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on Regulation |
| By: | Hirshleifer, David |
| Abstract: | I propose here the psychological attraction theory of financial regulation—that regulation is the result of psychological biases on the part of political participants—voters, politicians, bureaucrats, and media commentators; and of regulatory ideologies that exploit these biases. Some key elements of the psychological attraction approach are: salience and vividness, omission bias, scapegoating and xenophobia, fairness and reciprocity norms, overconfidence, and mood effects. This approach further emphasizes emergent effects that arise from the interactions of individuals with psychological biases. For example, availability cascades and ideological replicators have powerful effects on regulatory outcomes. |
| Keywords: | Investor psychology; regulation; salience; omission bias; scapegoating; xenophobia; fairness; reciprocity; norms; mood; availability cascades; overconfidence; evolutionary psychology; memes; ideology; replicators |
| JEL: | H10 H0 G0 |
| Date: | 2007–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5129&r=reg |
| By: | Severin Borenstein; Nancy L. Rose |
| Abstract: | Following a brief review of the U.S. domestic airline industry under regulation (1938-1978), we study the changes that have occurred in pricing, service, and competition in the 28 years since deregulation. We then examine some of the major public policy issues facing the industry: (a) the sustainability of competition and volatility of airline profits, (b) possible market power of dominant airlines, and (c) congestion and investment shortfall in the airport and air traffic infrastructure. |
| JEL: | L1 L13 L51 L93 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13452&r=reg |
| By: | Aloisio Pessoa de Araújo (EPGE/FGV); José Valentim M. Vicente |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:epgewp:651&r=reg |
| By: | James Bushnell; Carla Peterman; Catherine Wolfram |
| Abstract: | This paper considers the efficiency of various types of environmental regulations when they are applied locally to pollutants whose damages extend outside the jurisdiction of the local regulator. We draw on examples from state- and city-level efforts to address climate change by enacting policies to reduce greenhouse gases. While previous work has noted the possibility for leakage, whereby the polluting sources move outside the jurisdiction of the regulation in order to escape it, we note an additional problem when policies are targeted downstream at consumers of goods whose production creates pollution. Specifically, we show how consumer-based policies can be circumvented by a simple reshuffling of who is buying from whom. We argue that the leakage and reshuffling problems are most pronounced with more flexible or market-based regulations. We conclude that localities may have the most effect on global pollutants when they enact efficiency standards or targeted subsidies. |
| JEL: | Q48 Q54 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13472&r=reg |
| By: | Espen Erlandsen; Jens Lundsgaard |
| Abstract: | The economic crisis in the early 1990s prompted action on reforming the Swedish welfare state and its institutions, including deregulation of a wide range of product markets. In that way, Sweden took early action compared to other OECD countries currently struggling with how to make public finances more robust in an ageing context. The reforms that were implemented during the 1990s are now paying off in terms of productivity and GDP growth. Empirical evidence suggests that deregulation has delivered a considerable “productivity dividend”. Although significant progress therefore has been made, renewed regulatory reform is needed to safeguard Sweden’s ambitious public policy goals. Efforts should focus on improving enterprise formation and labour utilisation, as well as on providing better value for money in the public sector by raising its efficiency and delivering high quality services. <P>Comment les réformes réglementaires en Suède ont stimulé la productivité <BR>La crise économique du début des années 90 a servi de catalyseur pour la réforme de l’État providence suédois, qui s’est aussi accompagnée par une vaste libéralisation de des marchés des produits. Ce faisant, la Suède a agi de manière précoce comparée à d'autres pays de l’OCDE qui peinent à trouver une solution pour assainir les finances publiques dans le contexte du vieillissement de la population. Les réformes mises en oeuvre au cours des années 90 se sont révélées payantes en termes de productivité et de croissance du PIB. Les données disponibles suggèrent que la déréglementation s’est soldée par un « dividende de productivité » considérable. Malgré d’importants progrès dans ce domaine, de nouvelles réformes réglementaires sont nécessaires afin de sauvegarder les objectifs de politique publique ambitieux de la Suède. Il faudrait se concentrer sur l’amélioration des conditions de création d’entreprise et une meilleure utilisation de la main d’oeuvre, en plus d’une meilleure valeur ajoutée dans le secteur public en augmentant son efficacité et la qualité des services fournis. |
| Keywords: | product market regulation, network industries, industrie de réseau, regulatory reforms, réforme réglementaire |
| JEL: | D40 E20 E60 F40 H11 H40 H60 J20 L11 L50 L51 L53 O47 |
| Date: | 2007–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:577-en&r=reg |
| By: | Jean-Pierre Galavielle (Centre d'Economie de la Sorbonne) |
| Abstract: | Financial globalization has led to the explosion of the principle of societal regulation applied by the political domain considered as inoperative, in order to be taken over by civil society. This is the dogma of ungovernability. Civil society, proclaiming its expertise, does nevertheless affirm the fatality of the government of things and the pregnancy of the market law. This leads to the question of the legitimacy of regulation by organisms of private statute, on the outside of effective democratic political control. The excessive development of Soft Law and of the juridiciarization of practical proceedings bares witness to an unrestrained search for the identification of responsibilities. These reactions constitute a desire to "civilize the market". Who has to take charge of this, if not the political domain ?. |
| Keywords: | Ungovernability, civil society, expert, norms of accountancy, market law, soft law, legitimacy, ECB. |
| JEL: | J J21 J6 J64 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:r07046&r=reg |
| By: | Raffaele Miniaci (Università di Brescia); Carlo Scarpa (Università di Brescia); Paola Valbonesi (Università di Padova) |
| Abstract: | In this paper we analyse some distributional effects of the reforms of water and energy services in Italy. We first document the new regulation setting in these services, illustrating the dynamics of utility prices and of household expenditure in the period 1998-2005. We then propose a way to measure the affordability of public utilities, in order to investigate how many households would incur a potentially excessive burden, if they consumed a minimum quantity of utility services. Finally, we calculate this index on data from the ‘Survey on Family Budgets’. Our results show how the affordability of utility bills varies from region to region depending on climate, income, family endowment and size. The analysis – also based on a counterfactual exercise – finds that so far, utility reforms do not seem to have produced any negative effects on weaker households. |
| Keywords: | Affordability, Public Utilities, Regulation, Gas, Electricity, Water |
| JEL: | D12 L51 L97 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0050&r=reg |
| By: | Paul Lanoie; Jérémy Laurent-Lucchetti; Nick Johnstone; Stefan Ambec |
| Abstract: | Jaffe and Palmer (1997) present three distinct variants of the so-called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate certain kinds of environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology-based standards. Finally, the “strong” version posits that properly designed regulation may induce cost-saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance and commercial performance). The analysis is based upon a unique database which includes observations from approximately 4200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, and qualified support for the “strong” version as well. <P>Jaffe et Palmer (1997) présentent trois variantes distinctes de l’hypothèse de Porter. La version « faible » de l'hypothèse suppose que la réglementation environnementale stimulera l’apparition d’innovations dans le domaine de l’environnement. La version « étroite » de l'hypothèse affirme que les réglementations environnementales flexibles donnent aux firmes une plus grande incitation pour innover que les réglementations rigides, telles que les normes prescrivant une technologie pour une industrie donnée. Enfin, la version « forte » pose qu’une réglementation correctement conçue peut induire davantage de gains en termes d’innovation que de coûts pour se conformer à la règle. Dans cet article, nous examinons la portée de ces différentes variantes de l'hypothèse de Porter en utilisant des données sur les quatre principaux éléments de la chaîne présumée de causalité (politique environnementale, recherche et développement, performance environnementale et performance commerciale). L'analyse est fondée sur une base de données unique qui inclut des observations d'approximativement 4200 établissements dans sept pays de l’OCDE. Nos résultats supportent fortement la version « faible », mais de façon plus mitigée les versions « étroite » et « forte ». |
| Keywords: | Porter hypothesis, environmental policy, innovation, environmental performance, business performance., hypothèse de Porter, politique environnementale, innovation, performance environnementale, performance financière. |
| JEL: | L21 M14 Q52 Q55 Q58 |
| Date: | 2007–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2007s-19&r=reg |
| By: | M.A. de Figueiredo; H.J. Herzog; P.L. Joskow; K.A. Oye; D.M. Reiner |
| Abstract: | This essay examines several legal, regulatory and organizational issues that need to be addressed to create an effective regulatory regime for carbon dioxide capture and storage (“CCS”). Legal, regulatory, and organizational issues will need to be resolved for the industrial organization of CO2 transportation and storage, storage safety and integrity issues, and liability. Although there are some gaps in the current regulatory system as applied to CCS, we find that many of the currently identifiable issues have been successfully resolved in other contexts. |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0703&r=reg |
| By: | Larrain B., Felipe; Tavares, José |
| Abstract: | The economics literature provides ample evidence that higher corruption discourages FDI inflows. In this paper we address, for the first time in the literature in a systematic way, the exact reverse link, i.e., the empirical effect of FDI inflows on corruption. We present a simple model that illustrates the two-way relationship between foreign direct investment and corruption, identifying exactly the direction of causality that we address: how do “exogenous“ variations in FDI affect the degree of corruption in the host country. Our dataset covers a wide group of countries for the period 1981 – 2000, and we confront the issue of causality by constructing an original set of instrumental variables relying on geographical and cultural distance between FDI source and host countries to measure exogenous time-varying changes in FDI inflows. We find that FDI inflows (as a share of GDP) significantly decrease corruption in the host country. The quantitative impact of FDI inflows on corruption is stronger than the impact of trade openness and tariff rates on corruption and is validated by the use of instrumental variables. The results are robust to the inclusion of several determinants of openness, in addition to trade intensity and the average tariff level, including dependence on natural resources, ethnic fractionalization, size of the economy and government expenditure. Quantitatively, the impact of FDI inflows on corruption is of the same order of magnitude as the impact of per capita income on corruption. |
| Keywords: | Corruption; Foreign Direct Investment; Instrumental Variables; International Trade; Tariffs |
| JEL: | E5 F10 F13 F30 H10 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6488&r=reg |
| By: | Jokipii, Terhi (Stockholm School of Economics); Milne, Alistair (Bank of Finland and Cass Business School) |
| Abstract: | Using an unbalanced panel of accounting data from 1997 to 2004 and controlling for individual bank costs and risk, we find capital buffers of the banks in the EU15 have a significant negative co-movement with the cycle. For banks in the accession countries there is significant positive co-movement. Capital buffers of commercial and savings banks, and of large banks, exhibit negative co-movement. Those of co-operative and smaller banks exhibit positive co-movement. Speeds of adjustment are fairly slow. We interpret these results and discuss policy implications, noting that negative co-movement of capital buffers will exacerbate the procyclical impact of Basel II. |
| Keywords: | Bank capital; bank regulation; business cycle fluctuations |
| JEL: | G21 G28 |
| Date: | 2007–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sifrwp:0056&r=reg |
| By: | Donna Harris (Department of Land Economy, University of Cambridge, UK) |
| Abstract: | This paper considers the relationship between corruption and bonding social capital, which is characterised by high level of particularised trust and reciprocity amongst families and close friends. The main conjecture is that bonding social capital is likely to increase corruption and that it affects corruption not only directly, but also indirectly through other factors. Empirical results from the third wave of the World Value Survey confirm that bonding social capital leads to higher level of perceived corruption, particularly public and political corruption, when it discourages trust and cooperation towards outsiders. Bonding social capital also increases corruption indirectly by reducing opportunistic behaviour and imposing peer pressure on the ingroup members to reciprocate in a corrupt exchange i.e. to ‘return the favour’. This mechanism makes a corrupt transaction more predictable, i.e. increasing the confidence that the ‘goods’ will be delivered as promised and thus, leads to high level of corruption. |
| Keywords: | Corruption, Social Capital, Social Norms, Social Networks |
| JEL: | Q2 Q4 R4 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:lnd:wpaper:200727&r=reg |
| By: | Raymond Fisman; Shang-Jin Wei |
| Abstract: | We empirically analyze the illicit trade in cultural property and antiques, taking advantage of different reporting incentives between source and destination countries. We thus generate a measure of illicit trafficking in these goods based on the difference between imports recorded in United States' customs data and the (purportedly identical) trade as recorded by customs authorities in exporting countries. We find that this reporting gap is highly correlated with the corruption level of the exporting country as measured by commonly used survey-based indicies, and that this correlation is stronger for artifact-rich countries. As a placebo test, we do not observe any such pattern for U.S. imports of toys from these same exporters. We report similar results for four other Western country markets. Our analysis provides a useful framework for studying trade in illicit goods. Further, our results provide empirical confirmation that survey-based corruption indicies are informative, as they are correlated with an objective measure of illicit activity. |
| JEL: | F1 K42 O1 Z11 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13446&r=reg |
| By: | Matthieu Chemin |
| Abstract: | A key element of government is to uphold law and order. This paper will evaluate the impact of slow judiciaries on entrepreneurship. In 2002 a judicial reform was implemented in 6 of Pakistan's 117 districts to facilitate rapid case disposal. Drawing on a panel dataset of 875 district judges' performance between 2001 and 2003, a difference-in-differences analysis shows that judges disposed of 25 percent more cases thanks to the reform. Three rounds of the Labour Force Surveys will be then used to show that the reform improved security of property rights, encouraged people to seek loans, fostered entrepreneurship and was associated with increased transition from unemployment and paid employment to entrepreneurship. |
| Keywords: | Legal System, Entrepreneurship |
| JEL: | H11 H41 K42 O12 L26 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0727&r=reg |
| By: | Mattias Ganslandt (Research Institute of Industrial Economics (IFN)); Lars Persson (Research Institute of Industrial Economics (IFN) and CEPR); Helder Vasconcelos (Universidade Católica Portuguesa (Porto) and CEPR) |
| Abstract: | In their merger control, EU and the US have considered symmetric size distribution (cost structure) of firms to be a factor potentially leading to collusion. We show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with higher risk of collusion, when firms face indivisible costs of collusion. In particular, we show that if the rule determining the collusive outcome has the property that the large (efficient) firm benefits sufficiently more from collusion when industry asymmetries increase, collusion can become more likely when firms are moderately asymmetric. |
| Keywords: | Collusion; Cost Asymmetries; Merger Policy |
| JEL: | D43 L41 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:cap:wpaper:152007&r=reg |