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on Regulation |
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Issue of 2006‒11‒25
eleven papers chosen by Christian Calmes Universite du Quebec en Outaouais, Canada |
| By: | Inés Macho-Stadler |
| Abstract: | Compliance is an important issue in environmental regulation. In this paper, we discuss some of the key elements of the problem and analyze a situation where emissions are not random and firms are risk-neutral. We study the firm's decision on emissions and compliance when the environmental regulation is based on standards and the enforcement agency audits the firm with a certain probability. We then compare total emissions when environmental regulation is based on different instruments: standards, taxes, and tradable permits. We show that when compliance is an issue, environmental taxes are superior to the other instruments. We also analyze the (static) efficiency of the solution. |
| Keywords: | environmental regulation, audits and compliance, environmental standards, other instruments. |
| JEL: | K32 K42 D82 |
| Date: | 2006–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:673.06&r=reg |
| By: | T. Renee Bowen; Zaki Zahran (Department of Economics, Georgetown University) |
| Abstract: | What prevents majorities from extracting surplus from minorities in a dynamic legislative process? In this paper we study an infinitely repeated game where legislators determine the division of a surplus each period. A division proposal is made at the beginning of the period by a randomly selected legislator and is then voted on. Proposals that are accepted by a simple majority are implemented, otherwise the status quo allocation prevails. We show existence of a symmetric Markov perfect equilibrium in which more than a minimum winning majority receive a positive allocation for an intermediate range of discount factors. However, the equilibrium outcome is sensitive to initial conditions: compromise is achieved when initial allocations are well distributed, otherwise the equilibrium spirals towards a complete absence of compromise. We find that, contrary to intuition, compromise becomes easier to sustain as the number of legislators increases. Classification-JEL Codes: C73, D74 |
| Keywords: | Compromise, Legislative Bargaining, Dynamic Political Games |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~06-06-10&r=reg |
| By: | Robert Gagné (IEA, HEC Montréal); Simon van Norden (IEA, HEC Montréal); Bruno Versaevel |
| Abstract: | We analyse the effects of a price floor on price wars (or deep price cuts) in the retail market for gasoline. Bertrand supergame oligopoly models predict that price wars should last longer in the presence of price floors. In 1996, the introduction of a price floor in the Quebec retail market for gasoline serves as a natural experiment with which to test this prediction. We use a Markov Switching Model with two latent states to simultaneously identify the periods of price-collusion/price-war and estimate the parameters characterizing each state. Results support the prediction that price floors reduce the intensity of price wars but increase their expected duration. |
| Keywords: | price regulation, oligopoly supergame, Markov switching model, gasoline |
| JEL: | L13 L81 C32 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:0612&r=reg |
| By: | Etienne B. Yehoue; Jean-François Ruhashyankiko |
| Abstract: | This paper asks whether corruption might be the outcome of a lack of outside options for public officials or civil servants. We propose an occupational choice model embedded in an agency framework to address the issue. We show that technology-induced private sector expansion leads to a decline in publicly supplied corruption as it provides outside options to public officials who might otherwise engage in corruption. We provide empirical evidence that strongly shows that technology-induced private sector development is associated with a decline in aggregate corruption. This suggests that the decline in publicly supplied corruption outweighs the potential increase in privately supplied corruption that could result from private sector expansion. |
| Keywords: | Corruption , occupational choice , technology , private sector development , Corruption , Private sector , Economic models , |
| Date: | 2006–09–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/198&r=reg |
| By: | Thierry Tressel; Enrica Detragiache; Asli Demirgüç-Kunt |
| Abstract: | This paper studies whether compliance with the Basel Core Principles for Effective Banking Supervision (BCPs) improves bank soundness. The authors find a significant and positive relationship between bank soundness (measured with Moody's financial strength ratings) and compliance with principles related to information provision2. Specifically, countries that require banks to regularly and accurately report their financial data to regulators and market participants have sounder banks. This relationship is robust to controlling for broad indexes of institutional quality, macroeconomic variables, sovereign ratings, and reverse causality. Measuring soundness through Z-scores yields similar results. These findings emphasize the importance of transparency in making supervisory processes effective and strengthening market discipline. Countries aiming to upgrade banking regulation and supervision should consider giving priority to information provision over other elements of the core principles. |
| Keywords: | Bank soundness , regulation and supervision , Basel Core Principles , |
| Date: | 2006–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/242&r=reg |
| By: | John T. Addison (University of South Carolina, Queen’s University Belfast, Universidade de Coimbra/GEMF and IZA Bonn) |
| Abstract: | This paper offers an eclectic survey of the political economy of labor regulation in the United States at federal and state levels along the dimensions of occupational health and safety, unjust dismissal, right-to-work, workplace safety and workers’ compensation, living wages, and prevailing wages. We discuss rent seeking/predation, coalition formation, judicial review, and interjurisdictional competition as well as the implications of union decline. Our analysis should help dispel any notion that the U.S. labor market is unregulated while also indicating that the political process shows some sensitivity to benefits and costs. |
| Keywords: | labor regulation, regulatory capture, interjurisdictional competition, judicial review, OSHA, unjust dismissals, workplace safety, right-to-work, living wage ordinances, prevailing wages, unionism. |
| JEL: | H70 J28 J38 J41 J48 J58 J65 J80 K31 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2381&r=reg |
| By: | Christian Merkl; Stéphanie Stolz |
| Abstract: | Based on a quarterly regulatory dataset for German banks from 1999 to 2004, this paper analyzes the effects of banks’ regulatory capital on the transmission of monetary policy in a system of liquidity networks. The dynamic panel regression results provide evidence in favor of the bank capital channel theory. Banks holding less regulatory capital and less interbank liquidity react more restrictively to a monetary tightening than their peers. |
| Keywords: | monetary policy transmission, bank lending channel, bank capital channel, liquidity networks |
| JEL: | E52 G21 G28 C23 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1303&r=reg |
| By: | Edward J. Kane |
| Abstract: | Financial safety nets are incomplete social contracts that assign responsibility to various economic sectors for preventing, detecting, and paying for potentially crippling losses at financial institutions. This paper uses the theory of incomplete contracts to interpret the Basel Accords as a framework for continually renegotiating minimal duties and standards of safety-net management across the community of nations. Modelling the stakes and stakeholders represented by different regulators helps us to understand that inconsistencies exist in prior understandings about the range of sectoral effects that the 2004 Basel II agreement might produce. In the U.S., resolving these inconsistencies has complicated and markedly delayed Basel II's implementation. |
| JEL: | G21 G28 G33 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12705&r=reg |
| By: | Diemo Dietrich; Uwe Vollmer |
| Abstract: | This paper studies how capital requirements influence a bank’s mode of entry into foreign financial markets. We develop a model of an internationally operating bank that creates and allocates liquidity across countries and argue that the advantage of multinational banking over offering cross-border financial services depends on the benefit and the cost of intimacy with local markets. The benefit is that it allows to create more liquidity. The cost is that it causes inefficiencies in internal capital markets, on which a multinational bank relies to allocate liquidity across countries. Capital requirements affect this trade-off by influencing the degree of inefficiency in internal capital markets. |
| Keywords: | incomplete financial contracting; cross-border financial services; multinational banking; liquidity allocation; capital regulation. |
| JEL: | F21 F23 G21 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:18-06&r=reg |
| By: | Oliver Budzinski (Faculty of Business Administration and Economics, Philipps Universitaet Marburg); Gisela Aigner; Arndt Christiansen (Faculty of Business Administration and Economics, Philipps Universitaet Marburg) |
| Abstract: | The recent Impala Judgment by the CFI on the Sony/BMG Decision by the Commission represents the most important ruling on collective dominance since Airtours. We review both the Decision and the Judgment and derive implications for the institutional and substantive development of EU Merger Control. Firstly, Impala introduces an ambitious symmetric standard of proof for prohibition and clearance decisions by the Commission. While alleviating fears of an increasing number of false positives in the aftermath of Airtours, this entails the problem of how to deal with cases in which neither the existence, nor the absence of anticompetitive effects can be proven to the required standard. Secondly, the ongoing process of increasing the role of third parties in European Merger Control is fuelled. Thirdly, Impala has the potential to herald a comeback of coordinated effects analysis, further precising the conditions for establishing this kind of anticompetitive effect. Additionally, given the characteristics of the music industry, we criticise a lack of in-depth economic analysis of non-price competition issues, such as innovations and product diversity. |
| Keywords: | merger control, coordinated effects, standard of proof, music industry, collusion, Impala, Sony/BMG |
| JEL: | K21 L41 L13 L82 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:mar:volksw:200614&r=reg |
| By: | Peter H. Huang (Temple University, James E. Beasley School of Law) |
| Abstract: | This Article advocates that financial regulators analyze, measure, and take into account the emotional impacts of their policies and procedures. Examples of emotional impacts are investor confidence, process concerns, and overall market or social mood. Investor confidence or trust in securities markets, process concerns about how much securities regulators actually deliberate over proposed rules, and financial anxiety or investment stress affect and are affected by financial economic variables, such as consumer debt, consumer expenditures, consumer wealth, corporate investment, initial public offerings, and securities market demand, liquidity, prices, supply, and volume. Cost-benefit analysis does not quantitatively consider interdependencies between regulations’ emotional impacts and their financial outcomes. Emotional impact analysis does. This Article addresses general conceptual and measurement issues about emotional impact analysis. Because financial regulations affect investors’ confidence, process concerns, and social moods, this Article analyzes how financial regulators can quantitatively analyze emotional impacts of their regulations. |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:ads:wpaper:0062&r=reg |