nep-reg New Economics Papers
on Regulation
Issue of 2006‒04‒01
seven papers chosen by
Christian Calmes
Universite du Quebec en Outaouais, Canada

  1. Persistence of Power, Elites and Institutions By Daron Acemoglu; James A. Robinson
  2. Understanding the determinants of crime By Ayse Imrohoroglu; Antonio Merlo; Peter Rupert
  3. Regulatory harmonization and the development of private equity markets By Cumming,Douglas; Johan,Sofia
  4. Structural Remedies and Abuse of Dominant Position By Tajana,Alessandro
  5. Reputational Externality and Self-Regulation By Robert Evans; Timothy W. Guinnane
  6. Should You Turn Yourself In? The Consequences of Self-Policing By Sarah L. Stafford
  7. Energy Regulation and Legislative Development in the State Duma of Russia: A Spatial Analysis of Roll Call Votes with the Optimal Classification Model, Russia 1994-2003 By Theocharis N. Grigoriadis; Benno Torgler

  1. By: Daron Acemoglu; James A. Robinson
    Abstract: We construct a model of simultaneous change and persistence in institutions. The model consists of landowning elites and workers, and the key economic decision concerns the form of economic institutions regulating the transaction of labor (e.g., competitive markets versus labor repression). The main idea is that equilibrium economic institutions are a result of the exercise of de jure and de facto political power. A change in political institutions, for example a move from nondemocracy to democracy, alters the distribution of de jure political power, but the elite can intensify their investments in de facto political power, such as lobbying or the use of paramilitary forces, to partially or fully offset their loss of de jure power. In the baseline model, equilibrium changes in political institutions have no effect on the (stochastic) equilibrium distribution of economic institutions, leading to a particular form of persistence in equilibrium institutions, which we refer to as invariance. When the model is enriched to allow for limits on the exercise of de facto power by the elite in democracy or for costs of changing economic institutions, the equilibrium takes the form of a Markov regime-switching process with state dependence. Finally, when we allow for the possibility that changing political institutions is more difficult than altering economic institutions, the model leads to a pattern of captured democracy, whereby a democratic regime may survive, but choose economic institutions favoring the elite. The main ideas featuring in the model are illustrated using historical examples from the U.S. South, Latin America and Liberia.
    JEL: H2 N10 N40 P16
    Date: 2006–03
  2. By: Ayse Imrohoroglu; Antonio Merlo; Peter Rupert
    Abstract: In this paper, we use an overlapping generations model where individuals are allowed to engage in both legitimate market activities and criminal behavior in order to assess the role of certain factors on the property crime rate. In particular, we investigate if any of the following could be capable of generating the large differences in crime rates that are observed across countries: differences in the unemployment rate, the fraction of low-human-capital individuals in an economy, the probability of apprehension, the duration of jail sentences, and income inequality. We find that small differences in the probability of apprehension and in income inequality can generate quantitatively significant differences in the crime rates across similar environments.
    Keywords: Crime
    Date: 2006
  3. By: Cumming,Douglas; Johan,Sofia (TILEC (Tilburg Law and Economics Center))
    Abstract: This paper introduces a new dataset from 100 Dutch institutional investors domestic and international asset private equity allocations. The data indicate that the comparative dearth of regulations of private equity funds impedes institutional investor participation in private equity funds, particularly in relation to the lack of transparency. The data further indicate that regulatory harmonization of institutional investors has increased Dutch institutional investor allocations to domestic and international private equity funds, particularly via the harmonization from the International Financial Reporting Standards (regulation of reporting standards and transparency), the Financieel Toetsingkader (regulation of portfolio management standards such as of matching assets and liabilities), and Basel II (regulation of risk management and disclosure standards)
    Keywords: Private Equity;Law and Finance
    JEL: G23 G24 G28 K22 K34
    Date: 2006
  4. By: Tajana,Alessandro (TILEC (Tilburg Law and Economics Center))
    Abstract: Regulation 1/2003 empowers the European Commission to adopt remedies of a structural nature in order to bring an infringement of the rules of competition to an end. This paper first describes the legal conditions that have to be fulfilled for a structural remedy to be imposed under Art. 82. These conditions are strict: the effectiveness, necessity, and proportionality of a structural remedy function as a straitjacket and will rarely allow the adoption of structural remedies. The second issue addressed is whether economic analysis and reasoning should be taken into consideration in the decision to adopt a structural remedy. Indeed, a potential conflict may arise between the outcome of a legal test , based on the effectiveness of the remedy, and the economic test , mainly focused on the efficiency of a remedy. In analysing the efficiency of a remedy a three-stage test is suggested. This analysis leads to the suggestion that the Commission, when faced with the option of which remedy to choose, should take into account economic reasoning as much as possible. However, the attempt to reconcile the two tests, the legal and the economic one, inevitably brings to the conclusion that structural remedies have a residual nature and will be adopted only in particular circumstances
    Keywords: EU law;competition;antitrust;abuse of dominant position;monopolisation; structural remedies;behavioural remedies
    JEL: K21 L41
    Date: 2005
  5. By: Robert Evans; Timothy W. Guinnane
    Abstract: Professional associations and other producer groups often complain that their reputation is damaged by other groups providing a similar but lower-quality service and that the latter should be regulated. We examine the conditions under which a common regulatory regime can induce Pareto-improvements by creating a common reputation for quality among heterogeneous producers, when the regulator cannot commit to a given quality. A common reputation can be created only if the groups are not too different and if marginal cost is declining. High cost groups and small groups benefit most from forming a common regime.
    Keywords: Keywords: Quality Regulation, Licensing, Collective Reputation, Reputational Externality
    JEL: L43 L44
    Date: 2006–03
  6. By: Sarah L. Stafford (Department of Economics, College of William and Mary)
    Abstract: Facilities that self-police under the Environmental Protection AgencyÕs Audit Policy are eligible for reduced penalties on disclosed violations. This paper investigates whether self-policing has additional consequences, in particular whether self-policing reduces future enforcement activity. Using data on U.S. hazardous waste enforcement and disclosures, I find that facilities that self-police are rewarded with a lower probability of inspection in the future, although facilities with good compliance records may receive a smaller benefit than facilities with poor records. Additionally, facilities that are inspected frequently are more likely to disclose than facilities that face a low probability of inspection, perhaps because they have more to gain from decreasing future enforcement efforts.
    Keywords: Self-Policing, Enforcement, Targeting, Compliance, Hazardous Waste
    JEL: K32 K42 Q52 Q58
    Date: 2006–02–23
  7. By: Theocharis N. Grigoriadis; Benno Torgler
    Abstract: This paper investigates the role of the State Duma of Russia in energy regulation between 1994 and 2003. We applying Poole’s optimal classification model of roll call votes using an ordered probit model to show impact of partisan, bureaucratic, social and economic determinants on energy law reform in the first decade of Russia’s democratic transition. Our findings suggest that reforms strongly depend on negotiations, compromises and interest equilibrations. The cohesion and accountability of Russian political parties cannot be explained in terms of ideology; the traditional Left-Right axis does not hold in Russian legislative politics. Thus, our results suggest that Russia’s executive federalism and the personal interests of powerful parliamentary actors have the lead in developing competitive market structures in oil, gas and electricity markets. The paradoxical conclusion is that in this turbulent institutional setting State Duma functions as a de facto regulator by contributing to economic transparency and advancing energy law reform under conditions of democratic representation and political competition.
    Keywords: energy regulation; energy roll law reform; roll call votes; legislative politics; State Duma; Russia
    JEL: Q40 D72 K23 P27 P37 P31 R11
    Date: 2006–03

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