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on Regulation |
| By: | FLACHER, David; JENNEQUIN, Hugues; LORENZI, Jean-Hervé |
| Abstract: | This paper addresses the question of what options are available to regulate the sector in the near future. In order to answer this question, the paper focuses on the problem of investment and innovation in an ex ante regulated sector. Relying on existing literature, we argue that ex ante regulation could represent a danger for the long-term development of the sector by delaying or cancelling investment projects, especially (but not only) concerning the construction of new infrastructures. We also argue that ex ante regulation is distorting investment itself: incremental investment is privileged as opposed to radical investment. In this context, we identify three possible options for regulation in the near future: 1) continuing ex ante regulation, 2) substituting ex post regulation for ex ante regulation and 3) implementing an industrial policy for macro-strategic reasons. After describing a few major mutations in the sector that must be taken into account by regulators and presenting the major dilemmas that the latter are facing, we propose two possible solutions inspired by foreign policy. The first solution consists of offering investors regulation holidays, with regular reviews to deem whether these holidays should be prolonged or not. The second solution consists of implementing an industrial policy that could take the form of a contract negotiated between the regulator and operators. This would guarantee the absence of ex ante regulation if the conditions of the contract (in terms of regional planning, price, quality of service, types of investment…) are met. |
| Keywords: | regulation; innovation; investment and industrial policy. |
| JEL: | L50 L52 L41 L51 D43 K23 L96 L43 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3573&r=reg |
| By: | Tavares, Samia |
| Abstract: | It has been argued that greater transparency is needed to reduce corruption. One way of increasing transparency is through the adoption of Freedom of Information (FOI) laws. This paper uses the introduction of FOI laws as a natural experiment to determine their effect on corruption. Using a sample of democratic countries and two different corruption indices, I find that countries that adopted FOI laws saw an increase in corruption. Results are robust throughout different specifications. Moreover, I find that countries with plurality systems potentially experienced a decrease in corruption following the adoption of FOI legislation. Having a parliamentary system, however, had no impact on the effect of the reform. |
| Keywords: | Corruption; freedom of information; transparency; accountability |
| JEL: | K39 D73 D72 H11 K42 |
| Date: | 2007–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3560&r=reg |
| By: | Christopher Kent (Reserve Bank of Australia); John Simon (Reserve Bank of Australia) |
| Abstract: | This paper explores the effects of product and labour market regulation on growth in total factor productivity (TFP) using panel data from 1974–2003 for 18 OECD countries. Our regressions are specified so that labour and product market regulations can affect productivity both individually and in combination. While noting that the results are sensitive to the measure of labour market regulation used, we find some support for the hypothesis that lower initial levels of regulation are associated with higher TFP growth over subsequent years, and that labour and product market deregulation have more of an effect in combination. It also appears that product market deregulation has a larger positive effect on productivity growth the further a country is from the technological frontier. |
| Keywords: | structural reform; TFP growth; OECD; panel regression |
| JEL: | C33 J01 L50 O43 O57 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:rba:rbardp:rdp2007-04&r=reg |
| By: | CAVE, Martin |
| Abstract: | Numerous proposals have been made for separation in the telecommunications sector, some of which have been implemented, including the break-up of the Bell system in the 1980s and the widespread implementation of accounting separation. In recent years, attention has been focussed on operational separation. This paper identifies the problem that this is intended to tackle, lists a number of possible variants and discusses experiences in the UK. Having specified the circumstances under which operational separation may be justified, it suggests how provisions for such separation could be made in European legislation. |
| Keywords: | telecomunications; regulation; operational separation. |
| JEL: | L51 L41 L96 L43 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3572&r=reg |
| By: | Wayne Landsman (University of North Carolina at Chapel Hill - Accounting Area) |
| Abstract: | I identify issues that bank regulators need to consider if fair value accounting is used for determining bank regulatory capital and when making regulatory decisions. In financial reporting, US and international accounting standard setters have issued several disclosure and measurement and recognition standards for financial instruments and all indications are that both standard setters will mandate recognition of all financial instruments at fair value. To help identify important issues for bank regulators, I briefly review capital market studies that examine the usefulness of fair value accounting to investors, and discuss marking-to-market implementation issues of determining financial instruments' fair values. In doing so, I identify several key issues. First, regulators need to consider how to let managers reveal private information in their fair value estimates while minimising strategic manipulation of model inputs to manage income and regulatory capital. Second, regulators need to consider how best to minimise measurement error in fair values to maximise their usefulness to investors and creditors when making investment decisions, and to ensure bank managers have incentives to select investments that maximise economic efficiency of the banking system. Third, cross-country institutional differences are likely to play an important role in determining the effectiveness of using mark-to-market accounting for financial reporting and bank regulation. |
| Keywords: | fair values, financial instruments, information asymmetry |
| JEL: | E58 G15 M41 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:209&r=reg |
| By: | Stefan Ambec; Paul Lanoie (IEA, HEC Montréal) |
| Keywords: | Environmental policy; innovation; Porter hypothesis; environmental regulation; pollution; capital market; green products. |
| JEL: | D21 D23 G22 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:0704&r=reg |
| By: | Tavares, Samia |
| Abstract: | Corruption is a problem that has been shown to adversely affect a country’s development. Recent studies have shown that a country’s electoral system can affect its corruption level. But if that is the case, then electoral rules could be chosen to maximize opportunities for corruption. This paper uses the recent wave of democratization and the resulting writing of new constitutions, which entailed in many cases the adoption of a new electoral system, to analyze the choice of electoral rules. Results suggest that more corrupt countries are more likely to adopt a plurality system than less corrupt ones. |
| Keywords: | corruption; electoral system; government; democracy |
| JEL: | D73 H77 D72 H11 |
| Date: | 2007–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3559&r=reg |
| By: | Cord Brockmann (University of Augsburg, Department of Economics) |
| Abstract: | In order to increase efficiency in the provision of power distribution networks, the German regulator Bundesnetzagentur plans to implement revenue cap regulation together with yardstick competition. Revenue cap regulation could bear the ratchet effect: cost minimization need not to be optimal for the operator who anticipates that his revenue cap will become adjusted according to his cost performance. The regulator could extract all the rent by lowering an operator's revenue cap to the level of costs he revealed to be possible for him to reach. The ratchet effect could be mitigated by yardstick competition at which the level of revenues that is allowed to one operator is tied to the performance of others that are comparable to him. One will only be allowed to accumulate revenues that recover the least cost level that has been adopted within the group of comparable decision makers. In a setting of two sequential regulatory lags, this paper examines the occurence of the ratchet effect and the mitigating influence that yardstick competition has on it. |
| Keywords: | ratchet effect, yardstick competition, regulation |
| JEL: | L51 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0292&r=reg |
| By: | Anne Beatty (Ohio State University - Department of Accounting & Management Information Systems) |
| Abstract: | This study examines whether accounting changes result in changes in the economic behaviour of financial institutions. The results of several papers examining how banks respond to accounting changes that affect their regulatory capital ratios are consistent with Furfine's (2000) summary that "capital regulation, broadly speaking, can significantly influence bank decision-making." These papers do not attempt to disentangle the effects of capital regulation versus market discipline. This paper examines banks' response to recent changes in accounting for Trust Preferred Securities that effect how these securities are reported in the balance sheet but do not change the calculation of Tier 1 capital. This provides a good setting to examine whether accounting changes induce changes in banks' economic behaviour in the absence of an effect on regulatory capital. I test five hypotheses related to banks' decisions to issue Trust Preferred Stock during the period from 1997 through 2004. Specifically, I examine whether there was an overall decrease in banks' propensity to issue these securities after the accounting change, whether publicly traded banks and those that access the external debt markets were more likely to issue these securities before the accounting change but not after, and whether banks with low regulatory capital ratios and with high marginal tax rates were more likely to issue these securities both before and after the accounting change. The results suggest that accounting changes can lead to changes in banks' economic behaviour even when the change in accounting does not affect regulatory capital calculations. This is consistent with bank managers acting as if they are concerned with the markets' response to the numbers reported after the accounting change. |
| Keywords: | Bank capital, taxation, trust preferred securities, financial reporting |
| JEL: | G21 G32 M41 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:211&r=reg |
| By: | Miguel A. Malo; Luis Toharia |
| Abstract: | In this article, we explain that, in Spain, a relatively minor reform in unemployment benefits regulation has introduced a system to dismiss at will. Therefore, the fairness of the dismissal is not important in practice, although the whole legal system requiring a fair cause for dismissals remains. We present different empirical evidence supporting such statement. |
| Keywords: | Dismissal, Labour Law, Severance Pay |
| JEL: | K31 J53 J32 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0705&r=reg |
| By: | SCHEUER, Alexander |
| Abstract: | For over 10 years the European Community has strived to develop suitable and proportionate answers to the phenomenon of convergence in its audiovisual regulatory policy. This article outlines the regulatory process at an EU level since the early 1980s as far as media, telecommunications and Information Society services are concerned, and analyses some of the most relevant policy papers specifically related to the adoption of the EC legal framework for the media in the digital age, before focusing on the preparatory phase leading up to the adoption of the Commission proposal for a Directive on "Audiovisual Media Services", issued in December 2005. In addition, the core of this proposal for a revised "Television without Frontiers" Directive, i.e. the extension of its scope to cover new media services provided in a non-linear manner and the introduction of a graduated regime of regulation with a lighter-touch approach in view of such services, is presented along with the main lines of debate among stakeholders. |
| Keywords: | Convergence; digital television; new audiovisual media services; EU media regulatory policy; revision of TWF Directive; electronic communications; broadcasting |
| JEL: | L82 L51 K23 L41 L96 D82 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3517&r=reg |
| By: | Rafael Di Tella; Federico Weinschelbaum |
| Abstract: | There are a large number of cases where corruption has been discovered investigating levels of consumption that appear to be hard to justify. Yet, in the standard moral hazard model withholding of effort by the agent is not observable to the principal. We argue that this assumption has to be revised in applications that study corruption. The informativeness of an agent's level of consumption depends on his legal income and initial level of wealth, as conspicuous consumption by wealthy agents leads to little updating of the principal's belief about their honesty. This introduces a tendency to prefer poor agents as they are easier to monitor. More generally, we describe the basic problem of choosing agents and monitoring consumption with the aim of reducing corruption, and discuss features of the practical applications. We show that when there is consumption monitoring and wealth is observed, the effect of higher wealth on equilibrium bribes is ambiguous (and that the political class will exhibit lower variance in consumption than the general population). In settings where formal contracts matter, we show that monitoring consumption introduces a tendency towards low powered incentives (and more generally low wages). We also discuss the role of ability, the tax system, and the way to derive a measure of the value of illegal funds for the agent. |
| JEL: | D82 K42 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13163&r=reg |
| By: | Henrekson, Magnus (Research Institute of Industrial Economics (IFN)) |
| Abstract: | In this paper entrepreneurs are defined as agents who bring about economic change by combining their own effort with other factors of production in search of economic rents. The institutional setup is argued to determine both the supply and direction of entrepreneurial activity. Four key institutions are explored more closely: property rights protection, savings policies, taxation and the regulation of labor markets. Institutions have far-reaching effects on entrepreneurship, and they largely determine whether or not entrepreneurial activity will be socially productive. Due to the responsiveness of entrepreneurship to the institutional setup it is maintained that in-depth analyses of specific institutions are required in order to further our understanding of the determinants of entrepreneurial behavior and the economic effects of entrepreneurship. The paper also demonstrates that it is problematic to use self-employment as an empirical proxy for productive entrepreneurship. |
| Keywords: | Entrepreneurship; Industrial policy; Innovation; Institutions; Labor security; Property rights; Regulation; Self-employment; Tax policy |
| JEL: | H32 L25 L50 M13 O31 P14 |
| Date: | 2007–06–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0707&r=reg |
| By: | Jesús Saurina (Banco de España); Carlos Trucharte (Banco de España) |
| Abstract: | In this paper we develop a probability of default (PD) model for mortgage loans, taking advantage of the Spanish Credit Register, a comprehensive database on loan characteristics and credit quality. From that model, we calculate different types of PDs: point in time, PIT, through the cycle, TTC, average across the cycle and acyclical. Then, we compare capital requirements coming from the different Basel II approaches. We show that minimum regulatory capital under Basel II can be very sensitive to the risk measurement methodology employed. Thus, the procyclicality of regulatory capital requirements under Basel II is an open question, depending on the way internal rating systems are implemented and their output is utilised. We focus on the mortgage portfolio since it is one of the most under researched areas regarding the impact of Basel II and because it is one of the most important banks’ portfolios. |
| Keywords: | procyclicality, basel ii, rating systems, mortgages |
| JEL: | E32 G18 G21 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0712&r=reg |
| By: | Claudio E. V. Borio; Kostas Tsatsaronis |
| Abstract: | Advances in risk measurement technology have reshaped financial markets and the functioning of the financial system. More recently, they have been reshaping the prudential framework. Looking forward, they have the potential to reshape financial reporting too. Recent initiatives to improve financial reporting standards have brought to the fore significant differences in perspective between accounting standard setters and prudential authorities. Building on previous work, we argue that risk measurement and management technology can be instrumental in bridging this gap and, by the same token, in improving financial reporting. Risk measurement plays a crucial role in the measurement, verification and validation of valuations. It is the basis for giving more prominence to risk and measurement error information in public disclosures. And it could act as more of a focal point in the design of accounting standards, as greater consistency between sound risk management practices and accounting standards can help to narrow the wedge between accounting and underlying economic valuations. |
| Keywords: | risk measurement and management, accounting, regulation, financial reporting |
| JEL: | D52 G00 G12 G28 M41 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:213&r=reg |
| By: | KITTL, Jörg; LUNDBORG, Martin; RUHLE, Ernst-Olav |
| Abstract: | Unbundling of the local loop (ULL) has seen quite different "success stories" in the various countries across Europe. Although the obligation for the provision of ULL was implemented in the regulatory framework early and mostly parallel to other means of liberalisation, national implementation has been rather heterogeneous. One question of decisive importance for national regulatory authorities (NRAs) was whether to foster service-based competition in the first phase of liberalisation or to focus on infrastructurebased competition. The different NRAs chose to head down different roads. This paper analyses whether the strategy of NRAs has had any mid-term effect on the economic welfare created in the communications markets. It indicates that infrastructure-based competition has a positive effect on innovation. Moreover, infrastructure-based competition appears to be more important for business customers than for residential clients. On the other hand, service-based competition lowers call prices and appears to be more important to residential markets. The results of this study point out the importance of a balanced approach to both types of policies. |
| Keywords: | competition; telecommunication; ladder of infrastructure; ladder of investement; regulatory policies. |
| JEL: | L51 L41 D43 L96 L43 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3571&r=reg |
| By: | José Antonio Ocampo; Stephany Griffith-Jones |
| Abstract: | The major task of a development-friendly international financial architecture is to mitigate pro-cyclical effects of financial markets and open “policy space” for counter-cyclical macroeconomic policies in the developing world. This paper explores a series of policy instruments for this purpose: counter-cyclical prudential regulatory and supervisory frameworks; market mechanisms that better distribute the risk faced by developing countries through the business cycle; multilateral instruments that encourage more stable private flows; and better provision of counter-cyclical official liquidity. It also suggests that regional macroeconomic consultation, and common reserve funds or swap arrangements among developing countries can play a role in this regard. |
| Keywords: | volatility, contagion, financial crises, counter-cyclical macroeconomic policies, countercyclical prudential regulation, GDP-indexed and local currency bonds, regional macroeconomic cooperation. |
| JEL: | F3 F32 F4 F42 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:une:wpaper:39&r=reg |
| By: | Edith Ginglinger (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX]); Jacques Hamon (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX]) |
| Abstract: | Open market share repurchases are strictly regulated to prevent companies from profiting from insider information. We examine compliance with these rules in France, where the mandatory disclosure of share repurchases provides detailed information on repurchases actually undertaken. Using a database containing 36,848 repurchases made by 352 French firms over the period 2000-2002, we show that very few firms fully comply with the regulations for all their buybacks. Non-compliance has an adverse effect on liquidity only for the smallest and least liquid firms. |
| Keywords: | open market share repurchases, insider trading, regulations, liquidity |
| Date: | 2007–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00143974_v1&r=reg |
| By: | BOMSEL, Olivier; GEFFROY, Anne-Gaëlle |
| Abstract: | DRMs are intellectual property institutions. They transpose the empirical principle of copyright, which implicitly recognizes that specific ownership rules should be attached to non scientific creation, into the digital era. The legal protection of DRMs, a private means of enforcing content excludability, participates in the "privatization" of copyright protection. This, in turn, means that a proprietary software — governed by intellectual property rights, reinforced by public law — becomes the key to the vertical relations shaped by exclusive copyright. DRMs consequently represent a major stake in the competition to capture network effects in the content distribution vertical chain |
| Keywords: | copyright; distribution; DRMs; network effects |
| JEL: | D43 D62 L96 K21 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3515&r=reg |