nep-reg New Economics Papers
on Regulation
Issue of 2007‒07‒07
sixteen papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Sub-federal administrative regulation of entry in Russia By Kolomak Evgeniya
  2. Construction, corruption, and developing countries By Kenny, Charles
  3. Role of Non-Performing Loads (NPLs) and Capital Adequacy in Banking Structure and Competition By Yoonhee Tina Chang
  4. Privatization, Entry Regulation and the Decline of Labors Share of GDP: A Cross-Country Analysis of the Network Industries By Ghazala Azmat; Alan Manning; John Van Reenen
  5. Red tape and delayed entry By Antonio Ciccone; Elias Papaioannou
  6. The Integration of Occupational Pension Regulations: Lessons for Canada By Martin Hering; Michael Kpessa
  7. Introducing Competition and Deregulating the British Domestic Energy Markets: a Legal and Economic Discussion By Michael Harker; Catherine Waddams Price
  8. Corruption and Elections: An Empirical Study for a Cross-Section of Countries By Stefan Krause; Fabio Mendez
  9. Legislative powers and (X)NGO’s By Strazisar, Borut
  10. Market Reform, Regional Energy and Popular Representation: Evidence from Post-Soviet Russia By Theocharis N. Grigoriadis; Benno Torgler
  11. An Examination of Actual Fraud Cases With a Focus on the Auditor’s Responsibility By Holm, Claus; Langsted, Lars Bo; Seehausen, Jesper
  12. The Origins of State Capacity: Property Rights, Taxation, and Politics By Besley, Timothy J.; Persson, Torsten
  13. Exposing Corrupt Politicians: The Effects of Brazil’s Publicly Released Audits on Electoral Outcomes By Claudio Ferraz; Frederico Finan
  14. Ownership structure, sharing of control and legal framework. International evidence By López de Foronda Pérez, Óscar; López-Iturriaga, Félix; Santamaría Mariscal, Marcos
  15. UK Merger Remedies under Scrutiny By Michael Harker
  16. To Abuse, or not to Abuse: Discrimination between Consumers By Pinar Akman

  1. By: Kolomak Evgeniya
    Abstract: The project assesses the sub-federal regulation of market entry around Russian regions by addressing two problems: what are the consequences of the regulation and what determines the variation of the market entry regulation among the regions. Assumptions of public interest regulation and public choice theories are tested. Empirical base of the project is the constructed data set, describing the administrative regulation of entry by start-up companies in Russian regions.
    JEL: K2 K4
    Date: 2007–05–10
  2. By: Kenny, Charles
    Abstract: The construction industry accounts for about one-third of gross capital formation. Governments have major roles as clients, regulators, and owners of construction companies. The industry is consistently ranked as one of the most corrupt: large payments to gain or alter contracts and circumvent regulations are common. The impact of corruption goes beyond bribe payments to poor quality construction of infrastructure with low economic returns alongside low funding for maintenance-and this is where the major impact of corruption is felt. Regulation of the sector is nece ssary, but simplicity, transparency, enforcement, and a focus on the outcomes of poor construction are likely to have a larger impact than voluminous but poorly enforced regulation of the construction process. Where government is the client, attempts to counter corruption need to begin at the level of planning and budgeting. Output-based and community-driven approaches show some promise as tools to reduce corruption. At the same time they will need to be complimented by a range of other interventions including publication of procurement documents, independent and community oversight, physical audit, and public-private anticorruption partnerships.
    Keywords: Governance Indicators,Poverty Monitoring & Analysis,Corruption & Anitcorruption Law,Public Sector Corruption & Anticorruption Measures,Social Accountability
    Date: 2007–06–01
  3. By: Yoonhee Tina Chang (School of Management, University of Bath)
    Abstract: This paper analyses the impact of the transition from price-cap regulation (deposit/loan rate control) to rate-of-return regulation (ROA, NP:s and/or BIS ratio) on banking industry structure. A simple theoretical model of banking competition suggests that the relative dominance of the two objective functions under different regulatory regimes affects the market structure. Imposing more stringent rate-of-return regulation, whilst relaxing price-cap regulation, reduces the equilibrium number of banks. The result from the theoretical model is also supported by empirical evidence from Korea, which has undergone substantial consolidation in recent years. The empirical analysis uses a unique data set of the entire commercial banking sector in Korea between 1976 and 2003, which covers both pre- and post-banking crisis periods.
    Keywords: Non-performing loans, capital adequacy, banking structure, regulation, competition
    JEL: G21 G28 L13 L59
    Date: 2006–09
  4. By: Ghazala Azmat; Alan Manning; John Van Reenen
    Abstract: Labor's share of GDP in most OECD countries has declined over the last two decades. Someauthors have suggested that these changes are linked to deregulation of product and labormarkets. To examine this we focus on a large quasi-experiment in the OECD: theprivatization of many network industries (e.g. telecommunications and utilities). We present amodel with agency problems, imperfect product market competition and worker bargainingwhich makes clear predictions on how the labor share, employment and wages respond toprivatization and other regulatory changes. We exploit cross-country panel data on severalnetwork industries and find that privatization can account for a significant proportion of thefall of labor's share (a fifth overall, but over half in Britain and France). The impact ofprivatization has been offset by falling barriers to entry, which consistent with theory,dampens profit margins.
    Keywords: Profit share, Wages, Privatization, Entry Regulation
    JEL: E25 E22 E24 L32 L33 J30
    Date: 2007–06
  5. By: Antonio Ciccone (ICREA and Universitat Pompeu Fabra, Department of Economics and Business, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain.); Elias Papaioannou (European Central Bank, Financial Research Division, Postfach 160319, D-60066 Frankfurt am Main, Germany.)
    Abstract: Does cutting red tape foster entrepreneurship in industries with the potential to expand? We address this question by combining the time needed to comply with government entry procedures in 45 countries with industry-level data on employment growth and growth in the number of establishments during the 1980s. Our main empirical finding is that countries where it takes less time to register new businesses have seen more entry in industries that experienced expansionary global demand and technology shifts. Our estimates take into account that proxying global industry shifts using data from only one country–or group of countries with similar entry regulations–will in general yield biased results. JEL Classification: E6, F43, L16.
    Keywords: Entry, entry regulation and globally expanding industries.
    Date: 2007–06
  6. By: Martin Hering; Michael Kpessa
    Abstract: Is the integration of occupational pension regulations across the Canadian provinces feasible? In this paper, we assess the proposal for harmonization made by the Canadian Association of Pension Supervisory Authorities (CAPSA) by comparing it to the EU’s successful integration of member states’ pension regulations. We argue that CAPSA’s initiative failed both because regulatory diversity was defined as a fundamental problem and because the regulations that serve social policy goals were not protected from integration. We suggest that occupational pension integration in Canada would be feasible if provincial governments largely excluded rules on benefits and relied primarily on the mutual recognition of regulations.
    Keywords: occupational pensions, regulation, agenda-setting, problem definition, Canada, European Union
    JEL: D70 G23 G28 H10 J26 J38 J58 L38
    Date: 2007–05
  7. By: Michael Harker (Centre for Competition Policy, University of East Anglia); Catherine Waddams Price (Centre for Competition Policy, University of East Anglia)
    Abstract: In this article we chart the development of competition and deregulation of the British retail energy markets, explaining the evolution of competitive constraints when consumers are introduced to supplier choice for the first time. In the context of rising real energy prices for consumers, and continued market power on the part of the incumbents, we address the question of whether the control of pricing practices through the ex post provisions of the general competition law is sufficient to protect consumers. We also explore the issue of whether reliance solely on these provisions is desirable given the uncertainty which surrounds the application of the Chapter II prohibition (governing abuse of dominance), specifically in respect of price discrimination in final markets. We conclude that the outcome of the liberalisation experiment in terms of delivering benefits for consumers is unclear.
    Keywords: Energy markets, deregulation, monopoly, competition, dominance, market power, consumer switching, switching behaviour, price rebalancing, ex post and ex ante regulation
    JEL: K21 K23 I38 L12 L41 L51 L94 L95
    Date: 2006–11
  8. By: Stefan Krause; Fabio Mendez
    Abstract: In this paper, we study whether voters are more likely to “vote out” a corrupt incumbent than to re-elect him. Specifically, we examine whether they retract their support from political candidates who they think are corrupt by looking at changes in an index of corruption perceptions between the current and the last elections. Our results suggest that corruption in public office is effectively punished by voters. Furthermore, our findings support the idea that both the political system and the democratic experience are important determinants of the voters’ reaction and control of corruption: while voters in countries with parliamentary systems or with relatively low levels of democracy react negatively to an increase in corruption, no perceptible effect of this kind was found in countries with mature democracies; and the evidence is inconclusive in the case of countries with presidential systems.
    Date: 2007–06
  9. By: Strazisar, Borut
    Abstract: (X)NGOs1 in nowadays world become more and more important player who not only fulfill the humanitarian goals but also fulfill political goals of it members or even its sponsors. For (X)NGOs late task becomes easier because state uses them as auxiliary legislator. There are diverse reasons for such practice such as: - modern states wants to promote their economy by omitting expensive and unclear legislation (following OECD proposals for legislative reforms); - governing political parties want to pass the political responsibility for tricky political decisions to another body (i.e. collective doubt); - (X)NGOs have more accurate information on certain legislative questions than parliament or government. This article deals with two major problems. In first part it analyzes pro et contra’s for delegation of legislative powers to NGOs and possible risks of such processes. Second part takes in consideration different kind of legislative solutions how to use (X)NGOs in legislative procedure.
    Keywords: delegation of legislative powers; deregulation; self regulation; regulatory ferorm
    JEL: K40
    Date: 2007–03
  10. By: Theocharis N. Grigoriadis; Benno Torgler
    Abstract: This article investigates the relative impact of regional energy production on the energy voting choices of State Duma deputies between 1994 and 2003, controlling for other factors such as party affiliation, electoral mandate, committee membership and socio-demographic parameters. We apply Poole’s optimal classification method of roll call votes using an ordered probit model to explain energy market reform in the first decade of Russia’s democratic transition. Our main finding is that the gas production factor is inter temporally important in the formation of the deputies’ legislative choices and shows Gazprom’s strategic position in the post-Soviet Russian economy. The oil production factor is variably significant in the two first Dumas, when the main legislative debates on oil privatization occur. The energy committee membership tends to consistently explain pro-reform voting choices. The pro-and anti-reform poles observed in our Poole-based single dimensional scale are not necessarily connected with liberal and state-oriented policies respectively.
    Keywords: energy regulation, market reform, energy resources, roll call votes, legislative politics, State Duma, Russia
    JEL: Q40 D72 K23 P27 P37 P31 R11
    Date: 2007–06–28
  11. By: Holm, Claus (Department of Business Studies, Aarhus School of Business); Langsted, Lars Bo (Department of Business Studies); Seehausen, Jesper (Department of Business Studies)
    Abstract: The purpose of this paper is to contribute to an understanding of the intricate relationship between <p> audit regulation and developments in audit practice in relation to the fraud issue. The extent and exact nature of the responsibilities of the auditor to detect fraud in relation to audit engagements has been widely discussed over the years. In this paper we classify actual cases, where the responsibilities of auditors have been established by the court system and/or by the auditors own professional organizations in Denmark. The dataset includes all publicized cases raised against Danish auditors within the time period 1909-2006. The information provided in the cases provides a basis for identifying the actual responsibilities pertaining to fraud during the audit. The overall finding of the historical analysis is that the responsibilities of the auditor in relation to fraud should be interpreted not as a group of its own, but in line with the development of what constitutes a good audit in general.
    Keywords: Fraud; auditor responsibility; intentional misstatements; misappropriation; fraudulent reporting; embezzlement;
    Date: 2007–05–18
  12. By: Besley, Timothy J.; Persson, Torsten
    Abstract: Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where "policy choices", regulation of markets and tax rates, are constrained by "economic institutions", which in turn reflect past investments in legal and fiscal state capacity. We study the economic and political determinants of these investments. The analysis shows that common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity. Preliminary empirical evidence based on cross-country data find a number of correlations consistent with the theory.
    Keywords: development; property rights; state capacity
    JEL: D70 E60 H10 K40 O10
    Date: 2007–06
  13. By: Claudio Ferraz (IPEA, Brazil); Frederico Finan (University of California, Los Angeles and IZA)
    Abstract: This paper examines whether access to information enhances political accountability. Based upon the results of Brazil’s recent anti-corruption program that randomly audits municipal expenditures of federally-transferred funds, it estimates the effects of the disclosure of local government corruption practices upon the re-election success of incumbent mayors. Comparing municipalities audited before and after the elections, we show that the audit policy reduced the incumbent’s likelihood of re-election by approximately 20 percent, and was more pronounced in municipalities with radio stations. These findings highlight the value of information and the role of the media in reducing informational asymmetries in the political process.
    Keywords: corruption, political agency, transparency, information
    JEL: D72 D78 H41 O17
    Date: 2007–06
  14. By: López de Foronda Pérez, Óscar (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos); López-Iturriaga, Félix; Santamaría Mariscal, Marcos (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos)
    Abstract: We analyze the relation between capital structure, ownership structure, and corporate value for a sample of 1,216 firms from 15 European countries. Our results stress two different conflicts of interest and show the differential role played by the mechanisms of corporate control depending on the legal and institutional environment. In common law countries, as a consequence of the relationships between managers and shareholders, capital structure and managerial ownership are the most effective mechanisms of control. In civil law countries, however, as a consequence of the conflicts between majority and minority shareholders, the ownership concentration and the sharing of control within the firm become crucial. In this scenario, the second reference shareholder plays a critical role in contesting the control of the dominant largest shareholder in order to reduce the extraction of private benefits and improve the firm’s performance
    Keywords: Law and finance approach, capital structure, ownership structure, corporate governance.
    Date: 2007–06
  15. By: Michael Harker (Centre for Competition Policy, University of East Anglia)
    Abstract: This paper focuses on the Somerfield decision of the Competition Appeal Tribunal (CAT). In that decision, the CAT demonstrated a high degree of deference to the Competition Commission where the latter was scoping divestiture remedies in a merger case. This approach is consistent with the case law of the US and the EC and, it is argued, is appropriate given the need for procedural expediency. The decision is placed in the wider context of the debates over the efficacy of merger remedies and the appropriate limits of judicial supervision of agency discretion in this area.
    Keywords: Merger remedies, divestiture, merger appraisal
    JEL: K21
    Date: 2006–10
  16. By: Pinar Akman (Centre for Competition Policy, University of East Anglia)
    Abstract: This paper questions whether discrimination between consumers by a dominant undertaking can and should constitute an abuse of a dominant position under Article 82EC. By finding that it can, the paper challenges the traditional interpretation of the discrimination ban under that provision, namely that discrimination constitutes abuse only when directed against the intermediate customers of the dominant undertaking. As such, the paper seeks to clarify the scope of Article 82EC as regards discrimination, and elaborate on whether discrimination between consumers should be abusive. This is done from both a law and an economics perspective, in order to put forward a proposal to ensure that competition law does not prohibit discrimination where economics finds it potentiall welfare enhancing.
    Keywords: Abuse of a dominant position, (price) discrimination, consumer welfare
    JEL: K21
    Date: 2006–11

This nep-reg issue is ©2007 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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