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on Regulation |
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Issue of 2006‒05‒06
thirteen papers chosen by Christian Calmes Universite du Quebec en Outaouais, Canada |
| By: | Auriol, Emmanuelle; Picard, Pierre M |
| Abstract: | The paper studies the impact of government budget constraint in a pure adverse selection problem of monopoly regulation. The government maximizes total surplus but incurs some cost of public funds à la Laffont and Tirole (1993). An alternative to regulation is proposed in which firms are free to enter the market and to choose their price and output levels. However the government can contract ex-post with the private firms. This ex-post contracting set-up allows more flexibility than traditional regulation where governments commit to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties. |
| Keywords: | adverse selection; natural monopoly; privatization; regulation; soft-budget constraint |
| JEL: | D82 L33 L43 L51 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5643&r=reg |
| By: | Lars P. Feld; Bruno S. Frey |
| Abstract: | The traditional economic approach to tax evasion does not appear to be particularly successful in explaining the extent of tax compliance. We argue instead that a psychological tax contract which establishes a fiscal exchange between the state and the citizens shapes tax compliance to a large extent. In that respect, a case study of Switzerland is useful because the small size of the cantons and their direct democratic political systems procedurally establish a close exchange relationship between taxpayers and tax authorities. In this paper, evidence is discussed on how tax evasion and tax morale in Switzerland evolved over time. In addition, the impact of economic, legal, socio-demographic, psychological and institutional factors on Swiss tax evasion is discussed. |
| Keywords: | Tax Evasion; Tax Morale; Deterrence; Responsive Regulation |
| JEL: | H26 H73 D73 D78 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2006-13&r=reg |
| By: | Benno Torgler; Neven T. Valev |
| Abstract: | In recent years the topics of illegal activities such as corruption or tax evasion have attracted a great deal of attention. However, there is still a lack of substantial empirical evidence about the determinants of compliance. The aim of this paper is to investigate empirically whether women are more willing to be compliant than men and whether we observe (among women and in general) differences in attitudes among similar age groups in different time periods (cohort effect) or changing attitudes of the same cohorts over time (age effect) using data from eight Western European countries from the World Values Survey and the European Values Survey that span the period from 1981 to 1999. The results reveal higher willingness to comply among women and an age rather than a cohort effect. |
| Keywords: | corruption; bribe; social norms; tax compliance; gender effect; age effect; cohort effect |
| JEL: | H10 J16 K42 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2006-15&r=reg |
| By: | Lars P. Feld; Bruno S. Frey; Benno Torgler |
| Abstract: | This paper analyzes the impact of rewards on tax compliance as an additional instrument to take into account. While social psychologists and neuroscientists have emphasized the importance of rewards, the tax compliance literature has strongly disregarded the possibilities of rewards. The use of field experiments presents an alternative “carrot” strategy for tax policy. Design mechanisms to conduct a field experiments focusing on the impact of rewards on tax compliance are discussed. |
| Keywords: | positive rewards; tax compliance; tax evasion; field experiments |
| JEL: | H26 H41 C90 D63 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2006-16&r=reg |
| By: | William Thomson (University of Rochester) |
| Abstract: | For the problem of adjudicating conflicting claims, a rule is consistent if the choice it makes for each problem is always in agreement with the choice it makes for each "reduced problem" obtained by imagining that some claimants leave with their awards and reassessing the situation from the viewpoint of the remaining claimants. We develop a general technique to determine whether a given two-claimant rule admits a consistent extension to general populations, and to identify this extension if it exists. We apply the technique to a succession of examples. One application is to a one-parameter family of rules that offer a compromise between the constrained equal awards and constrained equal losses rules. We show that a consistent extension of such a rule exists only if all the weight is placed on the former or all the weight is placed on the latter. Another application is to a family of rules that provide a compromise between the constrained equal awards and proportional rules, and a dual family that provide a compromise between the constrained equal losses and proportional rules. In each case, we identify the restrictions implied by consistency. |
| Keywords: | claims problems, consistent extensions, proportional rule, constrained equal awards rule, constrained equal losses rule. |
| JEL: | C79 D63 D74 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:roc:rocher:528&r=reg |
| By: | Hussain, M. Ershad (University of New Orleans); Hassan, M. Kabir (University of New Orleans; Drexel University) |
| Abstract: | Existing literature has focused attention on the impact of Basle I and similar capital requirement regulations on developed countries where such regulations were found to be effective in increasing capital ratios and reducing portfolio credit risk of commercial banks. In the present study, we study the impact of such capital requirement regulations on commercial banks in 11 developing countries around the world within a cross-section framework with the widely popular simultaneous equations model of Shrieves and Dahl (1992). Surprisingly, we find that such regulations did not increase the capital ratios of banks in the developing countries. This implies that particular attention should be given to the business, environmental, legal, cultural realities of such countries while designing and implementing such policies for developing countries. However, we find evidence that such regulations did reduce portfolio risk of banks. We also find that capital ratios and portfolio risk are inversel. |
| Keywords: | Capital requirement, Commercial banks, Credit risk |
| JEL: | G21 G28 C12 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:uno:wpaper:2005-01&r=reg |
| By: | Lars P. Feld; Bruno S. Frey |
| Abstract: | In this paper, we develop the concept of a psychological tax contract that goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. Based on crowding theory, the impact of deterrence and rewards on tax morale is discussed. As a contractual relationship implies duties and rights for each contract partner, sticking to the fiscal exchange paradigm between citizens and the state increases tax compliance. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to their tax payments as long as the political process is perceived to be fair and legitimate. At the procedural level, a friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance. |
| Keywords: | Tax Compliance, Positive and Negative Incentives, Responsive Regulation |
| JEL: | H26 H73 D73 D78 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:287&r=reg |
| By: | Timothy Fogarty (Case Western Reserve University); Garen Markarian (Bocconi University); Antonio Parbonetti (University of Padua) |
| Abstract: | The literature on disclosure practices has posited a relationship between legal regime and the amount of voluntary disclosure. Specifically, companies in nations with a civil law tradition were expected to make more voluntary disclosure to compensate for the information that would otherwise be required in common law nations. This expectation was predicted on the assumptions that investors in the former nation would have salient information needs such that the proprietary costs of information production would be overcome. Data collected from 75 firms across the world were used to support the finding that the extent of difference across legal regimes is diminishing over time. |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0014&r=reg |
| By: | Pranab Bardhan (University of California at Berkeley); Dilip Mookherjee (Institute for Economic Development, Boston University) |
| Abstract: | The impact of government decentralization on economic performance and growth is a hotly contested issue. Waves of decentralization occurred in many developing countries over the past few decades, following the demise of a development paradigm in which centralized states played a leading role (see for instance, case studies of decentralization covering over half the world’s population in Bardhan and Mookherjee 2005b). The trends toward greater decentralization has been motivated by disenchantment with previous centralized modes of governance, owing partly to a perception that monolithic government bred high levels of rent-seeking, corruption and lack of accountability of government officials. An important research question, therefore, concerns the effects of decentralization on corruption. Can decentralization be a useful institutional reform to reduce corruption, or might corruption increase as political power shifts downward? |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-152&r=reg |
| By: | Dilip Mookherjee (Institute for Economic Development, Boston University); Ulf von Lilienfeld-Toal (Department of Economics, University of Frankfurt) |
| Abstract: | Should the law restrict liability of defaulting borrowers? We abstract from possible benefits arising from limited rationality or risk-aversion of borrowers, contractual incompleteness, or lender moral hazard. We focus instead on general equilibrium implications of liability rules with moral hazard among borrowers with varying wealth. If lenders are on the short side of the market, weakening liability rules lower lender profits, may cause additional exclusion among the poor, but generate additional rents for wealthier borrowers. For certain changes in liability rules (such as a ban on bonded labor, or weakening bankruptcy rules below a wealth threshold) they also raise productivity among borrowers of intermediate wealth. Hence they can be interpreted as a form of efficiency-enhancing redistribution from lenders and poor borrowers to middle class borrowers. Our model provides a possible rationale for why weaker liability rules are observed in wealthier countries. |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-155&r=reg |
| By: | Sujata Visaria (Institute for Economic Development, Boston University); |
| Abstract: | This paper investigates the micro-level link between judicial quality and eco- nomic outcomes. It uses a loan-level data set from a large Indian bank to es- timate the impact of a new quasi-legal institution, Debt Recovery Tribunals, which are aimed at accelerating banks' recovery of non-performing loans. I use a dfferences-in-dfferences strategy based on two sources of variation: the mon- etary threshold for claims to be eligible for these tribunals, and the staggered introduction of tribunals across Indian states. I find that the establishment of tribunals reduces delinquency in loan repayment by between 3 and 11 percent. The ffect is statistically significant within loans as well: for the same loan, in- stallments that become due after the loan becomes treated are more likely to be paid up on time than those that become due before. Furthermore, interest rates on loans sanctioned after the reform are lower by 1.4-2 percentage points. These results suggest that legal reform and the improved enforcement of loan contracts can reduce borrower delinquency, and can lead banks to provide cheaper credit. Thus the paper illustrates a microeconomic mechanism through which improve- ments in legal institutions might affect credit market outcomes. |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-157&r=reg |
| By: | Baldwin, John R.; Gellatly, Guy; Sabourin, David |
| Abstract: | This paper examines the incidence of foreign control in Canadian non-financial industries. It focuses on changes in the share of assets and revenues under foreign control over a long-run period during which Canada's regulatory climate shifted from being more restrictive to more liberal in its treatment of inward foreign direct investment. These regulatory changes coincided with a retrenchment and then a resurgence in the activities of foreign multinationals in Canadian industry. We report aggregate results for non-financial industries, along with specific tabulations for the energy sector. More detailed industry tabulations are presented for the 2000-2003 period. |
| Keywords: | National accounts, Business enterprises, Economic conditions, Business conditions |
| Date: | 2006–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp2e:2006013e&r=reg |
| By: | Robert Malina (Institute of Transport Economics, University of Muenster) |
| Abstract: | With the increasing profit orientation of German airport operators the question as to weather they possess market power is gaining more importance. Whereas there have been some studies about the degree of market power of individual airports in countries as Australia and Great Britain, the German airport market has not yet been studied in detail. This paper is a part of a research project that tries to assess market power in this market. It indicates which of the 35 examined German airports possess market power and therefore need special regulatory attendence. We calculate a substitution coefficient for inter-airport competition that quantifies the quality of the best substitute for a certain airport. It is defined as the proportion of inhabitants within the relevant regional market of an airport that consider another airport, which has been identified as meeting the demands of the airlines, to be a good substitute from their perspective as well. The analysis is complemented by an assessment of intermodal substitution and countervailing power of airlines. The study gives strong indication that 23 out of the 35 German airports do not possess relevant market power. In contrast to this, four airports (HAM, FRA, MUC, STR) and Berlin Airport System (THF, TXL, SXF) have strong, five (BRE, DRS, LEJ, NUE, HAJ) have modest market power. The results provide a basis for the construction of an efficient regulatory framework for the German airport market. |
| Keywords: | airport competition, counterveiling power, market power, substitution |
| JEL: | L93 R48 D42 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:mut:wpaper:10&r=reg |