nep-reg New Economics Papers
on Regulation
Issue of 2008‒10‒28
six papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage By Meredith Fowlie
  2. Regulation and governance of the firm By Michael Dietrich; Jackie Krafft; Jacques Laurent Ravix
  3. Commercial Policy and Foreign Ownership By Jota Ishikawa; Yoichi Sugita; Laixun Zhao
  4. China's New Labour Contract Law:No Harm to Employment? By Yu-Fu Chen; Michael Funke
  5. Are Product and Labour Market Reforms Mutually Reinforcing? By Paul Cavelaars
  6. A Meaningful U.S. Cap-and-Trade System to Address Climate Change By Robert N. Stavins

  1. By: Meredith Fowlie
    Abstract: For political, jurisdictional and technical reasons, environmental regulation of industrial pollution is often incomplete: regulations apply to only a subset of facilities contributing to a pollution problem. Policymakers are increasingly concerned about the emissions leakage that may occur if unregulated production can be easily substituted for production at regulated firms. This paper analyzes emissions leakage in an incompletely regulated and imperfectly competitive industry. When regulated producers are less polluting than their unregulated ounterparts, emissions under incomplete regulation can exceed the level of emissions that would have occurred in the absence of regulation. Converseley, when regulated firms are relatively more polluting, aggregate emissions under complete regulation can exceed aggregate emissions under incomplete regulation. In a straightforward application of the theory of the second best, I show that incomplete regulation can welfare dominate complete regulation of emissions from an asymmetric oligopoly. The model is used to simulate greenhouse gas emissions from California's electricity sector under a source-based cap-and-trade program. Incomplete regulation that exempts out-of-state producers achieves approximately a third of the emissions reductions achieved under complete regulation at more than twice the cost per ton of emissions abated.
    JEL: Q48
    Date: 2008–10
  2. By: Michael Dietrich (Université de Sheffield - University of Sheffield); Jackie Krafft (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis); Jacques Laurent Ravix (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis)
    Abstract: Uniformity in modes of regulation and governance is now widely debated. The predominant thesis is that there should be a superior model promoting optimality by disclosure of information and transparency. But today, this thesis is greatly contested, since the adoption of a unique and universal set of rules and arrangements neglects the diversity of national experiences and the heterogeneity of firms, institutions and social norms. Moreover, evidence shows that this unique model of regulation and governance tends to generate major failures and turbulences. What emerges as a result is that different types of rules and norms govern entrepreneurial as well as public firms in different industries and stages of their development. The special issue following this introduction aims at discussing this timely debate on uniformity versus variety of modes of regulation and governance, and especially privileges analytical and empirical contributions covering the following dimensions of the debate: new approaches on regulation and governance in the domain of economics of the firm, business strategy, law and economics; new evidence on the evolution of regulation and governance at the firm, industry, and national levels.
    Date: 2008
  3. By: Jota Ishikawa; Yoichi Sugita; Laixun Zhao
    Abstract: To serve the domestic market, foreign multinationals often not only export there but also control local firms through FDI. This paper examines the effects of trade and industrial policies on prices, outputs, profits, and welfare when exports and FDI coexist. Specifically, we focus on the case in which a foreign firm has full control of a local firm through partial ownership. Cross-border ownership on the basis of both financial interests and corporate control leads to horizontal market-linkages through which tariffs and production subsidies may harm a locally-owned firm but benefit a foreign firm. Foreign ownership regulation benefits a locally-owned firm.
    Keywords: foreign direct investment, corporate control, tariffs, production subsidies, ownership regulation
    JEL: F12 F13 F23
    Date: 2008–10
  4. By: Yu-Fu Chen; Michael Funke
    Abstract: In January 2008, China imposed a new labour contract law. This new law is the most significant reform to the law of employment relations in mainland China in more than a decade. The paper provides a theoretical framework on the inter-linkages between labour market regulation, option value and the choice and timing of employment. All in all, the paper demonstrates that the Labour Contract Law in it´s own right will have only small impacts upon employment in the fast-growing Chinese economy. On the contrary, induced increasing unit labour costs represent the real issue and may reduce employment.
    Keywords: China, Labour Contract Law, Real Options, Employment
    JEL: C61 D81 D92 J23
    Date: 2008–10
  5. By: Paul Cavelaars
    Abstract: This paper analyses the relationship between product market competition and labour market institutions in a general equilibrium context. It concludes that an increase in product market competition, enhanced .exibility of labour supply, social security reform and a reduction in union bargaining power are mutually re-inforcing (in terms of their employment impact) in some, but not all cases. This stresses the need for an extremely careful design of such reforms.
    Keywords: labour market regulation; wage bargaining.
    JEL: E24 E52 J50
    Date: 2008–09
  6. By: Robert N. Stavins (Harvard University)
    Abstract: There is growing impetus for a domestic U.S. climate policy that can provide meaningful reductions in emissions of CO2 and other greenhouse gases. In this article, I propose and analyze a scientifically sound, economically rational, and politically feasible approach for the United States to reduce its contributions to the increase in atmospheric concentrations of greenhouse gases. The proposal features an up-stream, economy-wide CO2 cap-and-trade system which implements a gradual trajectory of emissions reductions over time, and includes mechanisms to reduce cost uncertainty. I compare the proposed system with frequently discussed alternatives. In addition, I describe common objections to a cap-and-trade approach to the problem, and provide responses to these objections.
    Keywords: Cap-and-Trade System, Carbon Dioxide, Greenhouse Gas Emissions, Global Climate Change, Carbon Taxes
    JEL: Q54 Q28 Q38 Q48 Q58
    Date: 2008–10

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