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on Regulation |
| By: | Pauwels W.; Weverbergh M. |
| Abstract: | In this paper we analyze the optimal regulation of an internationally integrated monopolist, producing in one country and selling in another country. The monopolist’s pricing policy is constrained by transfer pricing regulations, and is subject to different tax rates on profits in the two countries. The governments of the two countries can use their tax rates as regulatory instruments, and they also determine an arm’s length interval of acceptable transfer prices. The two governments can cooperate in order to maximize world welfare, or they can each try to maximize their own country welfare. It is shown that in several of the solutions governments apply a golden rule. This rule requires that the firm realizes all profits in the manufacturing country, while no profits are made in the retailing country. This can be obtained by choosing a sufficiently high (low) tax rate in the retailing (manufacturing) country, or by appropriately fixing the transfer price. |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2005031&r=reg |
| By: | Amelie Constant; Klaus F. Zimmermann |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp547&r=reg |
| By: | David Bartolini |
| Abstract: | The regulation of monopolistic firms has been widely investigated in the economic literature. Particular emphasis has been placed on the relationship between the regulated monopolist and the regulator. The present work deals with problems that may arise from the presence of several regulators. If regulators have different objective functions, inefficiency is likely to arise. A theoretical model with two regulators, one monopolistic firm and a renewable natural resource is presented. In this set up the level of demand relative to the sustainable use of the water resource plays a major role. The main result is the characterization of the cases in which the outcome of the regulation actually differs between the integrated-regulator and the separate-regulator scenarios. We find that the main determinants of the equilibrium are the level of demand and the marginal environmental damage. The equilibria obtained are analyzed in terms of price, environmental tax levels, and in terms of welfare distribution among the components of the regulator(s)' objective function. |
| Date: | 2006–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:607&r=reg |
| By: | John J. Donohue; Steven D. Levitt |
| Abstract: | Donohue and Levitt (2001) argue that the legalization of abortion in the United States in the 1970s played an important role in explaining the observed decline in crime approximately two decades later. Foote and Goetz (2005) challenge the results presented in one of the tables in that original paper. In this reply, we regretfully acknowledge the omission of state-year interactions in the published version of that table, but show that their inclusion does not alter the qualitative results (or their statistical significance), although it does reduce the magnitude of the estimates. When one uses a more carefully constructed measure of abortion (e.g. one that takes into account cross-state mobility, or doing a better job of matching dates of birth to abortion exposure), however, the evidence in support of the abortion-crime hypothesis is as strong or stronger than suggested in our original work. |
| JEL: | K4 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11987&r=reg |
| By: | Rosemary J. Avery; Donald S. Kenkel; Dean R. Lillard; Alan D. Mathios |
| Abstract: | In this paper we investigate how direct-to-consumer (DTC) advertising of pharmaceutical products in affected by regulations of the Food and Drug Administration and by market conditions. We focus on a relatively under-studied segment of the pharmaceutical market -- the market for smoking cessation products. Because of their proven effectiveness, these products could be the key to meeting public health goals to reduce smoking. However, in many ways, smoking cessation products have been more heavily regulated than cigarettes. Our empirical analysis uses data on advertising expenditures and data from an archive of print advertisements. The archive includes all smoking cessation product advertisements that appeared in over 13,000 issues of 28 magazines between January 1985 and May 2002. Our study period begins shortly atfer the first nicotine replacement product was introduced, and covers the evolution of the market as new products are introduced while some of the older products move from prescription to over-the-counter (OTC) status. OTC status eases the disclosure requirements imposed on advertisements of prescription pharmaceuticals, substantially reducing the costs of a print advertisement. Our results suggest that OTC status is associated with an increase in advertising expenditures and the number and pages of magazine advertisements. A current proposal to reduce disclosure requirements on all DTC advertisements of prescription drugs could have similar effects. Our results also suggest that advertising increase with the introduction of new products and with market competition. |
| JEL: | I1 L5 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12001&r=reg |
| By: | Naci Mocan; Erdal Tekin |
| Abstract: | Using data from three waves of Add Health we find that being very attractive reduces a young adult's (ages 18-26) propensity for criminal activity and being unattractive increases it for a number of crimes, ranging from burglary to selling drugs. A variety of tests demonstrate that this result is not because beauty is acting as a proxy for socio-economic status. Being very attractive is also positively associated adult vocabulary test scores, which suggests the possibility that beauty may have an impact on human capital formation. We demonstrate that, especially for females, holding constant current beauty, high school beauty (pre-labor market beauty) has a separate impact on crime, and that high school beauty is correlated with variables that gauge various aspects of high school experience, such as GPA, suspension or having being expelled from school, and problems with teachers. These results suggest two handicaps faced by unattractive individuals. First, a labor market penalty provides a direct incentive for unattractive individuals toward criminal activity. Second, the level of beauty in high school has an effect on criminal propensity 7-8 years later, which seems to be due to the impact of the level of beauty in high school on human capital formation, although this second avenue seems to be effective for females only. |
| JEL: | I1 I2 K4 J2 J3 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12019&r=reg |
| By: | Michael D. Bordo; Peter L. Rousseau |
| Abstract: | Recent cross-country investigations of the role of institutional fundamentals such as the protection of property rights in promoting financial development have extended a literature that has for decades maintained that financial factors can affect real outcomes. In this paper we pursue this new direction by considering relationships between finance, growth, legal origin, and political environment in a historical cross-section of 17 countries covering the period from 1880 to 1997. We find that relationships between a county's legal origin (i.e., English, French, German, or Scandinavian) and financial development are roughly consistent with earlier findings but are not persistent. At the same time, political variables such as proportional representation election systems, frequent elections, universal female suffrage, and infrequent revolutions or coups seem linked to larger financial sectors and higher conditional rates of economic growth. Despite the explanatory power of some of our measures of the deeper "fundamentals," however, a significant part of the growth-enhancing role of financial development remains unexplained by them. |
| JEL: | E44 F3 N1 N2 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12035&r=reg |
| By: | Joanna Lahey |
| Abstract: | Some anti-discrimination laws have the perverse effect of harming the very class they were meant to protect. This paper provides evidence that age discrimination laws belong to this perverse class. Prior to the enforcement of the federal law, state laws had little effect on older workers, suggesting that firms either knew little about these laws or did not see them as a threat. After the enforcement of the federal Age Discrimination in Employment Act (ADEA) in 1979, white male workers over the age of 50 in states with age discrimination laws worked between 1 and 1.5 fewer weeks per year than workers in states without laws. These men are also .3 percentage points more likely to be retired and .2 percentage points less likely to be hired. These findings suggest that in an anti-age discrimination environment, firms seek to avoid litigation through means not intended by the legislation -- by not employing older workers in the first place. |
| JEL: | J1 J7 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12048&r=reg |
| By: | Benjamin E. Hermalin; Michael S. Weisbach |
| Abstract: | In light of recent corporate scandals, numerous proposals have been introduced for reforming corporate governance. This paper provides a theoretical framework through which to evaluate these reforms. Unlike various ad hoc arguments, this framework recognizes that governance structures arise endogenously in response to the constrained optimization problems faced by the relevant parties. Contract theory provides a set of necessary conditions under which governance reform can be welfare-improving: 1) There is asymmetric information at the time of contracting; or 2) Governance failures impose externalities on third parties; or 3) The state has access to remedies or punishments that are not available to third parties. We provide a series of models that illustrate the importance of these conditions and what can go wrong if they are not met. |
| JEL: | G30 G38 L51 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12050&r=reg |
| By: | Aleix Calveras; Juan José Ganuza; Gerard Llobet |
| Abstract: | This paper analyzes the current trend towards firms’ self-regulation as opposed to the formal regulation of a negative externality. Firms respond to increasing activism in the market(conscious consumers that take into account the external effects of their purchase) by providing more socially responsible goods. However, because regulation is the outcome of a political process, an increase in activism might imply an inefficiently higher externality level. This may happen when a majority of non-activist consumers collectively free-ride on conscious consumers. By determining a softer than optimal regulation, they benefit from the behavior of firms, yet they have access to cheaper (although less efficient) goods. |
| Keywords: | Activism, Corporate Social Responsability, Voting and Regulation |
| JEL: | D72 H42 L51 M14 Q52 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:935&r=reg |