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on Regulation |
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Issue of 2007‒01‒13
twenty-one papers chosen by Christian Calmes Universite du Quebec en Outaouais, Canada |
| By: | Stennek, Johan (Research Institute of Industrial Economics); Tangerås, Thomas (Research Institute of Industrial Economics) |
| Abstract: | This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. We show that the monopolistic outcome prevails independently of market concentration when access prices are determined in bilateral negotiations. A light-handed regulatory policy can induce effective competition. Call prices are close to the marginal cost if the networks are sufficiently close substitutes. Neither demand nor cost information is required. A unique and symmetric call price equilibrium exists under symmetric access prices, provided that call demand is sufficiently inelastic. Existence encompasses the case of many networks and high network substitutability. |
| Keywords: | Network Competition; Two-way Access; Access Price Competition; Entry; Regulation; Network Substitutability |
| JEL: | L51 L96 |
| Date: | 2006–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0685&r=reg |
| By: | Stephen Malpezzi (Center for Urban Land Economics Research, University of Wisconsin) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1033&r=reg |
| By: | John Quigley (University of California, Berkeley); Larry Rosenthal (University of California, Berkeley) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1052&r=reg |
| By: | Estache, Antonio; Goicoechea, Ana; Trujillo, Lourdes |
| Abstract: | This paper shows empirically that " privatization " in the energy, telecommunications, and water sectors, and the introduction of independent regulators in those sectors, have not always had the expected effects on access, affordability, or quality of services. It also shows that corruption leads to adjustments in the quantity, quality, and price of services consistent with the profit-maximizing behavior that one would expect from monopolies in the sector. The results suggest that privatization and the introduction of independent regulators have, at best, only partial effects on the consequences of corruption for access, affordability, and quality of utility services. |
| Keywords: | Infrastructure Regulation,Energy Production and Transportation,Town Water Supply and Sanitation,Social Accountability,ICT Policy and Strategies |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4081&r=reg |
| By: | Kenny, Charles |
| Abstract: | This paper examines what we can say about the extent and impact of corruption in infrastructure in developing countries using existing evidence. It looks at different approaches to estimating the extent of corruption and reports on the results of such studies. It suggests that there is considerable evidence that most existing perceptions measures appear to be very weak proxies for the actual extent of corruption in the infrastructure sector, largely (but inaccurately) measuring petty rather than grand corruption. Existing survey evidence is more reliable, but limited in extent and still subject to sufficient uncertainty that it should not be used as a tool for differentiating countries in terms of access to infrastructure finance or appropriate policy models. The paper discusses evidence for the relative costs of corruption impacts and suggests that a focus on bribe payments as the indicator of the costs of corruption in infrastructure may be misplaced. It draws some conclusions regarding priorities for infrastructure anti-corruption research and activities in projects, in particular regarding disaggregated and actionable indicators of weak governance and corruption. |
| Keywords: | Corruption & Anitcorruption Law,Public Sector Corruption & Anticorruption Measures,Poverty Monitoring & Analysis,Social Accountability,Government Diagnostic Capacity Building |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4099&r=reg |
| By: | John Quigley (University of California, Berkeley); Steven Raphael (Univesity of California, Berkeley) |
| Abstract: | During the three-year period ending in July 2003, the rise in housing costs in California far exceeded the national inflation rate. Housing prices in five coastal counties increased by more than 60 percent. For the highest quintile of cities, prices increased by an average of more than thirty percent per year. Evidently California housing markets differ along important dimensions from those in the rest of the country. One striking difference is the degree of regulation governing land use and residential construction. California represents the most extreme example of autarky in land use regulations of any U.S. state. Cities are free to set their rules independently, with little oversight. Moreover, state tax policy creates incentives that are likely to decrease production an increase housing costs. Property taxes are constitutionally limited to one percent of acquisition costs while cities are permitted a share of local sales tax receipts. This creates a regulatory incentive to favor retail development over housing construction, to favor development of expensive housing over moderately priced housing, and to discourage the construction of housing.In this paper, we explore the linkages between land-use regulations, growth in the housing stock, and housing prices in California cities. First, we assess whether housing is more expensive in more regulated cities. Next, we assess whether growth in the housing stock over the period of a decade depends on the degree of land-use regulation at the start of the decade. Finally, we estimate the price elasticity of housing supply in regulated and relatively unregulated cities. Our results suggest that current regulations have powerful effects on housing outcomes. |
| Keywords: | house prices, Housing, Housing markets, Laud-use policies, |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1060&r=reg |
| By: | Daron Acemoglu; Davide Ticchi; Andrea Vindigni |
| Abstract: | Inefficiencies in the bureaucratic organization of the state are often viewed as important factors in retarding economic development. Why certain societies choose or end up with such inefficient organizations has received very little attention, however. In this paper, we present a simple theory of the emergence and persistence of inefficient states. The society consists of rich and poor individuals. The rich are initially in power, but expect to transition to democracy, which will choose redistributive policies. Taxation requires the employment of bureaucrats. We show that, under certain circumstances, by choosing an inefficient state structure, the rich may be able to use patronage and capture democratic politics. This enables them to reduce the amount of redistribution and public good provision in democracy. Moreover, the inefficient state creates its own constituency and tends to persist over time. Intuitively, an inefficient state structure creates more rents for bureaucrats than would an efficient state structure. When the poor come to power in democracy, they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats. Anticipating this, when the society starts out with an inefficient organization of the state, bureaucrats support the rich, who set lower taxes but also provide rents to bureaucrats. We show that in order to generate enough political support, the coalition of the rich and the bureaucrats may not only choose an inefficient organization of the state, but they may further expand the size of bureaucracy so as to gain additional votes. The model shows that an equilibrium with an inefficient state is more likely to arise when there is greater inequality between the rich and the poor, when bureaucratic rents take intermediate values and when individuals are sufficiently forward-looking. |
| Keywords: | bureaucracy, corruption, democracy, patronage politics, political economy, public goods, redistributive politics. |
| JEL: | P16 H11 H26 H41 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:34&r=reg |
| By: | Roberto M Samaniego (Department of Economics George Washington University) |
| Abstract: | The paper presents a vintage capital model that is consistent with the the relationship between the rate of embodied technical change and the rate of entry and exit across industries. In the model, the costs imposed by the regulation of entry may bias the sectoral composition of an economy towards industries in which the rate of technical change is low -- an effect termed technological skew. This prediction matches the empirical relationship between institutional entry costs and several indicators of sectoral composition across industrialized economies |
| Keywords: | Entry, exit, embodied technical change, regulation of entry, sectoral composition, technological skew, information technology, services. |
| JEL: | H25 L63 O33 O38 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:765&r=reg |
| By: | Zvika Neeman; Daniele Paserman; Avi Simhon (The Hebrew University of Jerusalem) |
| Abstract: | We report an intriguing empirical observation. The relationship between corruption and output depends on the economy's degree of openness: in open economies, corruption and GNP per capita are strongly negatively correlated, but in closed economies there is no relationship at all. This stylized fact is robust to a variety of different empirical specifications. In particular, the same basic pattern persists if we use alternative measures of openness, if we focus on different time periods, if we restrict the sample to nclude only highly corrupt countries, if we restrict attention to specific geographic areas or to poor countries, and if we allow for the possible endogeneity of the corruption measure. We find that the extent to which corruption affects output is determined primarily by the degree of financial openness. The difference between closed and open economies is mainly due to the different effect of corruption on capital accumulation. We present a model, consistent with these findings, in which the main channel through which corruption affects output is capital drain. |
| Keywords: | corruption openness growth |
| JEL: | F2 H0 O1 O4 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:164&r=reg |
| By: | Gasmi, Farid; Noumba Um, Paul; Virto, Laura Recuero |
| Abstract: | The aim of this paper is to empirically explore the relationship between the quality of political institutions and the performance of regulation, an issue that has recently occupied much of the policy debate on the effectiveness of infrastructure industry reforms. Taking the view that political accountability is a key factor that links political structures and regulatory processes, the authors investigate, for the case of telecommunications, its impact on the performance of regulation in two time-series-cross-sectional data sets on 29 developing countries and 23 industrial countries covering the period 1985-99. In addition to confirming some well documented results on the positive role of regulatory governance in infrastructure industries, the authors provide empirical evidence on the impact of the quality of political institutions and their modes of functioning on regulatory performance. The analysis of the data sets shows that the (positive) effect of political accountability on the performance of regulation is stronger in developing countries. An important policy implication of this finding is that future reforms in these countries should give due attention to the development of politically accountable systems. |
| Keywords: | Infrastructure Regulation,Governance Indicators,National Governance,Statistical & Mathematical Sciences,Econometrics |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4101&r=reg |
| By: | Carl Mason (University of California, Berkeley); John Quigley (University of California, Berkeley) |
| Abstract: | This paper analyzes the implications of rent control as applied to dwellings located in mobile home parks. This form of regulation differs from apartment rent control in that: it is applied selectively to a small portion of the housing stock, and; it regulates the site rents paid to the park owner, not the selling prices of mobile homes. We present a detailed case study of the effects of this institution in three mobile home parks in different cities and regions in California, documenting the capitalization of regulatory rules into the selling prices of housing, and raising questions about the legality as well as the efficacy of the institution. |
| Date: | 2006–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1066&r=reg |
| By: | Behrens, Kristian (CORE, Universite catholique de Louvain); Carl Gaigne (IRNA); Jacques-Francois Thisse (CORE, Universite catholique de Louvain) |
| Abstract: | The aim of this paper is to qualify the claim that regulating a competitive transport sector is always detrimental to consumers. We show indeed that, although transport deregulation is beneficial to consumers as long as the location of economic activity is fixed, this is no longer true when, in the long run, firms and workers are freely mobile. The reason is that the static gains due to less monopoly power in the transport sector may well map into dynamic dead-weight losses because deregulation of the transport sector leads to more inefficient agglomeration. This latter change may, quite surprisingly, increase consumer prices in some regions, despite a more competitive transport sector. Transport deregulation is shown to map into aggregate consumer welfare losses and more inequality among consumers in the long run. |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2006cf455&r=reg |
| By: | Thomas J. Miceli (University of Connecticut); Richard P. Adelstein (Wesleyan University) |
| Abstract: | The doctrine of fair use allows limited copying of creative works based on the rationale that copyright holders would consent to such uses if bargaining were possible. This paper develops a formal model of fair use in an effort to derive the efficient legal standard for applying the doctrine. The model interprets copies and originals as differentiated products and defines fair use as a threshold separating permissible copying from infringement. The analysis highlights the role of technology in shaping the efficient standard. Discussion of several key cases illustrates the applicability of the model. |
| Keywords: | Fair use, copyright law, technological improvement |
| JEL: | K11 O34 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2005-56&r=reg |
| By: | Claessens, Stijn |
| Abstract: | Financial intermediation and financial services industries have undergone many changes in the past two decades due to deregulation, globalization, and technological advances. The framework for regulating finance has seen many changes as well, with approaches adapting to new issues arising in specific groups of countries or globally. The objectives of this paper are twofold: to review current international thinking on what regulatory framework is needed to develop a financial sector that is stable, yet efficient, and provides proper access to households and firms; and to review the key experiences regarding international financial architecture initiatives, with a special focus on issues arising for developing countries. The paper outlines a number of areas of current debate: the special role of banks, competition policy, consumer protection, harmonization of rules-across products, within markets, and globally-and the adaptation and legitimacy of international standards to the circumstances facing developing countries. It concludes with some areas where more research would be useful. |
| Keywords: | Banks & Banking Reform,Financial Intermediation,Non Bank Financial Institutions,Economic Theory & Research,ICT Policy and Strategies |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4103&r=reg |
| By: | António Antunes (Banco de Portugal, Departamento de Estudos Economicos, and Faculdade de Economia, Universidade Nova de Lisboa); Tiago Cavalcanti (Departamento de Economia, Universidade Federal de Pernambuco, INOVA, Faculdade de Economia, Universi-dade Nova de Lisboa.); Anne Villamil (Department of Economics, University of Illinois at Urbana- Champaign) |
| Abstract: | This paper studies the effect of financial repression and contract enforcement on entrepreneurship and economic development. We construct and solve a general equilibrium model with heterogeneous agents, occupational choice and two Financial frictions: intermediation costs and financial contract enforcement. Occupational choice and firm size are determined endogenously, and depend on agent type (wealth and ability) and the credit market frictions. The model shows that differences across countries in intermediation costs and enforcement generate differences in occupational choice, firm size, credit, output and inequality. Counterfactual experiments are performed for Latin American, European, transition and high growth Asian countries. We use empirical estimates of each country's financial frictions, and United States values for all other parameters. The results allow us to isolate the quantitative effect of these financial frictions in explaining the performance gap between each country and the United States. The results depend critically on whether a general equilibrium factor price effect is operative, which in turn depends on whether financial markets are open or closed. This yields a positive policy prescription: If the goal is to maximize steady-state efficiency, financial reforms should be accompanied by measures to increase financial capital mobility. |
| Keywords: | Financial frictions; Financial reform; Occupational choice; Development |
| JEL: | E60 G38 O11 |
| URL: | http://d.repec.org/n?u=RePEc:sca:scaewp:0610&r=reg |
| By: | John Quigley (University of California, Berkeley); Aaron Swoboda (University of Pittsburgh) |
| Abstract: | We consider the general equilibrium implications of land use restrictions which result in a reduction of otherwise profitable residential development. If the regulations affect a significant amount of land, they may have important effects on the rest of the regional economy - increasing rents and densities on lands not subject to the regulation, causing the conversion of lands from alternative uses, increasing the net developed area in the region, and decreasing consumer welfare. We develop a flexible general equilibrium simulation of the economic effects of land use restrictions, explicitly considering the distributional effects upon owners of different types of land and upon housing consumers. The results of our simulation show that the most significant economic effects of land use regulations occur outside of the designated area. The prices and rents of non-restricted lands increase significantly, and the well being of housing consumers is further affected through these linkages. |
| Keywords: | General Equilibrium, |
| Date: | 2006–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1071&r=reg |
| By: | Nicita, Antonio; Ramello, Giovanni B. |
| Abstract: | This paper investigates the interplay between copyright law and antitrust law in two distinct respects. We first argue that the origin of copyright seems to be rooted not only in the need to foster the production and the spread of knowledge but also in the necessity of limiting market power on the side of distributors. We then show the potential impact on market competition of the evolution of copyright as a property rule. While property rules reduce transaction costs in the standard case of bilateral monopoly over the exchange of information goods, they might increase transaction costs. When coupled with market power, a property rule enables the right holder to control uses and prices so as to implement entry deterrence strategies against potential competitors. Conversely, we argue that reversing property rules in favor of competitors or switching to liability rules for copyright may restore competitive outcomes. This conclusion brings new insights on the application of the essential facility doctrine to copyrighted works. |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:uca:ucapdv:75&r=reg |
| By: | Dhillon, Amrita; Rigolini, Jamele |
| Abstract: | The authors examine how institutions that enforce contracts between two parties-producers and consumers-interact in a competitive market with one-sided asymmetric information and productivity shocks. They compare an informal enforcement mechanism, reputation, the efficacy of which is enhanced by consumers investing in " connectedness, " with a formal mechanism, legal enforcement, the effectiveness of which can be reduced by producers by means of bribes. When legal enforcement is poor, consumers connect more with one another to improve informal enforcement. In contrast, a well-connected network of consumers reduces producers ' incentives to bribe. In equilibrium, the model predicts a positive relationship between the frequency of productivity shocks, bribing, and the use of informal enforcement, providing a physical explanation of why developing countries often fail to have efficient legal systems. Firm-level estimations confirm the partial equilibrium implications of the model. |
| Keywords: | Economic Theory & Research,Insurance & Risk Mitigation,Markets and Market Access,Business Environment,Business in Development |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4090&r=reg |
| By: | Alberto Bisin; Adriano Rampini (Department of Finance Northwestern University) |
| Abstract: | This paper provides a theory of government intervention, such as government ownership, regulation, mandatory public schooling, subsidies, and industrial policy, as an optimal policy response due to the inability to commit not to expropriate private investment or bail agents out. If the government cannot commit not to expropriate the capital of private firms expost, private firms may not invest ex ante. The government may hence need to undertake investment itself. Thus, government ownership may be optimal, and, indeed, may be optimal even if government owned firms are less efficient. Public enterprise as a remedy for lack of private investment due to the threat of expropriation by the government should be particularly important in capital intensive sectors such as manufacturing, extraction of natural resources, and services which require large infrastructure investments, which is consistent with the data. Similarly, if the government bails out households which do not invest in schooling or save for retirement ex post, the government has to enforce universal schooling and force agents to save through social security systems ex ante. Government intervention may thus primarily be a response to government failure rather than market failure |
| Keywords: | Public enterprise, time inconsistency, optimal policy |
| JEL: | H1 H2 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:888&r=reg |
| By: | Douhan, Robin (Department of Economics); Henrekson, Magnus (Research Institute of Industrial Economics) |
| Abstract: | In this introductory chapter to a collective volume dealing with the political economy of entrepreneurship,* we argue, based on a suggested unifying framework, that political economy is a fruitful approach to entrepreneurship. The importance of institutions in structuring such an analysis is also emphasized. The introduction also introduces the selected articles and puts them in context. Vital functions of the capitalist economy are ascribed to the productive entrepreneur, but the selected articles also show that the social value of entrepreneurship must be evaluated as it is realized. Three facets of entrepreneurship are claimed to be of particular importance from a political economy perspective: (i) Entrepreneurship is dynamic in the sense that it adapts to the politically determined institutional framework within which it acts. Under propitious circumstances, it can be a powerful engine of growth, but it can also be channelled in unproductive and destructive directions. (ii) Entrepreneurship enters directly into the political system. The close connection to property rights constitutes a link between entrepreneurship and private versus public ownership and redistribution. Under unfavourable institutional circumstances, rent-seeking and predatory entrepreneurship, via the political system, offer greater profit opportunities than the market. (iii) A political economy approach is necessary in order to understand how the political system shapes the institutional setup. Here, it is emphasized that the distribution of political power is partly determined by economic wealth. Hence, it is relevant to broaden the analysis to the effects on wealth creation and wealth redistribution stemming from entrepreneurial activity. |
| Keywords: | Entrepreneurship; Industrial Policy; Innovation; Property Rights; Regulation; Self-employment |
| JEL: | H32 L25 L50 M13 O31 P14 |
| Date: | 2007–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0688&r=reg |
| By: | Skander Van den Heuvel (Finance Department University of Pennsylvania) |
| Abstract: | This paper examines the role of bank lending in the transmission of monetary policy in the presence of capital adequacy regulations. I develop a dynamic model of bank asset and liability management that incorporates risk-based capital requirements and an imperfect market for bank equity. These conditions imply a failure of the Modigliani-Miller theorem for the bank: its lending will depend on the bank’s financial structure, as well as on lending opportunities and market interest rates. Combined with a maturity mismatch on the bank’s balance sheet, this gives rise to a ‘bank capital channel’ by which monetary policy affects bank lending through its impact on bank equity capital. This mechanism does not rely on any particular role of bank reserves and thus falls outside the conventional ‘bank lending channel’. I analyze the dynamics of the new channel. An important result is that monetary policy effects on bank lending depend on the capital adequacy of the banking sector; lending by banks with low capital has a delayed and then amplified reaction to interest rate shocks, relative to well-capitalized banks. Other implications are that bank capital affects lending even when the regulatory constraint is not momentarily binding, and that shocks to bank profits, such as loan defaults, can have a persistent impact on lending |
| Keywords: | Monetary Policy, Bank Capital, Capital Requirements, Bank Lending Channel |
| JEL: | E44 E52 G28 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:512&r=reg |