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on Regulation |
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Issue of 2006‒04‒29
seventeen papers chosen by Christian Calmes Universite du Quebec en Outaouais, Canada |
| By: | Bruno Deffains; Dominique Demougin |
| Abstract: | We compare the effect of legal and institutional competition for the design of labor institutions in an environment characterized by holdup problems in human and physical capital. We compare autarky with the two country case, assuming that capital is perfectly mobile and labor immobile. We distinguish two cases. In the first, the political system is free from capture, while in the second, we examine the case where labor captures the institutional design problem. We find that in the former case, a competition of systems reduces welfare while in the latter it improves the overall outcome. |
| Keywords: | Institutional Competition, Political Process, Holdup, Labor, Human Capital |
| JEL: | D24 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2006-027&r=reg |
| By: | Griffith, Rachel Susan; Harrison, Rupert; Macartney, Gareth |
| Abstract: | We analyze the impact of product market competition on unemployment and wages, and how this depends on labour market institutions. We use differential changes in regulations across OECD countries over the 1980s and 1990s to identify the effects of competition. We find that increased product market competition reduces unemployment, and that it does so more in countries with labour market institutions that increase worker bargaining power. The theoretical intuition is that both firms with market power and unions with bargaining power are constrained in their behaviour by the elasticity of demand in the product market. We also find that the effect of increased competition on real wages is beneficial to workers, but less so when they have high bargaining power. Intuitively, real wages increase through a drop in the general price level, but workers with bargaining power lose out somewhat from a reduction in the rents that they had previously captured. |
| Keywords: | competition; product market regulation; unemployment; wage bargaining |
| JEL: | E24 J50 L50 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5599&r=reg |
| By: | Adam B. Ashcraft |
| Abstract: | Although bank capital regulation permits a bank to choose freely between equity and subordinated debt to meet capital requirements, lenders and investors view debt and equity as imperfect substitutes. It follows that the mix of debt in regulatory capital should isolate the role that the market plays in disciplining banks. I document that since the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) reduced the ability of the FDIC to absorb losses of subordinated debt investors, the mix of debt has had a positive effect on the future outcomes of distressed banks, as if the presence of debt investors has worked to limit moral hazard. To mitigate concerns about selection, I use the variation across banks in the mix of debt in capital generated by cross-state variation in state corporate income tax rates. Interestingly, instrumental variables (IV) estimates document that selection problems are indeed important, but suggest that the benefits of subordinated debt are even larger. I conclude that the market may play a useful direct role in regulating banks. |
| Keywords: | Bank capital ; Federal Deposit Insurance Corporation Improvement Act of 1991 ; Debt ; Bank supervision |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:244&r=reg |
| By: | Franklin Allen; Elena Carletti; Robert Marquez |
| Abstract: | Market discipline for financial institutions can be imposed not only from the liability side, as has often been stressed in the literature on the use of subordinated debt, but also from the asset side. This will be particularly true if good lending opportunities are in short supply, so that banks have to compete for projects. In such a setting, borrowers may demand that banks commit to monitoring by requiring that they use some of their own capital in lending, thus creating an asset market-based incentive for banks to hold capital. Borrowers can also provide banks with incentives to monitor by allowing them to reap some of the benefits from the loans, which accrue only if the loans are in fact paid off. Since borrowers do not fully internalize the cost of raising capital to the banks, the level of capital demanded by market participants may be above the one chosen by a regulator, even when capital is a relatively costly source of funds. This implies that the capital requirement may not be binding, as recent evidence seems to indicate. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2006-11&r=reg |
| By: | Giang Ho; Anthony Pennington-Cross |
| Keywords: | Mortgages ; Banking law ; Home equity loans |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2006-022&r=reg |
| By: | Massimo Florio (University of Milan); Riccardo Puglisi (Department of Political Science, Massachusetts Institute of Technology) |
| Abstract: | Is privatization per se socially beneficial? Or do those benefits depend on the subsequent changes in the regulatory regime? In this paper, building on Vogelsang, Jones and Tandon (1994), we answer these questions by analyzing three different counterfactuals about British Telecom privatization and regulation. In the factual scenario, the British government decided to privatize British Telecom, and at the same time to establish an independent agency (OFTEL), which was to impose a price cap mechanism on BT services, in those market segments in which competition was unfeasible or limited. Our research strategy is to follow a simple ceteris paribus approach, and to change in each counterfactual only one aspect of the institutional setup. The analysis suggests that the change in ownership from public to private had negative welfare effects, under reasonable assumptions about the productive efficiency gains arising from it. Moreover, the paper studies the relationship between productive and allocative efficiency, by making hypotheses about the price changes induced by the new regulatory regime |
| Keywords: | privatization, regulation, British Telecom, welfare analysis, |
| Date: | 2006–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:bep:unimip:1017&r=reg |
| By: | Paula Sarmento (CETE, Faculdade de Economia, Universidade do Porto); António Brandão (CETE, Faculdade de Economia, Universidade do Porto) |
| Abstract: | In this paper we study the way a multiproduct firm, regulated through a dynamic price cap, can develop a price strategy that uses the regulatory policy to deter entry. We consider a firm that initially operates as a monopolist in two markets but faces potential entry in one of the markets. We conclude that the regulated firm can have the incentive to block the entry. This strategy leads to the reduction of the price in both markets. However, the final effect of the entry deterrence strategy on total consumer surplus is not always positive. |
| Keywords: | price cap regulation, entry |
| JEL: | L11 L51 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:por:cetedp:0502&r=reg |
| By: | Holm, Claus (Department of Business Studies); Warming-Rasmussen, Bent (University of Southern Denmark) |
| Abstract: | No abstract |
| Keywords: | No; keywords |
| Date: | 2006–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhb:aaracc:91-002&r=reg |
| By: | Jorge Farinha (CETE, Faculdade de Economia, Universidade do Porto); Óscar López de Foronda (Departamento de Economia y Administracion de Empresas, Área de Economía Financiera y Contabilidad, Universidad de Burgos, España) |
| Abstract: | This paper provides new international evidence on the relationship between dividend policy and insider ownership by analysing a sample of firms from countries characterised by an Anglo-Saxon tradition and a matching sample of companies from countries with Civil Law legal systems. We hypothesize that, due to the different characteristics of both the legal system and the nature of agency conflicts in firms from those countries, the relation between dividend policies and ownership by insiders will be considerably distinct between the two sets of companies. We find that while in firms from Anglo-Saxon tradition the relation between dividends and insider ownership follows the pattern negative-positive-negative, in Civil Law countries the relation is positive-negative-positive. These results are consistent with our hypotheses and breed new insights into the role of dividend policy as a disciplining mechanism in countries with different legal systems and distinct agency problems. |
| Keywords: | dividend policy, corporate governance, insider ownership, international financial markets, dynamic panel data and GMM estimation |
| JEL: | G32 G34 G35 G15 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:por:cetedp:0509&r=reg |
| By: | G. Chiesa |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:397&r=reg |
| By: | Paula Sarmento (CETE, Faculdade de Economia, Universidade do Porto); António Brandão (CETE, Faculdade de Economia, Universidade do Porto) |
| Abstract: | In this paper we compare two instruments of access price regulation, cost-based and retail-minus, with the full deregulation hypothesis. We consider an upstream monopolist firm that sells a vital input to an independent firm and to a subsidiary firm in the downstream market. We conclude that the retail-minus regulation avoids foreclosure and leads to better results than cost-based regulation in terms of investment level and consumer surplus. Moreover, retail-minus regulation allows a higher consumer surplus than deregulation of access price as long as the regulator carefully defines the retail-minus instrument. We also compare retail-minus regulation with the Efficient Component Pricing Rule and we conclude that the two mechanisms can lead to different results. |
| Keywords: | access regulation, vertical integration, retail-minus, Efficient Component Pricing Rule |
| JEL: | L12 L51 L96 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:por:cetedp:0603&r=reg |
| By: | D. Lanzi |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:405&r=reg |
| By: | Hasret Benar (Department of Economics, Eastern Mediterranean University); Glenn P. Jenkins (Department of Economics, Queen's University) |
| Abstract: | This paper considers alternative forms of regulation and taxation of the casino sector. The model considers the situation of a typical tourist destination country that is using casinos to attract and entertain foreign tourists. The objective is to invest in the sector efficiently while maximizing the amount of government revenue or profits accruing to the country. The regulator must determine how the price of gambling will be set, how many casinos will be allowed to enter the industry and the form and rates of taxation. Four alternative forms of regulation are considered: price regulation, state-owned monopoly, private monopoly and casino association regulation. Turnover taxes on the amount of funds gambled and also annual taxation of the fixed costs of the casinos are evaluated. Applications of the models are carried out for North Cyprus. The conclusion is that the economic efficiency costs and the revenue losses from the absence of effective regulation in these tourist destinations can be very substantial with welfare costs equal to the approximately 75 percent of the tax revenue generated by this sector. Furthermore it shows that while a tax on turnover can be efficient in the case of a competitive industry or a cartel association form of regulation, it will be distortunary if a private monopoly is controlling the sector. In contrast a tax on fixed costs will lead to an efficient result in the case of a competitive or private monopoly cases, but it will lead to allocate inefficiencies if the sector is regulated by a casino association that can only control the number of casino entering the sector. |
| Keywords: | Casino regulation, taxation, state-monopoly, welfare cost |
| JEL: | H21 H32 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1056&r=reg |
| By: | Giang Ho; Anthony Pennington-Cross |
| Abstract: | After a mortgage is originated the borrower promises to make scheduled payments to repay the loan. These payments are sent to the loan servicer, who may be the original lender or some other firm. This firm collects the promised payments and distributes the cash flow (payments) to the appropriate investor/lender. A large data set (loan-level) of securitized subprime mortgages is used to examine if individual servicers are associated with systematic differences in mortgage performance (termination). While accounting for unobserved heterogeneity in a competing risk (default and prepay) proportional hazard framework, individual servicers are associated with substantial and economically meaningful impacts on loan termination. |
| Keywords: | Mortgages ; Banking law ; Home equity loans |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2006-024&r=reg |
| By: | Francisco Rodríguez (Department of Economics, Wesleyan University) |
| Abstract: | This paper proposes a simple mechanism for evaluating the relevance of credibility problems in politics. If candidates are capable of making credible policy promises, we will not expect them to systematically adopt platforms that entail large probabilities of losing an election. This is because the adoption of very extreme platforms has the effect of shifting expected policies systematically away from their ideal points. For candidates who lack the capacity of making credible commitments, in contrast, policy platforms are simply a reflection of their preferences, which may well be very extreme. I show that this fact implies that when politicians are credible the correlation between candidates preferences and expected policies will always be positive, whereas when they lack credibility the correlation can be negative. Empirical tests on a panel of US abortion preferences and legislation show that the correlation between the preferences of party constituents and enacted policies is consistently negative, a result that strongly suggests the existence of significant credibility problems. |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2006-014&r=reg |
| By: | G. Bellettini; C. Berti Ceroni |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:394&r=reg |
| By: | Frédéric Marty (IDEFI - Institut de droit et d'économie de la firme et de l'industrie - http://www.idefi.cnrs.fr/ - [CNRS : FRE2814] - [Université de Nice Sophia-Antipolis] - []) |
| Abstract: | Le propos de cet article tient à l'analyse du modèle économique mis en place par la firme Enron et dans un questionnement quant à son rôle dans la crise de l'électricité californienne au début des années 2000. |
| Keywords: | Marchés de l'électricité, pouvoir de marché, incitations |
| Date: | 2006–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00010371_v1&r=reg |