel); Lorenz Blume (Department of Economics, University of Kassel) |
| Abstract: | It is argued that government credibility is an important resource and that it can be improved by delegating decision-making competence beyond the nation-state. It is hypothesized that such delegation should result in higher income and growth. Some former British colonies retained the Judicial Committee of the Privy Council as their final court of appeals even after independence. This court is thus taken as a natural experiment to test our hypothesis. It turns out that retaining the jurisdiction is indeed significant for explaining economic growth. |
| Keywords: | Credibility, Delegation of Competence, Judicial Independence, Economic History, Judicial Committee of the Privy Council |
| JEL: | H11 K11 K41 N40 O57 P51 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:kas:wpaper:67/04&r=reg |
| By: | Robert E. Hoyt (University of Georgia); David B. Mustard (University of Georgia); Lars S. Powell (University of Arkansas) |
| Abstract: | Insurance fraud, which adds an estimated $85 billion per year to the total insurance bill in the U.S., is an extremely serious problem for consumers, regulators, and insurance companies. This paper analyzes the effects of state legislation and market conditions on automobile insurance fraud from 1988 to 1999, a period representing a substantial increase in the enactment of antifraud legislation. Our empirical results show that the laws have mixed effects; two laws have no statistically significant effect on fraud. The strongest evidence of fraud mitigation effects are associated with mandatory Special Investigation Units, classification of insurance fraud as a felony, and mandatory reporting of professionals to licensing authorities. However, laws requiring insurers to report potentially fraudulent claims to law enforcement authorities increase fraud, which may reflect some substitution from more efficacious private efforts to less productive state activity. Many underlying characteristics of the market also affect fraud. |
| Keywords: | Insurance Fraud, Automobile Insurance, Moral Hazard |
| Date: | 2005–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpri:0501001&r=reg |
| By: | Cervellati, Matteo (Universitat Pompeu Fabra and University of Bologna); Fortunato, Piergiuseppe (University of Bologna); Sunde, Uwe (IZA Bonn) |
| Abstract: | We analyze the endogenous evolution of economic and political institutions and the interdependencies with the process of economic development. Favorable economic institutions ensure the appropriability of rents in form of a state of law. We study the conditions under which a state of law can be implemented under oligarchy, and when democratization is necessary. Inequality in endowments and incomes prolongs the absence of good institutions and delays democratization. Conversely, institutions shape the income distribution. Simulations illustrate how inequality affects the development process and may lead to overtaking and divergence. The implications are in line with historical and empirical evidence. |
| Keywords: | inequality, democratization, institutions, state of law, long-term development |
| JEL: | H10 O20 N10 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1450&r=reg |