nep-reg New Economics Papers
on Regulation
Issue of 2007‒07‒13
nine papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Responsive Regulation and the Uncertainty of Tax Law - Time to Reconsider the Commissioner's Model of Cooperative Compliance By Mark Burton
  2. Money Laundering and its Regulation By Alberto Chong; Florencio López-de-Silanes
  3. Bargaining over Remedies in Merger Regulation By Bruce Lyons; Andrei Medvedev
  4. The Political Economy of Environmental Regulations and Industry Compensation By Barbara Stoschek
  5. Rethinking the Informal Economy: Linkages with the Formal Economy and the Formal Regulatory Environment By Martha Alter Chen
  6. Survey of Public Attitudes to Price-Fixing and Cartel Enforcement in Britain By Andreas Stephan
  7. The Regulatory Perception of the Marketing Function: an Interpretation of UK Competition Authority Investigations 1950-2005 By John K. Ashton; Andrew Pressey
  8. How does the design of international environmental agreements affect investment in environmentally friendly technologies ? By Basak Bayramoglu
  9. Conflicts of Interest in Financial Services: Taxonomy and Mechanisms for Regulatory Control By Lazen, Vicente; Eguiluz, Cristian

  1. By: Mark Burton
    Abstract: Over the last decade the Australian Taxation Office has adapted the model of ‘responsive regulation’ in developing its cooperative compliance model. This model seeks to promote voluntary compliance with Australia’s taxation laws by tailoring the administrative treatment of taxpayers in accordance with the individual taxpayer’s tax compliance posture. The fulcrum of this model of tax administration is the proposition that taxation law is determinate, such that ‘complying’ and ‘non-complying’ taxpayers may be segregated and treated accordingly. This paper argues that this dichotomous model is problematic in at least some tax contexts, and considers the implications of legal indeterminacy for the cooperative compliance model.
    Keywords: cooperative compliance model, responsive regulation, tax administration, tax compliance
    Date: 2007–07–05
  2. By: Alberto Chong (Inter-American Development Bank); Florencio López-de-Silanes (University of Amsterdam and NBER)
    Abstract: The recent wave of terrorist attacks has increased the attention paid to money laundering activities. Using several methodologies, this paper investigates empirically the determinants of money laundering and its regulation in over 80 countries by assembling a cross-country dataset on proxies for money laundering and the prevalence of feeding activities. The paper additionally constructs specific money laundering regulation indices based on available information on laws and their mechanisms of enforcement and measures their impact on money laundering proxies. The paper finds that tougher money laundering regulations, particularly those that criminalize feeding activities and improve disclosure, are linked to lower levels of money laundering across countries; the results are robust to potential endogeneity of money laundering regulation. The relevance of historical factors in explaining the variation of money laundering regulation across countries sheds light on theories of institutions and provides room for further action, particularly in the areas of the law that improve the impact of criminalization, including liability of intermediaries, reductions of the burden of proof and better disclosure.
    Keywords: Money laundering; regulation; laws; crime; enforcement
    JEL: K40 G10
    Date: 2007–01
  3. By: Bruce Lyons (Centre for Competition Policy, University of East Anglia); Andrei Medvedev (Centre for Competition Policy, University of East Anglia)
    Abstract: This paper provides a first attempt to understand how outcomes are determined by the standard institutions of merger control. In particular, we focus on the internationally standard 2-phase investigation structure and remedy negotiations of the form practiced by the EC. We find that there are inherent biases in remedy outcomes, and identifiable circumstances where offers will be excessive and where they will be deficient. In particular, we find clear circumstances in which firms offer excessive remedies, which goes against a possible intuition that firms should expect to extract an information rent for possessing superior information about competition in the market.
    Keywords: Merger regulation, merger remedies, competition policy, bargaining
    JEL: K21 L41 L51
    Date: 2007–02
  4. By: Barbara Stoschek
    Abstract: This paper uses a political-economy framework to analyze what consequences the exogenous introduction of a quantitative restriction on total emissions in a small open economy has on the stringency of domestic trade policy. The question is whether and to what extent the government, if it takes different lobby groups´ interests into consideration, has an incentive to compensate the polluting industry for stricter environmental regulations by granting higher protection to it. It turns out that the government will indeed tend to increase subsidization of the industry affected by environmental regulation. This compensation will even be more than complete as long as environmental interests are taken into account. Hence, contrary to what might be expected, a net benefit for the polluting sector arises from environmental restrictions.
    Keywords: Environmental Regulations; International Competitiveness; Political
    JEL: F18 Q52 Q58
    Date: 2007–06–26
  5. By: Martha Alter Chen
    Abstract: This paper explores the relationship of the informal economy to the formal economy and the formal regulatory environment. It begins with a discussion of the concept of the informal economy and its size, composition, and segmentation. It then discusses the linkages between the informal economy and the formal economy and the formal regulatory environment. The conclusion suggests why and how more equitable linkages between the informal economy and the formal economy should be promoted through an appropriate inclusive policy and regulatory environment.
    Keywords: informal sector, informal economy, informal enterprises, informal workers, formal economy, formal regulatory environment, linkages, formalization
    JEL: J01 J08 K23 K31 L22 L25 L26 O17
    Date: 2007–07
  6. By: Andreas Stephan (Centre for Competition Policy, University of East Anglia)
    Abstract: The paper reports on results from a public survey on attitudes to collusion and cartel enforcement in Britain. Respondents demonstrate an understanding that price-fixing is harmful and should be punished. While there is strong support for high corporate fines and naming and shaming, only 1 in 10 Britons think individuals responsible should be imprisoned. Weak perceptions of the severity of price-fixing are confirmed by only 6 in 10 people considering such practices to be dishonest. Sex and age stronly influence attitudes. Education and newspaper readership have less of an effect, indicating poor information dissemination. Only 20% would report their employer's involvement in price-fixing without guarantees of anonymity and/or a reward; 14% would not report at all for fear of consequences. Public opinion is divided as to whether leniency programmes are justifiable. Respondents consider public enforcement to be more important than compensating parties injured by cartels.
    Keywords: Cartels, public survey, enforcement, UK cartel offence, leniency, private enforcement, competition law
    JEL: L13 L42 K21 L41
    Date: 2007–05
  7. By: John K. Ashton (Centre for Competition Policy, University of East Anglia); Andrew Pressey (Norwich Business School, University of East Anglia)
    Abstract: This paper explores and quantifies the link between marketing and rulings on competition or antitrust law made by UK competition or antitrust authorities. This examination is timely due to both the changing form and increasing severity of competition law in the UK and the strong associations identified between marketing and antitrust law in the US literature. Through a comprehensive examination of past UK competition rulings from 1950-2005, the frequency and content of the principal forms of uncompetitive behaviour during the last half century are recorded. A high proportion of competition law violations are associated with the marketing function. UK competition authorities have viewed specific marketing practices and, more generally, the direction, scope and scale of marketing activity to be causes for concern. We conclude that marketers need to develop a greater awareness of competition law and contribute more to the ongoing discussion as to the present and future form of competition policy.
    Keywords: Marketing, marketing practices, competition law, antitrust law, anticompetitive behaviour
    JEL: M31 K21 L42
    Date: 2007–01
  8. By: Basak Bayramoglu (PSE - Paris-Jourdan Sciences Economiques - [CNRS : UMR8545] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale des Ponts et Chaussées][Ecole Normale Supérieure de Paris], CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: This paper studies the link between the design of international environmental agreements and the incentives for the private sector to invest in cleaner technologies. More specifically, it compares the performance, in the Paretoo sense, of two types of agreement : an agreement on a uniform standard with transfers and an agreement on differentiated standards without transfers. To achieve this goal, we use a multi-stage game where the private sector anticipates its irreversible investment given the expected level of abatement standards, resulting from future bilateral negotiations. Our findings indicate that whenever countries are able to partially commit, the agreement on a uniform standard may be preferable, as it creates greater incentives for firms to invest in costly abatement technology. This result relies on the low level of the set-up cost of this technology. If this level is sufficiently high, the announcement and implementation of the agreement on a uniform standard with transfers is not optimal, because it takes away the incentive of all firms to invest in a new abatement technology.
    Keywords: agreements, standards, transfers, technology adoption, irreversible investment, bargaining, transboundary pollution.
    Date: 2007–07–03
  9. By: Lazen, Vicente; Eguiluz, Cristian
    Abstract: This article intends to serve as a practical tool for the design of a regulatory framework in a context of conflicts of interest in the activities capital markets institutions. In the first part of this article those situations of conflicts of interest are identified, described and classified. Next, alternatives to efficiently deal with conflicts of interest are analyzed. For this, in the first place we detail a set of measures that allow to control these conflicts, or to stimulate its resolution under a suitable way, in order to obtain the best social benefit. The analysis follows with the criteria that allow deciding the use of the appropriate mitigation alternative or regulatory tool, according to the characteristics of the conflict of interest and the circumstances that surrounds it. Este artículo pretende servir como herramienta práctica para el diseño de un marco regulatorio en un contexto de conflictos de interés de las actividades realizadas en el mercado de capitales. En la primera parte de este artículo se identifican, describen y clasifican aquellas situaciones de conflictos de interés. Posteriormente, se analizan las alternativas que permiten afrontar de manera eficiente los conflictos de interés. Para esto, en primer lugar se detallan un conjunto de medidas que permiten controlar dichos conflictos, o bien incentivar su resolución de manera adecuada, para lograr el mejor beneficio social. Finalmente, se analizan los criterios que permiten decidir el uso de la alternativa apropiada de mitigación según las características que presenta el conflicto de interés y las circunstancias que lo rodea.
    Keywords: conflictos de interes conflicts of interest financial services securities
    JEL: G10 G20
    Date: 2006–12

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.