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on Regulation |
| By: | Flavio M. Menezes (School of Economics, The University of Queensland) |
| Abstract: | This paper examines some important economic aspects associated with the notion that consistency in the regulation of infrastructure businesses is a desirable feature. It makes two important points. First, it is not easy to measure consistency. In particular, one cannot simply point to different regulatory parameters as evidence of inconsistent regulatory policy. Second, even if one does observe consistency emerging from decisions made by different regulators, it does not necessarily mean that this consistency is desirable. It might be the result, at least partially, of career concerns of regulators. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:372&r=reg |
| By: | Adrienne HERITIER; Sandra ECKERT |
| Abstract: | How and to what effect do firms coordinate their actions in order to deal with the negative external effects of productive activity? Under which conditions do firm associations engage in environmental self-regulation and what kind of governance devices do they develop in order to tackle the specific regulatory challenges at stake? Is the 'shadow of hierarchy', the credible threat of legislation, executive intervention or court rulings, a necessary condition for associative action to emerge? Or is it only necessary if a redistributive problem is at stake? These are the questions discussed in this article. We will first develop the theoretical argument based on economic institutionalism, derive hypotheses and then submit the propositions to a first empirical assessment of associative self-regulation on waste recycling in the plastic and paper industry. |
| Keywords: | governance; self-regulation; shadow of hierarchy; transaction cost theory. |
| Date: | 2008–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2008/26&r=reg |
| By: | Carmine Guerriero (University of Cambridge) |
| Abstract: | The determinants of incentive regulation are a key issue in industrial policy. I study an asymmetric information model of incentive rules selection by a political principal endowed with an information-gathering technology whose efficiency increases with the effort exerted by two accountable supervisors (a regulator and a judge). This set up captures the institutions of several international markets. The model predicts that reforms toward higher powered rules are more likely the more inefficient (efficient) is the production (information-gathering) technology, the less tight is political competition and the greater are pro-consumer supervisors’ incentives. This prediction is consistent with evidence based on US electric power market data. |
| Keywords: | Incentive Schemes, Accountability Rules, Regulatory Capture |
| JEL: | D73 H11 L51 K2 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2008.34&r=reg |
| By: | Forster, Josef |
| Abstract: | Credit rating agencies (CRAs) very often have been criticized for announcing inaccurate credit ratings and are suspected of being exposed to conflicts of interest. Despite these objections CRAs remained largely unregulated. Based on Pagano & Immordino (2007), we study the optimal regulation of CRAs in a model where rating quality is unobservable and enforcing regulation is costly. The model shows that minimum rating standards increase the social value of credit ratings. The model also analyzes implications for regulation in the presence of conflicts of interest between the CRA and the rated clients by direct bribes and by the joint provision of rating and consulting services. |
| Keywords: | credit rating agencies; regulation; conflicts of interest |
| JEL: | G20 G24 G28 |
| Date: | 2008–07–25 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:5169&r=reg |
| By: | Fernando T. Camacho; Flavio M. Menezes (School of Economics, The University of Queensland) |
| Abstract: | This paper examines a three-period model of an investment decision in a network industry characterized by demand uncertainty, economies of scale and sunk costs. In the absence of regulation we identify the market conditions under which a monopolist decides to invest early as well as the underlying overall welfare output. In a regulated environment, we first consider a monopolist facing no downstream competition but subject to a price cap on the downstream retail (final good) market. We identify the welfare-maximising regulated prices using the unregulated market output as a benchmark. In particular, we show that the optimal regulation depends on market conditions (that is, the nature of demand) and there are three possible outcomes: (i) price regulation does not improve welfare; (ii) regulated prices include an option to delay value and provide a positive payoff to the firm; and (iii) regulated prices yield a zero payoff to the firm. Second, we consider a vertically integrated network provider that is required to provide access to downstream competitors. We show that when the regulator has only one instrument, namely the access price, an option-to-delay pricing rule generates (weakly) higher welfare than the Efficient Component Pricing Rule (ECPR), except under very specific conditions. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:373&r=reg |
| By: | Carmine Guerriero (University of Cambridge) |
| Abstract: | This paper analyzes the political economy of regulatory and judicial appointment rules. I study a model of price-setting by a political principal faced with a firm with unknown costs, and endowed with an information-gathering technology whose efficiency rises with the effort exerted by two accountable supervisors (a regulator and a judge). This set-up captures the institutions of several international markets. The model predicts that reforms toward election rather than appointment of regulators are more likely the less efficient is the information-gathering technology, the less stringent are the investment concerns of society, the stronger are regulators’ revolving-door motivations, and the closer is political competition. These predictions are consistent with US electric power market data. Moreover, in accordance with the model, electricity rates are lower and respond less to shock in input costs in states that elect their regulators or their High Court judges. |
| Keywords: | Election, Agency, Judges, Regulation, Electricity |
| JEL: | K23 L51 Q43 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2008.55&r=reg |
| By: | Joan Canton (University of Ottawa); Maia David (UMR INRA-AgroParisTech Economie publique); Bernard Sinclair-Desgagné (HEC Montreal, CIRANO and Ecole Polytechniqu) |
| Abstract: | This paper considers the environmental policy and welfare implications of a merger between environment firms (i.e., firms managing environmental resources or supplying pollution abatement goods and services). The traditional analysis of mergers in Cournot oligopolies is extended in two ways. First, we show how environmental policy affects the incentives of environment firms to merge. Second, we stress that mergers in the eco-industry impact welfare beyond what is observed in other sectors, due to an extra effect on pollution abatement efforts; this might lead to disagreements between an anti-trust agency seeking to limit market concentration which can be detrimental to consumer surplus and a benevolent regulator who maximizes total welfare. |
| Keywords: | Eco-Industry, Environmental Policy, Horizontal Mergers |
| JEL: | D62 H23 L11 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2008.46&r=reg |
| By: | Rui J. Lopes; Ana Santos (Universidade de vora); Jos‚ Caetano (CEFAGE-UE, Centro de Estudos e Forma‡Æo Avan‡ada em GestÆo e Economia, Universidade de vora) |
| Abstract: | The biggest producers and exporters of agricultural products have been adopting the genetic engineering in order to improve the factors productivity and the firms profits In the last decade, the United States of America (US) and the European Union (EU) have established a high divergent regulation on production, distribution and consumption of genetically modified organisms (GMOs). Apparently, the EUïs complex legislative framework related to GMOs was intend to satisfy the European consumers which are concerned about food safety and whish to make more informed choice about the food they eat. The aim of this paper is to understand the potential motivations behind the different policies on GM products adopted by US and EU. |
| Keywords: | Genetically Modified Organisms; Consumers preferences; Food security; Technical barriers to trade. |
| JEL: | F13 Q17 Q18 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:cfe:wpcefa:2008_10&r=reg |
| By: | Maria Claudia Lopez (Workshop in Political Theory and Policy Analysis, Indiana University, Bloomington, IN); James J. Murphy (Department of Economics, University of Alaska Anchorage, Anchorage, AK); John M Spraggon (Department of Resource Economics, University of Massachusetts Amherst); John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst) |
| Abstract: | In this paper we describe a field experiment conducted among mollusk harvesters in a community on the Pacific Coast of Columbia. The experiment is based on a standard linear public good and consists of two stages. In the first stage we compare the ability of monetary and nonmonetary sanctions among community members to increase contributions to the public good. In the second stage we add a government regulation with either a high or low sanction for noncompliance to community enforcement efforts. The results for the first stage are consistent with other comparisons of monetary and nonmonetary sanctions within groups; both led to higher contributions. The results from the second stage reveal that government regulations always complemented community enforcement efforts. While the subjects tended to reduce their sanctioning efforts under the government regulations, contributions and earnings were significantly higher than without government interventions. In fact, the combination of community and government enforcement efforts generated near-perfect contributions to the public good. However, more research into the combined roles of government intervention and community enforcement efforts is needed because the complementarity we find may be situation-specific. |
| Keywords: | Field experiments, public goods, government regulation, community enforcement |
| JEL: | C93 H41 Q2 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:dre:wpaper:2008-4&r=reg |
| By: | Ann Kjos |
| Abstract: | On June 29, 2007, the Payment Cards Center of the Federal Reserve Bank of Philadelphia sponsored a workshop led by Jeanne Hogarth, program manager, Consumer Education and Research Section, Division of Consumer and Community Affairs, Federal Reserve Board of Governors, to discuss the Board’s proposed changes to disclosure requirements for open-end credit, in particular, credit card billing statements and solicitation materials. Hogarth tied the proposed changes to her own research that identified certain behaviors most likely to affect the interest rates consumers pay for credit card borrowing. Given these research findings, Hogarth argued that having access to easily understood information about critical credit card terms and conditions can help consumers make more financially efficient decisions. |
| Keywords: | Regulation Z: Truth in Lending ; Credit cards |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpdp:08-02&r=reg |
| By: | John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); Wei Zhang (Department of Resource Economics, University of Massachusetts Amherst) |
| Abstract: | Under favorable but reasonable conditions, an imperfectly enforced emissions tax produces the efficient allocation of individual emissions control; aggregate emissions are independent of whether enforcement of the tax is sufficient to induce the full compliance of firms, and differences in individual violations are independent of firm-level differences. All of these desirable characteristics disappear when some firms under an emissions tax risk bankruptcy—the allocation of emissions control is inefficient, imperfect enforcement causes higher aggregate emissions, and financially insecure firms choose higher violations. |
| Keywords: | Bankruptcy, Emissions Taxes, Limited Liability |
| JEL: | L51 Q28 Q58 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:dre:wpaper:2008-3&r=reg |
| By: | Simona Tenaglia (ISFOL - Institute for the Development of Training for Workers); Marco Ventura (ISAE - Institute for Studies and Economic Analyses) |
| Abstract: | This paper aims at estimating the value of legal patent protection of environment-related technologies, using the real options approach. In particular, we manage to overcome the problem of the lack of data for those countries that do not collect patent renewal data. Following this estimation strategy, we rank the value of legal patent protection for seventeen countries, closely reproducing other rankings based on surveys, for instance the PatVal survey by the EU Commission (2006), but relying on macro data publicly available and easy to access. The unit value of damage is found to be the most important determinant of the value of patents granted by legal protection. |
| Keywords: | value of patents, legal protection, real options, abatement technology, environmental technologies. |
| JEL: | K40 O38 Q55 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:isa:wpaper:103&r=reg |
| By: | Thomas C O'Connor (Economics, National University of Ireland, Maynooth); |
| Abstract: | Using the change in ordinary dividend payout as a proxy for improved governance, I show that cross-listing in the U.S. is associated with enhanced protection for the minority ordinary shareholders of exchange listed non-U.S. firms. These firms substitute dividends for enhanced governance. I find no such effect for Rule 144a firms. Interestingly, I document evidence inconsistent with the legal bonding hypothesis for Level 1 firms. I believe that their ability to pay lower dividends post-listing is primarily due to their ability to credibly commit to fair treatment of thek minority investors, given their record for equitable treatment of their ordinary shareholders. They achieve this reputation by consistently paying out a sizable proportion of their earnings as dividends. I find that the firm-level governance of Level 1 firms, as measured by the number of closely held shares improves in the post-listing period. I find no such effect for Rule 144a traded firms. My results also have important implications for the agency models of dividends. |
| Keywords: | Cross-listing, legal bonding, dividend policy |
| JEL: | G15 G34 G35 C34 |
| URL: | http://d.repec.org/n?u=RePEc:may:mayecw:n1861107.pdf&r=reg |
| By: | Jürgen Odenius |
| Abstract: | This article reviews Germany's corporate governance system and the effectiveness of recent reforms. Since the early 1990s far-reaching reforms have complemented the traditional stakeholder system with important elements of the shareholder system. Instead of taking a view on the superiority of either system, this article raises the important question whether these reforms created sufficient flexibility for the market to optimize its corporate governance structure within well established social and legal norms. It concludes that there is scope for enhancing flexibility in three core areas, relating to (i) internal control mechanisms, especially the flexibility of board structures; (ii) self-dealing; and (iii) external control, particularly take-over activity. |
| Keywords: | Germany , Corporate governance , Economic reforms , Securities regulations , |
| Date: | 2008–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/179&r=reg |
| By: | Michèle Breton (GERAD, CREF and HEC Montréal); Lucia Sbragia (GERAD and HEC Montréal); Georges Zaccour (GERAD and Chair in Game Theory & Management HEC Montréal) |
| Abstract: | In this paper we develop a model to analyze, in a dynamic framework, how countries join international environmental agreements (IEAs). In the model, where countries suffer from the same environmental damage as a result of the total global emissions, a non-signatory country decides its emissions by maximizing its own welfare, whereas a signatory country decides its emissions by maximizing the aggregate welfare of all signatory countries. Signatory countries are assumed to be able to punish the non-signatories at a cost. When countries decide on their pollution emissions they account for the evolution of the pollution over time. Moreover, we propose a mechanism to describe how countries reach a stable IEA. The model is able to capture situations with partial cooperation in an IEA stable over time. It also captures situations where all countries participate in a stable agreement, or situations where no stable agreement is feasible. When more than one possibility coexists, the long-term outcome of the game depends on the initial conditions (i.e. the size of the initial group of signatory countries and the pollution level). |
| Keywords: | International Environmental Agreements, Non-Cooperative Dynamic Game, Coalition Stability |
| JEL: | C73 Q53 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2008.33&r=reg |