nep-reg New Economics Papers
on Regulation
Issue of 2006‒10‒07
fourteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais, Canada

  1. Labour Market Regulation and Industrial Performance in India--A Critical Review of the Empirical Evidence By Aditya Bhattacharjea
  2. Pigou's Dividend versus Ramsey's Dividend in the Double Dividend Literature By Eduardo L. Giménez Fernández; Miguel Rodríguez Méndez
  3. Rules of Proof, Courts, and Incentives By Dominique Demougin; Claude Fluet
  4. Regulation, Market Structure and Service Trade Liberalization By Denise Eby Konan; Ari Van Assche
  5. The Emergence of Central Banks and Banking Regulation in Comparative Perspective By Richard S. Grossman
  6. Financial Liberalization in a Small Open Economy By Jürgen von Hagen; Haiping Zhang
  7. The Effect of Business Regulations on Nascent and Young Business Entrepreneurship By Stel, A.J. van; Storey, D.; Thurik, A.R.
  8. Increasing Longevity and Social Security Reforms By Torben Andersen
  9. Dependent Controllers and Regulation Policies: Theory and Evidence By Carmine Guerriero
  10. Reinforcing the patent system? Patent fencing, knowledge diffusion and welfare By Murat YILDIZOGLU (E3i-IFReDE-GRES)
  11. Etude comparée des systèmes de régulation ferroviaire : Grande-Bretagne, France et Suède. Analyse des règles du jeu et de leur mise en œuvre, Enseignements pour la France By Dominique Bouf; Yves Crozet; Julien Lévêque; William Roy
  12. Optimal regulatory design for the Central Bank of Russia By Claeys, Sophie
  13. Bank supervision Russian style: Rules versus enforcement and tacit objectives By Claeys, Sophie; Lanine , Gleb; Schoors, Koen
  14. By Chance or Choice: The Regulation of the Apprenticeship System in Australia, 1900-1930 By Thorsten Stromback

  1. By: Aditya Bhattacharjea (Delhi School of Economics)
    Abstract: This paper offers a critique of recent empirical studies on the impact of labour regulation on industrial performance in India. It begins with a review of earlier studies that tried to infer the effects on manufacturing employment of amendments to the Industrial Disputes Act (IDA) in 1976 and 1982 that required government permission for layoffs, retrenchments and closures, and shows that the results are ambiguous. It then criticizes the widely-used index of state-level labour regulation devised by Besley and Burgess (2004), and the econometric methodology they use to establish that excessively pro-worker regulation led to poor performance in Indian manufacturing. Several recent studies that have used their index are also surveyed. Finally, the paper reviews other evidence, pointing in a very different direction, on the actual enforcement of labour laws, labour flexibility, and industrial employment. Throughout, attention is paid to the crucial role of judicial interpretation of the IDA, which has been neglected in this literature.
    Keywords: India, industrial relations, employment protection laws, job security regulations, labor flexibility.
    JEL: J53 J68 O53
    Date: 2006–06
  2. By: Eduardo L. Giménez Fernández (Universidad de Vigo); Miguel Rodríguez Méndez (Universidad de Vigo)
    Abstract: The aims of this paper are to highlight misinterpretations of policy assessments in the double dividend literature, to specify which of the efficiency costs and benefits should be ascribed to each dividend, and then, to propose a definition for the first dividend and the second dividend. We found the Pigou's dividend more appropiate for policy guidance than the usual Ramsey's dividend. Finally, the paper analyzes a green tax reform for the US economy to illustrate the advantages of the new definitions proposed in this paper: i) overcome some shortcoming of the mainstream current definitions in the literature regarding overestimation of the efficiency costs; and, ii) provide information by themselves and not as a partial view of the whole picture.
    Keywords: Double dividend, Green Tax Reforms, Ramsey's dividend, Pigou's dividend
    JEL: H23 Q58
    Date: 2006
  3. By: Dominique Demougin; Claude Fluet
    Abstract: We analyze the design of legal principles and procedures for court decision-making in civil litigation. The objective is the provision of appropriate incentives for potential tort-feasors to exert care, when evidence about care is imperfect and may be distorted by the parties. Efficiency is shown to be consistent with courts adjudicating on the basis of the preponderance of evidence standard of proof together with common law exclusionary rules. Inefficient equilibria may nevertheless also arise under these rules. Directing courts as to the assignment of the burden of proof is then useful as a coordination device. Alternatively, burden of proof guidelines are unnecessary if courts are allowed a more active or inquisitorial role, by contrast with that of passive adjudicator.
    Keywords: Evidentiary rules, standard of proof, burden of proof, inquisitorial, adversarial, discovery, deterrence
    JEL: D8 K4
    Date: 2006
  4. By: Denise Eby Konan; Ari Van Assche
    Abstract: In this paper, we develop a method to quantify the importance of regulation and market structure on the success of trade liberalization. For this purpose, we incorporate a single imperfectly competitive service sector that can take on various market structures into a standard computational general equilibrium model. We apply our framework to analyze the impact of allowing a single foreign telecom provider to enter Tunisia. If the regulation environment guarantees competition, Tunisia’s welfare can improve up to 0.65 percent. If a cartel is formed between the domestic incumbent and foreign entrant, however, Tunisia’s welfare can drop up to 0.25 percent. Our results thus call for Tunisia among other developing countries to step up its procompetitive regulatory reforms while liberalizing its telecom sector. <P>Dans ce papier, nous développons une méthode permettant de quantifier l’importance de la réglementation et de la structure des marchés sur la libéralisation du commerce et sur son succès. À ces fins, nous incorporons un secteur unique et imparfaitement compétitif pouvant intégrer différentes structures de marché dans un modèle standard de calcul d’équilibre général. Nous appliquons notre cadre d’analyse afin d’étudier l’impact de l’entrée d’un seul fournisseur étranger en Tunisie. Nous trouvons que si la réglementation du marché y garantit la compétition, le bien-être de la Tunisie peut augmenter de 0,65 %. Cependant, s’il y a formation d’un cartel entre le réseau domestique et l’entrant étranger, le bien-être de la Tunisie peut baisser de 0,25 %. Nos résultats démontrent que tout en libéralisant son secteur des télécommunications, la Tunisie bénéficierait de réformes visant des régulations pro-compétitives.
    Keywords: service trade liberalization, regulation, market structure, imperfect competition, CGE (Computable General Equilibrium), CGE (équilibre général calculable), compétition imparfaite, libéralisation du commerce, réglementation, structure de marché
    JEL: F12 F13 F23
    Date: 2006–09–01
  5. By: Richard S. Grossman (Department of Economics, Wesleyan University)
    Date: 2006–06
  6. By: Jürgen von Hagen; Haiping Zhang
    Abstract: We analyze the long-run and short-run implications of financial liberalization in a small open economy. Our main results are as follows. First, whether financial deregulation in one sector can improve production efficiency may depend on financial regulation in other sectors. Second, financial liberalization may have opposite welfare implications to domestic agents with different productivity in the long run. Third, although some domestic agents lose in the long run, they benefit from financial liberalization during the transitional process of deregulation. Finally, a gradual implementation helps achieve a smooth transition.
    Keywords: financial frictions, financial liberalization, foreign borrowing, macroeconomic fluctuations, overshooting
    JEL: E32 E44 F34 F41
    Date: 2006
  7. By: Stel, A.J. van; Storey, D.; Thurik, A.R. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: We examine the relationship, across 39 countries, between regulation and entrepreneurship using a new two-equation model. We find the minimum capital requirement required to start a business lowers entrepreneurship rates across countries, as do labour market regulations. However the administrative considerations of starting a business ? such as the time, the cost, or the number of procedures required ? are unrelated to the formation rate of either nascent or young businesses. Given the explicit link made by Djankov et al. (2002) between the speed and ease with which businesses may be established in a country and its economic performance ? and the enthusiasm with which this link has been grasped by European Union policy makers ? our findings imply this link needs reconsidering.
    Keywords: Nascent Entrepreneurship;Young Businesses;Business Regulations;Global Entrepreneurship Monitor;World Bank Doing Business;
    Date: 2006–09–26
  8. By: Torben Andersen
    Abstract: Increasing longevity causes an upward trend in the dependency ratio in many countries. This raises concerns about the financial sustainability of social security schemes, and reform initiatives and proposals abound. It is shown that a fundamental policy choice inevitably arises since a given social security system cannot be maintained by simply indexing retirement ages and benefits to longevity. The political reform process is analysed using the so-called legislative procedure. When longevity increases, the young generation contributes more, and the old generation faces lower benefits and a retirement age that increases more than proportionally to the increase in longevity.
    Keywords: longevity, social security, political economy
    JEL: D72 H55 J11 J14 J18
    Date: 2006
  9. By: Carmine Guerriero (University of Cambridge)
    Abstract: This paper analyzes the effects of supervisors’ (i.e., regulators and judges) selection rules on regulated prices. A checks and balances’ regulatory review process strengthens the role of the judicial power and election increases the populism of implicitly motivated supervisors. Election arises when the risk related to expropriation of sunk investments and the inter-party distance are lower. Employing U.S. electric power market’s data, the empirical evidence strongly confirms these predictions. Indeed, when treated as endogenous, only the election of administrative law judges and not the one of regulators significantly lowers the level of electricity rates. Moreover a more effective supervision technology shows a marginal negative effect on regulated rates as well.
    Keywords: Election, Agency, Judges, Regulation, Electricity
    JEL: K23 L51 Q43
    Date: 2006–08
  10. By: Murat YILDIZOGLU (E3i-IFReDE-GRES)
    Abstract: This article develops an evolutionary model of industry dynamics in order to carry out a richer theoretical analysis of the consequences of a stronger patent system. This model explicitly takes into account the potentially positive effects of the patents: Publication of patents participates to the building of a collective knowledge stock on which the innovations can rely, and dropped patents can provide a source of technological progress for firms that are lagging behind the leaders of the industry. These dimensions of the patent system are used to question the negative results of Vallée & Yildizoglu (2006). The main results of the new model show that these positive effects do not counterbalance the negative effects of a stronger patent system on social welfare and global technological progress, even if it is a source of better protection and higher profits for the firms.
    Keywords: Innovation, Technical progress, Patent system, Intellectual property rights (IPR), Technology policy, Technological regimes
    JEL: O3 O34 L52
    Date: 2006
  11. By: Dominique Bouf (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat]); Yves Crozet (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat]); Julien Lévêque (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat]); William Roy (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat])
    Abstract: Ce rapport de recherche commandé par la direction de la stratégie de la SNCF compare les systèmes de régulation ferroviaire britannique et français. Il s'agit d'étudier les règles du jeu établies pour réguler un système ferroviaire verticalement dé-intégré avec un gestionnaire d'infrastructure et des entreprises ferroviaires. Après avoir rappelé les principes et l'évolution de la réforme ferroviaire britannique, la régulation ferroviaire est analysée en détail. Les activités régulées sont distinguées selon qu'elles concernent l'établissement de la grille horaire, la gestion opérationnelle du réseau ou les modifications de celui-ci. La régulation britanniques repose largement sur le consensus entre partenaires de l'industrie ferroviaire. Pour ce faire, un système de compensation des externalités a été établi, un régulateur indépendant a été institué et un dispositif de règlement des conflits propre à l'industrie a été mis en place. Mais ce système incitatif est pénalisé par des coûts de transaction très élevés. En France, la régulation est largement définie par la loi et repose sur l'antagonisme entre le gestionnaire d'infrastructure, RFF, et l'opérateur historique, SNCF, qui est aussi gestionnaire délégué de l'infrastructure. Il apparaît globalement que pour faire pression sur l'acteur dominant (la SNCF), les pouvoirs publics ont eu tendance à laisser à RFF une liberté d'action relativement importante au regard des contraintes que la régulation britannique fait porter sur Network Rail.
    Keywords: Etude comparée ; systèmes de régulation ferroviaire ; règlementation ferroviaire ; infrastructure ; dé-intégration
    Date: 2006–10–04
  12. By: Claeys, Sophie (BOFIT)
    Abstract: The Central Bank of Russia (CBR) assumes a wide range of functions not raditional to a central bank. In addition to the daily conduct of monetary policy, it acts as a regulator and supervisor of the banking sector. It is currently overssing the implementation of a deposit insurance scheme and is the main owner of Russia's largest commercial bank, Sberbank. As this additional functions may conflict with the CBR policy objectives, I review how the current design of the CBR deviates from the optimal allocation of regulatory powers within a central bank prescribed in the literature. I then empirically investigate the need for a supervisory body within the CBR. Using a simple Taylor rule framework I find that the CBR does not use its "hands-on" supervisory information to maintain financial stability, but rather to accomodate state-owned banks' balances.
    Keywords: Central Bank; Prudential Regulation and Supervision; Monetary Policy Rules; Russia
    JEL: G21 G28
    Date: 2005–07–08
  13. By: Claeys, Sophie (CERISE); Lanine , Gleb (CERISE); Schoors, Koen (CERISE)
    Abstract: We focus on the conflict between two central bank objectives – individual bank stability and systemic stability. We study the licensing policy of the Central Bank of Russia (CBR) during 1999-2002. Banks in poorly banked regions, banks that are too big to be disciplined adequately, and banks that are active on the interbank market enjoy protection from license withdrawal, which suggests a tacit concern for systemic stability. The CBR is also found reluctant to with-draw licenses from banks that violate the individual's deposits-to-capital ratio as this conflicts with the tacit CBR objective to secure depositor confidence and systemic stability.
    Keywords: bank supervision; bank crisis; Russia
    JEL: E50 G20 N20
    Date: 2005–09–05
  14. By: Thorsten Stromback
    Abstract: This paper traces the process whereby the apprenticeship system came to be regulated by industrial tribunals during the period 1900 to 1930. It describes how the regulation emerged, the motives that underpinned it, and the wider political debate about the apprenticeship system at the time. It then goes on to assess the effect of this regulation. This assessment is informed by an underlying theoretical perspective and draws on the contemporary debate and the outcomes that can be observed. While the question of primary interest is the efficiency of the regulatory regime that emerged, broader considerations are invoked. What was set in place in the early part of the 20th century has continued to shape the how the apprenticeship system has developed since then. For that reason, the future development of the apprenticeship system may be a more relevant indicator of outcomes than the contemporary facts.
    Keywords: apprenticeship, trade unions, arbitration, Australia
    JEL: J51 M53 N37
    Date: 2006–09

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