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on Regulation |
| By: | Pinotti, Paolo |
| Abstract: | This paper investigates the importance of cultural traits for understanding the causes and consequences of government intervention in the economy. First, it presents a simple model in which, under reasonable assumptions about the structure of the economy and the individual values and beliefs, more trustful individuals prefer lower product market regulation. This theoretical prediction is supported by evidence from international survey data. Second, it shows that, if trust predicts trustworthiness across countries, lower honesty would drive both greater regulation and higher incidence of illegal activities. It follows that some of the negative effects usually associated with government intervention may indeed be a consequence of underlying cultural traits. In particular, evidence from cross-country data suggests that a large part of the effect of regulation on corruption and unofficial activity estimated in previous studies can be attributed to omitted variation in trust and honesty. |
| Keywords: | trust; honesty; regulations; corruption; unofficial economy |
| JEL: | L51 D02 Z10 K42 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7740&r=reg |
| By: | TCHANA TCHANA , Fulbert |
| Abstract: | The Basel Accords promote the adoption of capital adequacy requirements to increase the banking sector's stability. Unfortunately, this type of regulation can hamper economic growth by shifting banks' portfolios from more productive risky investment projects toward less productive but safer projects. This paper introduces banking regulation in an overlapping-generations model and studies how it affects economic growth, banking sector stability, and welfare. In this model, a banking crisis is the outcome of a productivity shock, and banking regulation is modeled as a constraint on the maximal share of banks' portfolios that can be allocated to risky assets. This model allows us to evaluate quantitatively the key trade-off, inherent in this type of regulation, between ensuring banking stability and fostering economic growth. The model implies an optimal level of regulation that prevents crises but at the same time is detrimental to growth. We find that the overall effect of optimal regulation on social welfare is positive when productivity shocks are sufficiently high and economic agents are sufficiently risk-averse. |
| Keywords: | Overlapping Generations; Competitive Equilibrium; Economic Growth; Banking Regulation |
| JEL: | G28 E44 D92 |
| Date: | 2007–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7588&r=reg |
| By: | Benjamin Lorent (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.) |
| Abstract: | The role of insurance sector has grown in importance. While there is a plethora of academic literature on the needs for a banking regulation, literature on insurance regulation is scarce and mainly focused on asymmetry issues. In this paper, we describe the reasons for an insurance regulation. Recent developments faced by insurers modified the risks encountered by the sector, especially liquidity risk and systemic risk. The purpose of the discussion presented here is also to outline the specificities of the new framework for the regulation of European insurance undertakings, Solvency II, as it is currently discussed to provide an appropriate response to the changing needs of insurance regulation. Our analysis leads us to conclude that Solvency II answers well to the developing insurance sector. However, caution is warranted for some areas such as evaluation of embedded options and guarantees, risk transfer and financial conglomerates. |
| Keywords: | Insurance, Regulation, Solvency II, Liquidity risk, Systemic risk |
| JEL: | G20 G22 G28 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:08-007&r=reg |
| By: | Silvester van Koten |
| Abstract: | In the EU electricity industry, many Vertically Integrated Utilities (VIUs) have ownership both of electricity generators and of transmission, hence VIU-owned or allied generators often are bidders in auctions for VIU-owned transmission. In Van Koten (2006) I show that welfare suffers and the holding company benefits – through increased auction revenue – from more aggressive bidding by the allied bidder and that it does not make a difference whether transmission is legally separated from the VIU or not. Here I analyze the regulatory measure of also legally separating the allied generator from the VIU; this measure effectively transforms the VIU into a holding company and prevents the “VIU” from influencing day-to-day decision-making of the “VIU”-owned generator and bans cross-subsidization between divisions. I show that such a measure may not improve welfare; the holding company can formulate a simple compensation scheme that does not violate the restrictions imposed by legal separation but induces the manager of the allied generator to bid more aggressively, thereby increasing the profits of the holding company and decreasing welfare, as in Van Koten (2006). |
| Keywords: | Asymmetric auctions, bidding behavior, electricity markets, strategic delegation, regulation, vertical integration. |
| JEL: | L22 L43 L51 L94 L98 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp346&r=reg |
| By: | Monasso, Ton; van Leijden, Fabian |
| Abstract: | This working paper extends the mainstream theoretical thinking in the field of telecommunications regulations to better fit with processes perceived in rural areas. The implicit framework of Levy & Spiller, Berg and Stern & Holder is extended to incorporate ideas of public administration theory, especially Kiser & Ostrom’s three levels of action. In this way, processes at different policy levels are viewed as games in themselves and we can better explain the observed behaviour of actors and the outcomes of the regulatory process than mainstream thinking does. |
| JEL: | H54 L96 B52 |
| Date: | 2007–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7625&r=reg |
| By: | Khan, Haider; Liu, Yibei |
| Abstract: | We discuss thje role of the dispute settlement mechanism (DSM) of the World Trade Organization (WTO) in the context of a complex characterization of globalization.The dispute settlement mechanism (DSM) of the World Trade Organization (WTO) is at present a controversial exercise at the international level. Reasonable people disagree as to whether it has enhanced and maintained equality between developing and developed countries. Through examining its concrete provisions, procedures and several important factors such as resource availability and political influence outside the WTO, it can be found that there are conditions under which the new rule-based DSM can indeed contribute to promoting developing countries’ status in the system . Consequently, it can provide them with more power to defend their own interests. However, the DSM still does not eliminate the power-based relationships among countries. Developing countries are still affected by biases, which stem from several sources such as high financial and legal resource costs, political pressure generated outside the WTO, declarative WTO legal provisions, etc..A reformed WTO with less asymmetry of power will result in a higher level of global social welfare. |
| Keywords: | dispute settlement mechanism (DSM);World Trade Organization (WTO) ;Globalization |
| JEL: | F15 F13 F10 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7613&r=reg |