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on Regulation |
| By: | Vincenzo Atella; Jay Bhattacharya; Lorenzo Carbonari |
| Abstract: | The aim of this article is to analyze the relationship between drug price and drug quality and how it varies across two of the most common regulatory regimes in the pharmaceutical market: Minimum Efficacy Standards (MES) and Price Controls (PC). We develop a model of adverse selection where a pharmaceutical company can charge different prices to a heterogeneous group of buyers for its (innovative) drug, and we evaluate the properties of the equilibria under the two regimes. We model consumer heterogeneity stemming from differences in the willingness-to-pay for drug quality, measured through ex-post efficacy. The theoretical analysis provides two main results. First, the average drug quality delivered is higher under the MES regime than in the PC regime or a in combination of the two. Second, PC regulation reduces the difference in terms of high-low quality drug prices. The empirical analysis based on Italian and US data corroborates these results. |
| JEL: | I1 L51 L65 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14567&r=reg |
| By: | Yan Li (Centre for Competition Policy, University of East Anglia) |
| Abstract: | This study examines the impacts of reforms – privatization, new entry and independent regulatory authority – on mobile network penetration and expansion using a new and hitherto unused panel dataset for 30 national mobile markets (i.e. 29 OECD countries and China) over the time period 1991-2006 under a 3-equation econometric framework. The estimation results confirm that introducing new entry is, in general, positively correlated with mobile network penetration and expansion; and in particular, the third entry brings many more benefits than the second one. The results also highlight the crucial role of an independent regulator in privatized mobile markets. Especially, the dynamic estimation results suggest that without an independent regulator, privatization is, on average, negatively correlated with mobile network expansion, even in certain competitive market environments. |
| Keywords: | New entry, privatization, independent regulator, mobile network, econometric analysis |
| JEL: | L10 L51 L96 K23 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:ccp:wpaper:wp08-35&r=reg |
| By: | Tomas Konecny; Jan Myslivecek |
| Abstract: | One of the arguments against the Fair Trade scheme is that the guaranteed minimum price tends to depress world prices and thus the incomes of non-participating farmers (e.g. The Economist, 2006). We develop a model that distinguishes between the impact of the introduction of a Fair Trade market per se and the effect of minimum price policies given that a Fair Trade market actually exists. The model suggests that the claims against Fair Trade might not be correct. The introduction of a Fair Trade market may increase the incomes of both participating and non-participating farmers. The minimum contracting price as part of Fair Trade standards, however, precludes the full realization of the program’s potential benefits. The minimum price also paradoxically increases the profits of the middlemen whose local monopsony power the Fair Trade scheme originally aimed to retrench. Furthermore, the total surplus generated by Fair Trade cooperatives declines as the guaranteed price increases. |
| Keywords: | Certification, regulation, price setting, coffee, Fair Trade, monopsony |
| JEL: | D18 D21 D43 D45 D71 J51 Q17 Q56 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp367&r=reg |
| By: | Francesco Testa (Scuola Superiore Sant'Anna of Pisa); Fabio Iraldo (Scuola Superiore Sant'Anna of Pisa & IEFE – Institute for Environmental and Energy Policy and Economics, Bocconi University; Scuola Superiore Sant'Anna of Pisa & IEFE – Institute for Environmental and Energy Policy and Economics, Bocconi University) |
| Abstract: | The EMAS Regulation (Reg 761/01 EC) is an EU scheme for the implementation of an Environmental Management System (EMS) by any organization, implemented by the European Commission since the year 1993. The EMS has been originally proposed both by the European Commission and by ISO as the frontrunner of a series of policy tools that were conceived to enable companies to simultaneously pursue environmental objectives and competitive targets (in a synergetic way). Based on the unique dataset of the EVER project, this paper investigates whether or not an EMS implemented within the EMAS Regulation has an effect on firm performance both from an environmental and a competitive point of view. The econometric analysis shows a positive impact of well-designed environmental management system on environmental performance and, as a consequence, on technical and organizational innovations. Effects on other competitive variable as market performance, resource productivity and intangible asset are not strongly supported |
| Date: | 2008–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:sse:wpaper:200804&r=reg |
| By: | Maximilian J. B. Hall (Dept of Economics, Loughborough University) |
| Abstract: | On 8 October 2008 the UK Government announced a far-reaching plan to restore financial stability, protect depositors and re-invigorate the flow of credit to businesses and individuals in the UK. The £400 billion bailout plan embraced three elements: a massive expansion in emergency liquidity support from the Bank of England; recapitalisation of UK banks and building societies using taxpayers' money; and the provision of a Government guarantee of new short- and medium-term debt issuance made by UK-incorporated banks and building societies. This action proved necessary in the wake of continuing and substantial weaknesses in many banks' share prices despite the temporary ban on short-selling imposed by the Financial Services Authority. It followed two revisions to domestic deposit protection arrangements, and the adoption of a piecemeal approach to failure resolution which saw the eventual nationalisation of Northern Rock in February 2008, the nationalisation of Bradford and Bingley in September 2008 and the brokering of takeover rescues of Alliance and Leicester and HBOS by Banco Santander and Lloyds TSB respectively in July and September 2008, and of the Cheshire and Derbyshire Building Societies by the Nationwide Building Society in September 2008. This metamorphosis in approach to failure resolution by the UK authorities in response to the sub-prime crisis and the credit crunch – nationalisation by default to (part) nationalisation as the preferred course of action - is duly analysed in this article, as well as their proposals for banking reforms which still have to be agreed by Parliament. |
| Keywords: | UK banks; banking regulation and supervision; failure resolution; central banking; deposit protection. |
| JEL: | E53 E58 G21 G28 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2008_14&r=reg |
| By: | Rinaldo Brau; Raffaele Doronzo; Carlo V. Fiorio; Massimo Florio |
| Abstract: | The paper offers an exploratory empirical analysis of the impact on consumers’ welfare of the reforms of the gas industry in EU-15 area. After considering the key features of the natural gas industry and of its reform in selected countries, we study the relationship between regulatory reform indicators and price dynamics by means of panel data techniques. We find that none of the relationships between price dynamics and regulatory reform indicators is robust to different econometric specifications. Our findings suggest that until now there is limited evidence of beneficial effects of a standard package gas industry reforms for the European consumers. Country specific factors and price inertia seem to be more important than the reforms as determinants of consumers’ prices. |
| Keywords: | Natural gas industry, privatization, liberalization, regulatory reform. |
| JEL: | L32 L33 L95 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:200816&r=reg |
| By: | Rafael La Porta; Andrei Shleifer |
| Abstract: | In developing countries, informal firms (those that are not registered with the government) account for about half of all economic activity. We consider three broad views of the role of such firms in economic development. According to the romantic view, these firms would become the engine of economic growth if not stopped by government regulation. According to the parasite view, informal firms, by avoiding taxes and regulations, unfairly compete with the more efficient formal firms and, by taking away their market share, undermine economic progress. According to the dual view, informal firms are highly inefficient, do not pose much threat to the formal firms, but also do not contribute to economic growth, which is driven by the efficient formal firms. Using data from World Bank firm level surveys, we find that informal firms are small and extremely unproductive, compared even to the small formal firms, and especially relative to the larger formal firms. Compared to the informal firms, formal ones are run by much better educated managers. As a consequence, they use more capital, have different customers, market their products, and use more external finance. Hardly any formal firms had ever operated informally. This evidence is inconsistent with the romantic and parasite views, but supports the dual view. In this "Walmart" theory of economic development, growth comes from the creation of the highly productive formal firms. Informal firms keep millions of people alive, but disappear over time. |
| JEL: | O17 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14520&r=reg |