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on Regulation |
| By: | Mickaël Clévenot (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Yann Guy (GERME - Groupe d’Études sur la Régulation et les Mutations - Equipe d'accueil) |
| Abstract: | The absence of specifically dedicated method to represent financialized capitalism constitutes a significant gap in contemporary macroeconomic modelling considering the impact of finance on the rules of wealth production and distribution. From both the lessons of Regulation theory in terms of accumulation pattern and regulation mode declined through the concepts of institutional hierarchy and complementarity, and the neo-Cambridgian modelling framework, one tries to establish the causes which prevail in the divergence of American and French economies in the adoption of finance-led capitalism. |
| Keywords: | modelling and macroeconomic simulation; institutional complementarity and hierarchy; accumulation regime; regulation pattern; financialization. |
| Date: | 2007–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:hal-00188614_v1&r=reg |
| By: | Haufler, Andreas; Schulte, Christian |
| Abstract: | In many situations governments have sector-specific tax and regulation policies at their disposal to influence the market outcome after a national or an international merger has taken place. In this paper we study the implications for merger policy when countries non-cooperatively deploy production-based taxes. We find that whether national or international mergers are more likely to be enacted in the presence of nationally optimal tax policies depends crucially on the ownership structure of firms. When all firms are owned domestically in the pre-merger situation, non-cooperative tax policies are more efficient in the national merger case and smaller synergy effects are needed for this type of merger to be proposed and cleared. These results are reversed when there is a high degree of foreign firm ownership prior to the merger. |
| Keywords: | merger regulation; tax competition |
| JEL: | H21 H77 L13 L50 |
| Date: | 2007–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:2074&r=reg |
| By: | Balázs Zsámboki (Magyar Nemzeti Bank) |
| Abstract: | This study aims to analyse the sensitivity of capital requirements to changes in risk parameters (PD, LGD and M) by creating a ‘model bank’ with a portfolio mirroring the average asset composition of internationally active large banks, as well as locally oriented smaller institutions participating in the QIS 5 exercise. Using historical data on corporate default rates, the dynamics of risk weights and capital requirements over a whole business cycle are also examined, with special emphasis on financial stability implications. The purpose of this paper is to contribute to a better understanding of the mechanism of Basel II and to explore the possible impacts of prudential regulation on cyclical swings in capital requirements. |
| Keywords: | Basel II, credit risk, capital requirement, regulation, cyclicality, financial stability. |
| JEL: | G21 G28 G32 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:opaper:2007/67&r=reg |
| By: | Eric Chiang (Department of Economics, College of Business, Florida Atlantic University); Janice Hauge (University of North Texas); Mark Jamison (University of Florida) |
| Abstract: | There is general concern that producer subsidies distort competition. We examine a telecommunications subsidy system that transfers money from low cost regions to high cost regions of the U.S. Even though the system is designed to be competitively neutral, we find evidence that the system, combined with carrier of last resort policies, promotes cream skimming by entrants in low cost areas and deters entry in high cost areas, where incumbents are more likely than entrants to receive subsidies. We are unable to rule out the possibility that state regulatory policies favor incumbents in states that are net beneficiaries of the subsidy system. |
| Keywords: | subsidies, Universal Service Fund, telecommunications, regulation |
| JEL: | L52 L96 O11 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:fal:wpaper:07002&r=reg |
| By: | Bhattacharya, Sudipto; Chiesa, Gabriella |
| Abstract: | We examine the implications of optimal credit risk transfer (CRT) for bank-loan monitoring. In the model, monitoring improves expected returns on bank loans, but the loan-portfolio return distribution fails to satisfy the Monotone-Likelihood-Ratio Property (MLRP) because monitoring is most valuable in downturns. We find that CRT enhances loan monitoring and expands financial intermediation, in contrast to the findings of the previous literature, and the reference asset for optimal CRT is the loan portfolio, in line with the preponderance of portfolio products. An important implication of optimal CRT is that it allows maximum capital leverage. The intuition is that the lack of MLRP makes debt financing suboptimal, so the bank is rewarded for good luck rather than for monitoring, and it faces a tighter constraint on outside finance: incentive-based lending capacity, given bank capital, is smaller. Optimal CRT exploits the information conveyed by loan portfolio outcomes to shift income from lucky states to those that are more informative about the monitoring effort. Thus, monitoring incentives are optimized and incentive-based lending capacity is maximized. The role for prudential regulation of banks is examined. |
| Keywords: | Credit Risk Transfer; Monitoring Incentives; Prudential Regulation |
| JEL: | D61 D82 G21 G28 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6584&r=reg |
| By: | Don Fullerton; Garth Heutel |
| Abstract: | Regulations that restrict pollution by firms also affect decisions about use of labor and capital. They thus affect relative factor prices, total production, and output prices. For non-revenue-raising environmental mandates, what are the general equilibrium impacts on the wage, the return to capital, and relative output prices? Perhaps surprisingly, we cannot find any existing analytical literature addressing that question. This paper starts with the standard two-sector tax incidence model and modifies one sector to include pollution as a factor of production that can be a complement or substitute for labor or for capital. We then look not at taxes but at four types of mandates, and for each mandate determine conditions that place more of the burden on labor or on capital. Stricter regulation does not always place less burden on the factor that is a better substitute for pollution. Also, a relative restriction on the amount of pollution per unit of output creates an "output-subsidy effect" on factor prices that can offset and reverse the traditional output effect and substitution effect. An analogous effect is found for a relative restriction on pollution per unit of capital. |
| JEL: | H23 L51 Q52 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13645&r=reg |
| By: | Nicholas Economides (Stern School of Business, New York University); Joacim Tåg (Swedish School of Economics and Business Administration, FDPE, and HECER) |
| Abstract: | We discuss the benefits of net neutrality regulation in the context of a two-sided market model in which platforms sell Internet access services to consumers and may set fees to content and applications providers “on the other side” of the Internet. When access is monopolized, we find that generally net neutrality regulation (that imposes zero fees “on the other side” of the market) increases total industry surplus compared to the fully private optimum at which the monopoly platform imposes positive fees on content and applications providers. Similarly, we find that imposing net neutrality in duopoly increases total surplus compared to duopoly competition between platforms that charge positive fees on content providers. We also discuss the incentives of duopolists to collude in setting the fees “on the other side” of the Internet while competing for Internet access customers. Additionally, we discuss how price and non-price discrimination strategies may be used once net neutrality is abolished. Finally, we discuss how the results generalize to other two-sided markets. |
| Keywords: | net neutrality, two-sided markets, Internet, monopoly, duopoly, regulation, discrimination |
| JEL: | L1 D4 L12 L13 C63 D42 D43 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0745&r=reg |
| By: | Benjamin Miranda Tabak; Solange Maria Guerra; Eduardo José Araújo Lima; Eui Jung Chang |
| Abstract: | In this article the relation between non-performing loans (NPL) of the Brazilian banking system and macroeconomic factors, systemic risk and banking concentration is empirically tested. While evaluating this relation, we use a dynamic specification with fixed effects, using a panel data approach. The empirical results indicate that the banking concentration has a statistically significant impact on NPL, suggesting that more concentrated banking systems may improve financial stability. These results are important for the design of banking regulation policies. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:145&r=reg |
| By: | Hülya Eraslan; Wenli Li; Pierre-Daniel Sarte |
| Abstract: | By compiling a novel data set from bankruptcy court dockets recorded in Delaware between 2001 and 2002, the authors build and estimate a structural model of Chapter 13 bankruptcy. This allows them to quantify how key debtor characteristics, including whether they are experiencing bankruptcy for the first time, their past-due secured debt at the time of filing, and income in excess of that required for basic maintenance, affect the distribution of creditor recovery rates. The analysis further reveals that changes in debtors' conditions during bankruptcy play a nontrivial role in governing Chapter 13 outcomes, including their ability to obtain a financial fresh start. The authors' model then predicts that the more stringent provisions of Chapter 13 recently adopted, in particular those that force subsets of debtors to file for long-term plans, do not materially raise creditor recovery rates but make discharge less likely for that subset of debtors. This finding also arises in the context of alternative policy experiments that require bankruptcy plans to meet stricter standards in order to be confirmed by the court. |
| Keywords: | Bankruptcy |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:07-31&r=reg |
| By: | Kose John; Hamid Mehran; Yiming Qian |
| Abstract: | We study CEO compensation in the banking industry by considering banks’ unique claim structure in the presence of two types of agency problems: the standard managerial agency problem and the risk-shifting problem between shareholders and debtholders. We empirically test two hypotheses derived from this framework: that the pay-for-performance sensitivity of bank CEO compensation (1) decreases with the total leverage ratio and (2) increases with the intensity of monitoring provided by regulators and nondepository (subordinated) debtholders. We construct an index of the intensity of outsider monitoring based on four variables: the subordinated debt ratio, subordinated debt rating, nonperforming loan ratio, and BOPEC rating (regulators’ assessment of a bank’s overall health and financial condition). We find supporting evidence for both hypotheses. Our results hold after controlling for the endogeneity among compensation, leverage, and monitoring; they are robust to various regression specifications and sample criteria. |
| Keywords: | Bank directors ; Chief executive officers ; Banks and banking - Ratio analysis ; Bank supervision ; Wages |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:308&r=reg |
| By: | Rafael La Porta; Florencio Lopez-de-Silanes; Andrei Shleifer |
| Abstract: | In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform. |
| JEL: | K00 N20 P51 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13608&r=reg |
| By: | Ines Macho-Stadler (Universitat Autonoma de Barcelona); David Perez-Castrillo (Universitat Autonoma de Barcelona) |
| Abstract: | We analyze environments where firms chose a production technology which, together with random events, determines the final emission level. We consider the coexistence of two alternative technologies. The cost of the adoption of the clean technology and the actual emissions are firms' private information. The environmental regulation is based on taxes over reported emissions, and on monitoring and penalties over unreported emissions. We show that the optimal monitoring is a cut-off policy, where all reports below a threshold are inspected with the same probability, while reports above the threshold are not monitored. We show that if the adoption of the technology is firms' private information, too few firms will adopt the clean technology under the optimal monitoring policy. However, when the EA can check the technology adopted by the firms, the optimal policy may induce overswitching or underswitching to the clean technology. |
| Keywords: | Production technology, random emissions, environmental taxes, optimal monitoring policy. |
| JEL: | K32 K42 D82 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0060&r=reg |