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on Regulation |
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Issue of 2006‒01‒29
eight papers chosen by Christian Calmes Université du Québec en Outaouais, Canada |
| By: | Jean-Jacques Laffont (IDEI and GREMAQ (UMR 5603 CNRS), Universite des Sciences Sociales, Place Anatole-France,); Jerome Pouyet (CERAS-ENPC (URA 2036 CNRS), 28 rue des Saint Peres, 75007 Paris, France.) |
| Abstract: | We study the choice of the regulatory structure when a regulated firm engages in different activities for different countries. Under decentralization each activity is regulated independently and the contracts offered to the firm suffer from two oppos- ite distortions with respect to centralization: the competition between regulatory authorities forces them to offer too high-powered incentive contracts; however, be- cause the ownership structure of the firm is dispersed across the countries, each regulator does not fully internalize the effect of his regulation on the firm's rent and contracts tend to be too low-powered. When the activities of the firm are suf- ficiently substitutable we show that decentralization always leads to an inefficient drift of the regulatory contracts towards fixed-price contracts. Nonetheless, when regulators have private agendas and possess the discretion to distort their policy to gain the support of some interest groups, then decentralization of the regulat- ory powers may be preferred to centralization as competition between regulatory authorities eradicates their discretionary power. |
| Keywords: | incentives, decentralization, regulation |
| JEL: | D72 H41 H70 L20 |
| URL: | http://d.repec.org/n?u=RePEc:bai:series:wp0001&r=reg |
| By: | Ivana Capozza (Dipartimento di Scienze Economiche, Università degli Studi di Bari, Via Camillo Rosalba 53, BARI) |
| Abstract: | In this paper we investigate how the interaction between the product and the emission permit markets may affect firms' propensity to adopt cleaner technologies. The adoption of a cleaner technology has the direct effect of reducing the compliance cost of the firm, but it also involves a strategic decision, if the industry is not perfectly competitive. We look at this problem from both a theoretical and an experimental point of view. We develop a model of duopoly, in which two firms engage in quantity competition in the output market and behave as price takers in the permit market. Firms have the possibility of investing in a cleaner production technology, which is available on the market at some cost. We set up a dynamic game over an infinite horizon in order to investigate firms' investment decisions: in each period, each firm decides whether to invest in the new technology or not. The stationary equilibria to this game crucially depend on both the cost of switching to the cleanest technology and the emission cap. Technology diffusion is one of the possible equilibria of the game. In order to test the predictions of the theory, we design and implement an "innovation experiment" that replicates the "innovation game". The results of our pilot experiment suggest that firms' behaviour will eventually lead to innovation diffusion. |
| Keywords: | tradable permits, technology adoption, oligopoly, laboratory experiments |
| JEL: | C91 L13 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:bai:series:wp0008&r=reg |
| By: | Angela S. Bergantino (University of Bari, Department of Economics, Via C. Rosalba, 53, 70124 Bari (Italy)); Etienne Billette de Villemeur (University of Toulouse, IDEI and GREMAQ, Manufacture des Tabacs, Aile Jean-Jacques Laffont); Annalisa Vinella (University of Toulouse, GREMAQ, Manufacture des Tabacs, Aile Jean-Jacques Laffont) |
| Abstract: | In this paper, we study how maritime ferry industries should be regulated. This is a fundamental issue in so far as maritime transport between islands and mainland is a service of general interest. We argue that the policy design crucially depends on the goals the collectivity pursues (pure e¢ ciency, fairness) as well as on the relevant industry structure (monopoly, oligopoly). We show that the regulator needs to prevent ine¢ cient crowding out, whenever room exists for access of new providers to former monopolies. By properly allocating tra¢ c across shippers, the regulated firm's budget constraint can then be relaxed. We subsequently shed light on the implications of adopting the territorial continuity principle to boost social fairness. We establish that the incumbent's public service obligations dump the entrant's incentives to provide connections in the low season; conversely, soft competition encourages the entrant to operate in the high season, when it pockets a net rent. As to customers, our model predicts that the islanders, whose consumption is partly subsidized by the non-residents, patronize the incumbent and that liberalization directly benefits the non-residents who switch to the entrant. |
| Keywords: | Maritime transport; Price and frequency; Partial regulation; Territorial |
| JEL: | L51 L92 R48 |
| URL: | http://d.repec.org/n?u=RePEc:bai:series:wp0010&r=reg |
| By: | Buccirossi, Paolo; Spagnolo, Giancarlo |
| Abstract: | We study the consequences of leniency - reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers - on sequential, bilateral, illegal transactions such as corruption, manager-auditor collusion, or drug deals. It is known that leniency helps to deter illegal relationships sustained by repeated interaction. Here we find that - when not properly designed - leniency may simultaneously provide an effective governance mechanism for occasional sequential illegal transactions that would not be feasible in its absence. |
| Keywords: | amnesty; collusion; corruption; financial fraud; governance; hold up; hostages; illegal trade; immunity; law enforcement; leniency; organized crime; self-reporting; whistleblowers |
| JEL: | D73 G38 K21 K42 M42 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5442&r=reg |
| By: | Calvó-Armengol, Antoni; Verdier, Thierry; Zenou, Yves |
| Abstract: | This paper analyses the interplay between social structure and information exchange in two competing activities, crime and labour. We consider a dynamic model in which individuals belong to mutually exclusive two-person groups, referred to as dyads. There are multiple equilibria. If jobs are badly paid and/or crime is profitable, unemployment benefits have to be low enough to prevent workers for staying too long in the unemployment status because they are vulnerable to crime activities. If, instead, jobs are well paid and/or crime is not profitable, unemployment benefits have to be high enough to induce workers to stay unemployed rather to commit crime because they are less vulnerable to crime activities. Also, in segregated neighbourhoods characterized by high interactions between peers, a policy only based on punishment and arrest will not be efficient in reducing crime. It has to be accompanied by other types of policies that take into account social interactions. |
| Keywords: | crime; forward-looking agents; labour market; social interaction |
| JEL: | A14 J40 K42 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5448&r=reg |
| By: | Stolowy, Hervé |
| Abstract: | This article reviews the reactions of the French accounting profession and academia following the collapse of both Enron and Andersen. It considers the general impact on University accounting education programmes and the value of using corporate scandals in the teaching process. |
| Keywords: | Enron; accounting eductation; ethics; France |
| JEL: | K41 K42 M41 |
| Date: | 2005–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:0815&r=reg |
| By: | Mattoo, Aaditya; Amin, Mohammad |
| Abstract: | The authors analyze recent efforts at international cooperation to limit illegal migration, particularly through the use of legal migration avenues like guest worker schemes. They show that while guest worker schemes may be desirable as an avenue of international migration, they are an inefficient instrument to induce cooperation on illegal migration. On the one hand, guest worker schemes suffer from a negative selection problem relative to illegal migration, which tends to erode their attractiveness to source countries. On the other hand, guest worker schemes increase total (legal and illegal) migration which make them a costly compensating device for the host country. Moreover, guest worker schemes create additional pressure on host countries to implement tough laws against illegal immigration even when the host finds such laws undesirable. Thus, less favorable treatment of illegal immigrants, as in California Proposition 187, may be an inevitable rather than incidental outcome of reliance on guest worker schemes. In contrast, countries that are willing to use transfers and other forms of economic assistance to induce source countries to cooperate can afford relatively liberal treatment of illegal immigrants. |
| Keywords: | Gender and Social Development,Voluntary and Involuntary Resettlement,Anthropology,Human Migrations & Resettlements,Gender and Development |
| Date: | 2006–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3828&r=reg |
| By: | Bokan, Nikola; Hughes Hallett, Andrew |
| Abstract: | It is widely accepted that in order to improve the economic position of the EU relative to the USA certain structural reforms need to be undertaken, mainly in the labour market. However few EU countries have undertaken such reforms. The reason lies in the fact that those reforms are going to be costly in terms of economic performance, unemployment and hence the cost of financing them - at least in the short term. Blanchard and Giavazzi (2003) develop a model based on imperfect competition in both product and labour markets in order to show the impact of deregulation on the economy. However they do not consider the question of how to finance such reforms or overcome the short run costs, a key consideration if the short run costs are large relative to the long run gains. We extend their model by including the effects of another inevitable source of imperfections: distortionary taxation - not only the most likely candidate for reform, but also the most likely instrument for financing the restructuring process. By extending the model in this way we can establish formally that reforms imply significant short run costs as well as long run gains; that (political opposition apart) the financing of such reforms will be the main stumbling block. We come to a number of conclusions which reverse the Blanchard and Giavazzi results; and find that, in addition, the composition of the reform package matters, as does the distribution of the tax burden. This model therefore supplies new results on the design and sequencing of reforms. |
| Keywords: | short vs. long runs substitutability; structural reform; wage bargains |
| JEL: | E24 H23 J58 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5431&r=reg |