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on Regulation |
| By: | Anthony Niblett; Richard Posner; Andrei Shleifer |
| Abstract: | The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained empirically untested. We create a dataset of 465 state-court appellate decisions involving the application of the Economic Loss Rule in construction disputes and track the evolution of law in this area from 1970 to 2005. We find that over this period the law did not converge to any stable resting point and evolved differently in different states. We find that legal evolution is influenced by plaintiffs' claims, the relative economic power of the parties, and nonbinding federal precedent. |
| JEL: | K13 K41 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13856&r=reg |
| By: | Clemens Heuson (University of Augsburg, Department of Economics) |
| Abstract: | It is well known that uncertainty concerning firms’ costs as well as market power of the latter have to be taken into account in order to design and choose environmental policy instruments in an optimal way. As a matter of fact, in the most actual environmental regulation settings the policy maker has to face both of these complications simultaneously. However, hitherto environmental economic theory has restricted itself to either of them when submitting conventional policy instruments to a comparative analysis. The article at hand accounts for closing this gap by investigating the welfare effects of emission standards and taxes against the background of uncertain emission control costs and a polluting asymmetric Cournot duopoly. |
| Keywords: | asymmetric Cournot duopoly, external diseconomies of pollution, cost uncertainty, emission standard, emission tax |
| JEL: | D62 D89 L13 Q58 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0300&r=reg |
| By: | Sandra Rousseau |
| Abstract: | This model explicitly incorporates the dynamic aspects of conservation programs with incomplete compliance and it allows landholders’ behavior to change over time. A distinction is made between initial and continuing compliance. We find that incomplete and instrument-specific enforcement can have a significant impact on the choice between subsidy schemes and reserves for conservation policies. The results suggest that it is useless to design a conservation scheme for landholders, if the regulator is not prepared to explicitly back the program with a monitoring and enforcement policy. In general, the regulator will prefer to use compensation payments, if the cost of using government revenues is sufficiently low, the environmental benefits are equal, and the cost efficiency benefits exceed the (possible) increase in inspection costs. If the use of government funds is too costly, the reserve-type instruments will be socially beneficial. |
| Keywords: | monitoring and enforcement, policy instruments, conservation policy |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0806&r=reg |
| By: | Bottazzi, L.; Da Rin, M.; Hellmann, T. (Tilburg University, Center for Economic Research) |
| Abstract: | We develop a theory and empirical test of how the legal system affects the relationship between venture capitalists and entrepreneurs. The theory uses a double moral hazard framework to show how optimal contracts and investor actions depend on the quality of the legal system. The empirical evidence is based on a sample of European venture capital deals. The main results are that with better legal protection, investors give more non-contractible support and demand more downside protection. These predictions are supported by the empirical analysis. Using a new empirical approach of comparing two sets of fixed-effect regressions, we also find that the investor?s legal system is more important than that of the company in determining investor behavior. |
| Keywords: | Financial Intermediation;Law and Finance;Corporate Governance;Venture Capital |
| JEL: | G20 G30 G24 K22 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200830&r=reg |
| By: | Carmen Arguedas; Sandra Rousseau |
| Abstract: | Over time, inspection agencies gather information about firms that cause harmful externalities. This information may allow agencies to differentiate their monitoring strategies in the future, since inspections can be influenced by firms' past performance relative to other competitors in the market. If a firm is less successful than it peers in reducing the externality, if faces the risk of being targeted for increased inspections in the next period This risk of stricter monitoring might induce high cost firms to mimic low cost firms, while the latter might try to avoid being mimicked We show that under certain circumstances, mimicking, or even the threat of mimicking, might reduce socially harmful activities and thus be welfare improving. |
| Keywords: | monitoring and enforcement, externalities, learning, mimicking |
| JEL: | D82 H83 K42 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0808&r=reg |
| By: | Christophe J. Godlewski (Laboratoire de Recherche en Gestion et Economie, Université Louis Pasteur) |
| Abstract: | Bank loan syndicate structure can be considered as an organizational response to agency problems stemming from the syndication process. The banking environment also influences the syndication process. We investigate how syndicate structure is influenced by the characteristics of the banking environment, such as banking market structure, financial development, banking regulation and supervision, and legal risk. The results of a cross-country analysis performed on a sample of 15,586 syndicated loan facilities from 24 countries over a period of 15 years confirm that syndicate structure is influenced by banking environments consistent with agency costs minimization and efficient re-contracting objectives. |
| Keywords: | Banking environment, Agency costs, Loan syndication, Syndicate structure. |
| JEL: | C31 F30 G21 G32 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2008-08&r=reg |
| By: | Edward J. Kane |
| Abstract: | This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory elements: politically directed subsidies to selected bank borrowers; subsidized provision of explicit or implicit repayment guarantees for the creditors of banks that participate in the credit-allocation scheme; and defective government monitoring and control of the subsidies to leveraged risk-taking that the other two elements produce. In 2007-2008, technological change and regulatory competition simultaneously encouraged incentive-conflicted supervisors to outsource much of their due discipline to credit-rating firms and encouraged banks to securitize their loans in ways that pushed credit risks on poorly underwritten loans into corners of the universe where supervisors and credit-ratings firms would not see them. |
| JEL: | G28 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13895&r=reg |
| By: | Ahsan, Ahmad (World Bank); Pagés, Carmen (Inter-American Development Bank) |
| Abstract: | Using manufacturing data for India, this paper studies the economic effects of legal amendments on two types of labor laws: employment protection and labor dispute resolution legislation. We find that laws that increase employment protection or the cost of labor disputes substantially reduce registered sector employment and output. These laws do no seem to benefit workers either, as they do not increase the share of value added that goes to labor. Labor-intensive industries, such as textiles, are the hardest hit by amendments that increase employment protection while capital-intensive industries are the most affected by laws that increase the cost of labor dispute resolution. These adverse effects are not alleviated by the widespread and increasing use of contract labor, particularly in regards to employment. Results are robust to an alternative codification of legal amendments suggested by Bhattacharjea (2006). |
| Keywords: | employment protection, labor dispute resolution, contract labor, employment, India |
| JEL: | J23 J52 K31 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3394&r=reg |
| By: | Birner, Regina; Linacre, Nicholas |
| Abstract: | "Many developing countries are currently in the process of designing regulatory systems that should allow them to use genetically modified organisms (GMOs) for agricultural development, while also managing the food safety and environmental risks potentially associated with these technologies. Various regions of the developing world are seeking to establish regional systems of biotechnology regulation. However, considerable costs are associated with biotechnology regulation, and biosafety specialists are scarce. In addition, there is no consistent understanding of how regional systems of biotechnology regulation can be designed to be effective and efficient, while also fulfilling the principles of good governance, such as transparency, voice and accountability, control of corruption, and avoidance of special interest capture. There are a wide variety of possible regional approaches, differing with regard to the level of centralization, the scope of the regional system, the types of regional institutions and processes, and the types of financing mechanisms. Here, based on findings in the fields of environmental and fiscal federalism and transaction costs economics, we develop a conceptual framework for the assessment of regional systems of biotechnology regulation. The framework specifies design options and assessment criteria, and identifies major trade-offs and their mediating factors. We use the case of West Africa to illustrate this framework, and refer to the European Union for comparison. Our analysis indicates that involving regional experts, stakeholders and policy-makers in the design of a regional regulatory system will help fill knowledge gaps and generate conclusions regarding the trade-offs involved in regional biotechnology regulation." from Author's Abstract |
| Keywords: | Regional biotechnology regulation, Regulatory federalism, Transaction cost economics, European Union, Governance, |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:753&r=reg |