nep-reg New Economics Papers
on Regulation
Issue of 2005‒02‒13
eleven papers chosen by
Christian Calmes
Université du Québec en Outaouais, Canada

  1. GM Food Crop Technology: Implications For Sub-Saharan Africa By Anderson, Kym; Jackson, Lee Ann
  2. Bigger and Better: A Dynamic Regulatory Mechanism for Optimum Quality By De Fraja, Gianni; Iozzi, Alberto
  3. Sectoral Regulators and the Competition Authority: Which Relationship is Best? By Barros, Pedro Pita; Hoernig, Steffen
  4. Trust and Bribery: The Role of the Quid Pro Quo and the Link With Crime By Hunt, Jennifer
  5. Telecommunications Policies: Determinants and Impact By Gual, Jordi; Trillas, Francesco
  6. Rule of Law, Democracy, Openness and Income: Estimating the Interrelationships By Rigobon, Roberto; Rodrik, Dani
  7. Anatomy of the Rise and Fall of a Price-Fixing Conspiracy: Auctions at Sotheby's and Christie's By Ashenfelter, Orley C; Graddy, Kathryn
  8. Banks' Loan Portfolio and the Monetary Transmission Mechanism By Den Haan, Wouter; Sumner, Steven; Yamashiro, Guy
  9. Harmonization of Food Regulations and Trade in the Single Market : Evidence from Disaggregated Data By Mark, VANCAUTEREN; Bruno, HENRY DE FRAHAN
  10. Regulating Between National Fears and Global Disciplines: Agricultural Biotechnology in the EU By Gregory Shaffer; Mark Pollack
  11. Aid and Regulation By Kilby, Christopher

  1. By: Anderson, Kym; Jackson, Lee Ann
    Abstract: The first generation of genetically modified (GM) crop varieties sought to increase farmer profitability through cost reductions or higher yields. The next generation of GM food research is focusing also on breeding for attributes of interest to consumers, beginning with ‘golden rice’, which has been genetically engineered to contain a higher level of vitamin A and thereby boost the health of unskilled labourers in developing countries. This Paper analyses empirically the potential economic effects of adopting both types of innovation in Sub-Saharan Africa (SSA). It does so using the global economy-wide computable general equilibrium model known as GTAP. The results suggest the welfare gains are potentially very large, especially from golden rice, and that those benefits are diminished only slightly by the presence of the European Union’s current ban on imports of GM foods. In particular, if SSA countries impose bans on GM crop imports in an attempt to maintain access to EU markets for non-GM products, the loss to domestic consumers due to that protectionism boost to SSA farmers is far more than the small gain in terms of greater market access to the EU.
    Keywords: biotechnology; computable general equilibrium; GMOs; regulation; sub-saharan africa; trade policy
    JEL: C68 D58 F13 O30 Q17 Q18
    Date: 2004–07
  2. By: De Fraja, Gianni; Iozzi, Alberto
    Abstract: Vogelsang and Finsinger’s seminal paper (Bell Journal of Economics, 1979) proposes a mechanism for price regulation with some desirable properties, such as convergence to a second best optimum. This mechanism applies to situations where quality is fixed: in practice, quality can be varied by the firm, and regulators have typically imposed constraints on the firm’s quality choice. This Paper lays a rigorous theoretical foundation to the inclusion of quality measures in the constraints faced by a regulated firm. We identify a potential pitfall in the approach taken in practice by regulators, and show that, in order to avoid it, the regulated firm should be subject to an additional constraint, which, loosely speaking, requires firms’ choices not to be too erratic.
    Keywords: price cap; quality; regulation; RPI-X
    Date: 2004–08
  3. By: Barros, Pedro Pita; Hoernig, Steffen
    Abstract: Inspired by the creation of the new Competition Authority in Portugal, we consider the interplay between regulatory agencies with overlapping competencies; for example, a competition authority and a sectoral regulator. We analyse how authorities’ incentives are affected if they can decide independently, or must follow each others’ opinions, respectively, and consider how this relationship performs in the presence of institutional biases and lobbying efforts. It is found that the best results tend to be achieved when the authorities act independently of each other: the probability of coming to a decision is higher, and decisions are less vulnerable to lobbying.
    Keywords: competition authority; institutional relationship; lobbying; sectoral regulators; strategic substitutes and complements
    JEL: L51
    Date: 2004–08
  4. By: Hunt, Jennifer
    Abstract: I study data on bribes actually paid by individuals to public officials, viewing the results through a theoretical lens that considers the implications of trust networks. A bond of trust may permit an implicit quid pro quo to substitute for a bribe, which reduces corruption. Appropriate networks are more easily established in small towns, by long-term residents of areas with many other long-term residents, and by individuals in regions with many residents their own age. I confirm that the prevalence of bribery is lower under these circumstances, using the International Crime Victim Surveys. I also find that older people, who have had time to develop a network, bribe less. These results highlight the uphill nature of the battle against corruption faced by policy-makers in rapidly urbanizing countries with high fertility. I show that victims of (other) crimes bribe all types of public officials more than non-victims, and argue that both their victimization and bribery stem from a distrustful environment.
    Keywords: corruption; crime; networks
    JEL: D60 K40 O10
    Date: 2004–08
  5. By: Gual, Jordi; Trillas, Francesco
    Abstract: This Paper presents new data, in the form of several indices, on liberalization policies and the independence of regulators for a cross section of countries. These indices are combined with a comprehensive set of performance, institutional and political data to analyse both the determinants and the impact of telecommunications policies. We find that liberalization policies are negatively associated with the degree to which countries have an interventionist tradition, but not with the partisan ideology of reforming governments. We also find that countries with weak protection of investors’ quasi-rents by other means, and countries with a larger incumbent, are more prone to create (at least legally) independent regulatory agencies. There is preliminary evidence with this dataset that, when the endogeneity of policies is taken into account, the creation of independent regulatory agencies and pro-entry policies have a significant positive effect on network penetration and a negative effect on productivity.
    Keywords: institutions; liberalization; telecommunications
    JEL: F21 L32 L96
    Date: 2004–08
  6. By: Rigobon, Roberto; Rodrik, Dani
    Abstract: We estimate the interrelationships among economic institutions, political institutions, openness, and income levels, using identification through heteroskedasticity (IH). We split our cross-national dataset into two sub-samples: (i) colonies versus non-colonies; and (ii) continents aligned on an East-West versus those aligned on a North-South axis. We exploit the difference in the structural variances in these two sub-samples to gain identification. We find that democracy and the rule of law are both good for economic performance, but the latter has a much stronger impact on incomes. Openness (trade/GDP) has a negative impact on income levels and democracy, but a positive effect on rule of law. Higher income produces greater openness and better institutions, but these effects are not very strong. Rule of law and democracy tend to be mutually reinforcing.
    Keywords: growth
    JEL: O10
    Date: 2004–10
  7. By: Ashenfelter, Orley C; Graddy, Kathryn
    Abstract: The Sotheby’s/Christie’s price-fixing scandal that ended in the public trial of Alfred Taubman provides a unique window on a number of key economic and antitrust policy issues related to the use of the auction system. The trial provided detailed evidence as to how the price fixing worked, and the economic conditions under which it was started and began to fall apart. The outcome of the case also provides evidence on the novel auction process used to choose the lead counsel for the civil settlement. Finally, though buyers received the bulk of the damages, a straightforward application of the economic theory of auctions shows that it is unlikely that successful buyers as a group were injured.
    Keywords: auctions; cartels; commissions; price-fixing
    JEL: D44 K21 L41
    Date: 2004–10
  8. By: Den Haan, Wouter; Sumner, Steven; Yamashiro, Guy
    Abstract: This Paper compares the responses of bank loan components to a monetary tightening with the responses to negative output shocks. Real estate and consumer loans sharply decrease during a monetary tightening but not after a negative output shock. In contrast, C&I loans (and commercial paper) sharply decrease in response to output shocks, but not in response to a monetary tightening. These results are difficult to reconcile with a bank-lending channel of monetary transmission, in which the supply of commercial and industrial (C&I) loans is constrained. Hedging and bank capital regulation provide reasons why banks may want to substitute out of real estate and consumer loans, and into C&I loans during periods of high interest rates.
    Keywords: bank capital regulation; hedging; interest rates
    JEL: E40
    Date: 2004–11
    Abstract: This paper uses a structural gravity model based on Anderson and van Wincoop (2003) to quantify and test the hypothesis that EU harmonization of food regulations increases EU bilateral trade. Using a self-constructed database that identifies processed food products at a detailed level covered by harmonization, our results suggest that bilateral exports subject to harmonized food regulations are 253 % greater than bilateral exports not covered by harmonized food regulations for 1998. The paper also estimates a tariff equivalent of trade costs that arises from non-harmonized food regulations which ranges between 73 % and 97 %. Both of these effects vary across food sub-sectors.
    Keywords: Food Regulation; Harmonization; European Integration; Gravity Model
    JEL: C31 F15 Q17 Q18
    Date: 2004–10–31
  10. By: Gregory Shaffer; Mark Pollack
    Abstract: In this paper, we develop three interrelated arguments about the nature of GMO regulation and the challenges that it poses to the European Union (EU). First, we highlight the inherently multi-sectoral nature of GMO regulation, which links together the internal market with industrial policy, research and technological development, environmental policy, food safety, agriculture, and international trade. As a multi-sectoral issue, the regulation of GMOs raises the challenge of coordinating policymaking horizontally among a large number of public and private actors with diverse perspectives about the aims and the content of EU regulation. Second, we emphasize the multi-level nature of the process, which involves overlapping and sometimes conflicting regulations promulgated at the national, supranational/EU, and international levels. As such, EU policy has faced sharp political and legal challenges both from below (in the form of national revolts against the licensing of individual GM foods and crops) and from above (in the form of challenges from other countries within the World Trade Organization, or WTO). Third, the regulation of GM foods and crops is an instance of a broader category of “risk regulation,” in which government actors are called upon to adopt regulations about the acceptable degree of risk posed to society by products or industrial processes. Such decisions about risk regulation – including the regulation of GMOs – not only mobilize diverse interest groups, they also raise fundamental normative questions about the degree of risk judged to be acceptable to society, as well as about the roles of science and politics in the regulation of risk under uncertainty. As such, risk regulation raises fundamental questions of the legitimacy of decision-making at different levels of government, and, in particular, for our case, at the supranational level of EU institutions.
    Date: 2004–12–12
  11. By: Kilby, Christopher (Vassar College Department of Economics)
    Abstract: In recent decades, one of the objectives of international development assistance has been to encourage developing country governments to reorient their economies from highly regulated and centrally controlled to deregulated and market-based. However, poor economic performance on its own might well necessitate such a shift. Does aid from donors accelerate this process by providing additional incentives and critical resources (finance and advice)? Or do donor funds slow the retreat of the state by lessening financial crises and indirectly promoting state control (e.g., through state-run development projects)? This paper contributes to the empirical analysis of this question by examining the link between aid flows and regulatory burden. Using an instrumental variables method on panel data from 71 aid receiving countries from 1970 to 1995, estimation results support the first position. Donor funds favor more heavily regulated economies and successfully promoted deregulation. This apparent example of successful conditionality points to the importance of a more disaggregate analysis of the interaction of aid and policy in developing countries.
    Date: 2004–11

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.