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on Regulation |
| By: | Ojo, Marianne |
| Abstract: | This paper traces the developments that have contributed to the importance of risk in regulation. Not only does it consider theories associated with risk, it also discusses explanations as to why risk has become so important within regulatory and governmental circles. Two forms of risk regulation, namely risk based regulation and meta regulation are considered. As well as considering the application of both in jurisdictions such as the UK, the paper places greater focus in discussing the importance of meta regulation in jurisdictions such as Germany, Italy and the US. The preference for meta regulation is based on the premises, not only of the advantages considered in this paper but also on the application of Basel 11 in several jurisdictions. Whilst meta regulation also has its disadvantages, the impact of risk based regulation on the use of external auditors plays a part in the preference for meta regulation. |
| Keywords: | meta regulation; enforced self regulation;risk; compliance |
| JEL: | K2 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:13723&r=reg |
| By: | Frank A.G. den Butter (VU University Amsterdam); Marc de Graaf (VU University Amsterdam); André Nijsen (VU University Amsterdam) |
| Abstract: | This paper explores the feasibility to extend the Standard Cost Model (SCM) for calculating the costs of government regulation by taking all transaction costs into account which stem from the principal/agent relationship between regulatory authorities and economic entities. From that perspective these transaction costs do not only relate to the bonding costs of the regulated entities – part of these costs can be regarded as the administrative burden of regulation for the private sector – but also to the monitoring costs of the regulators and to the residual loss. These latter costs can be regarded as cost to society due to e.g. miscommunication on the aims of regulation, and are, of course, hard to quantify. A cost calculation using the (extended) SCM presumes that the regulatory rules are given and set autonomously by the regulatory authorities. However, it may be welfare enhancing if regulations are fashioned in such a way that net benefits are optimized. From that perspective the paper looks at the possibility to select optimal regulation by means of a cost benefit analysis. A major argument is that the benefits of regulatory measures, e.g. to internalize external effects, comprise avoiding societal costs associated with no or less regulation. |
| Keywords: | bonding costs; compliance costs; monitoring costs; welfare effects of government regulation |
| JEL: | D73 D78 H11 H83 |
| Date: | 2009–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20090013&r=reg |
| By: | Jean-Michel Glachant |
| Abstract: | The regulation of network industries has undergone profound transformation in the past twenty years. The regulated industry is no longer the same, being exposed to new competitive dynamics having revolutionized their industrial framework, technology and interactions with users. There also have been fundamental changes in what regulation is feasible. In an “information society” a model devised in the 19th century to set prices for monopoly infrastructures such as bridges, roads and railways no longer captures the essential: the interactive dynamics created by technologies, uses, and markets. |
| Keywords: | Regulatory economics, network industries, utilities regulation, information society |
| Date: | 2009–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2009/05&r=reg |
| By: | de la Torre, Augusto; Ize, Alain |
| Abstract: | The Subprime crisis largely resulted from failures to internalize systemic risk evenly across financial intermediaries and recognize the implications of Knightian uncertainty and mood swings. A successful reform of prudential regulation will need to integrate more harmoniously the three paradigms of moral hazard, externalities, and uncertainty. This is a tall order because each paradigm leads to different and often inconsistent regulatory implications. Moreover, efforts to address the central problem under one paradigm can make the problems under the others worse. To avoid regulatory arbitrage and ensure that externalities are uniformly internalized, all prudentially regulated intermediaries should be subjected to the same capital adequacy requirements, and unregulated intermediaries should be financed only by regulated intermediaries. Reflecting the importance of uncertainty, the new regulatory architecture will also need to rely less on markets and more on"holistic"supervision, and incorporate countercyclical norms that can be adjusted in light of changing circumstances. |
| Keywords: | Debt Markets,Banks&Banking Reform,Emerging Markets,Labor Policies,Financial Intermediation |
| Date: | 2009–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4842&r=reg |
| By: | Paul L. Joskow |
| Abstract: | The industry structure and regulatory framework that characterizes the electric power sector in the U.S. is in a state of disarray. Some regions have adopted a fully liberalized electricity sector model, others have retained the traditional model of regulated vertically integrated monopolies, while still other regions are "stuck" with combinations of both. This situation will undermine the ability of the U.S. electric power sector (a) to provide an abundant and reliable supply of electricity efficiently, (b) to confront retail consumers with the appropriate prices to encourage efficient utilization of electricity, (c) to meet greenhouse gas mitigation goals efficiently, and (d) to support efforts to increase energy security and reliability. A federal reform program for dealing with the underlying structural and regulatory problems is suggested. |
| Keywords: | electricity, regulation, deregulation, energy |
| Date: | 2009–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2009/01&r=reg |
| By: | Hayley H. Chouinard; David E. Davis; Jeffrey LaFrance; Jeffrey M. Perloff (School of Economic Sciences, Washington State University) |
| Abstract: | Determining the impacts on consumers of government policies affecting the demand for food products requires a theoretically consistent micro-level demand model. We estimate a system of demands for weekly city-level dairy product purchases by nonlinear three stage least squares to account for joint determination between quantities and prices. We analyze the distributional effects of federal milk marketing orders, and find results that vary substantially across demographic groups. Families with young children suffer, while wealthier childless couples benefit. We also find that households with lower incomes bear a greater regulatory burden due to marketing orders than those with higher income levels. |
| Keywords: | Milk, marketing orders, dairy industry regulation |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:wsu:wpaper:chouinard-3&r=reg |
| By: | Ojo, Marianne |
| Abstract: | This paper considers the need for a more pro active approach which facilitates greater on site work being carried out by supervisors – as highlighted in the Legal and General Case. It also considers the recommendations made to the UK’s regulator - the FSA, and in particular to the FSA Board, following the Legal and General Case. The recommendations are compared to the Basel Committee’s Core Principles for Effective Banking Supervision. In drawing a comparison, the importance of independent verification of work carried out by external auditors, be it through on-site examinations or the use of external experts, is once again emphasised. The involvement of external auditors or other experts in the supervisory process should not relieve a regulator from on site supervisory responsibilities. As vital as an external auditor’s work is, it is also important to verify such work. |
| Keywords: | pro active;monitoring;on-site;supervision;inspections |
| JEL: | K2 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:13688&r=reg |
| By: | Romana L. Autrey (Harvard Business School, Accounting and Management Unit); Francesco Bova (Rotman School of Management, University of Toronto) |
| Abstract: | Gray markets arise when a manufacturer's products are sold outside of its authorized channels, for instance when goods designated for a foreign market are resold domestically. One method multinationals use to combat gray markets is to increase internal transfer prices to foreign subsidiaries in order to increase the gray market's cost base. We illustrate that when a gray market competitor is present, the optimal price for internal transfers exceeds marginal cost, but decreases in the competitiveness of the domestic economy. Moreover, we illustrate that gray markets may cause unintended social welfare consequences when domestic governments mandate the use of arm's length transfer prices between international subsidiaries. Specifically, a shift to arm's length transfer pricing erodes domestic consumer surplus by making the gray market less competitive domestically. Under certain circumstances, the domestic welfare destruction arising from this erosion dominates the domestic welfare gains that accompany a shift to arm's length transfer pricing. Finally, the analysis illustrates that in a gray market setting, the transfer price that maximizes a multinational's profits may also be the same one that maximizes the social welfare of the domestic economy that houses it. |
| Keywords: | transfer pricing, gray markets, regulation |
| JEL: | D43 F23 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:09-098&r=reg |
| By: | Antonio Nicita (University of Siena); Matteo Rizzolli (University of Milan - Bicocca) |
| Abstract: | In this paper we outline the economic rationale behind the virtual strike, and workers' incentives to use this bargaining solution rather than resorting to standard strike. We show that, from a welfare perspective, a virtual strike always dominates a standard strike and it would be most needed precisely when workers have weaker incentives to adopt it. We then discuss the pros and cons of legally regulating the virtual strike rather than leaving it to self-regulation. Finally, we apply our findings to the analysis of Italy’s draft legislation on virtual strikes. |
| Keywords: | stoppage strike, virtual strike, penal code, labor law and economics |
| JEL: | D74 D78 J52 J83 K31 M55 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ent:wpaper:wp08&r=reg |
| By: | Wouter den Haan; Vincent Sterk |
| Abstract: | In this paper, we analyze the business cycle behavior of home mortgages and consumer credit and investigate whether the observed changes. and in particular observed changes in the comovement between the loan variables and real activity. are likely to be caused by changes in financial markets. We find that there may have been such a role for changes in markets for consumer credit, but even before the financial crisis hit, the data do not support the hypothesis that changes in mortgage markets reduced the impact of economic shocks on real activity. |
| JEL: | C10 E44 F15 F36 F37 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:204&r=reg |
| By: | Sandén, Klas (Centre for Labour Market Policy Research (CAFO)) |
| Abstract: | This paper makes a theoretical contribution by investigating how the optimal copyright legislation depend on hidden information. A mixed hidden action – hidden information model is used. The regulator neither observes the type of firm nor the quality choice of firms. The paper provides no evidence that hidden information can motivate a copyright legislation. In fact it shows that the optimal policy, with asymmetric information, is a reward system that is second best. |
| Keywords: | Asymmetric information; Copyright; Reward system; Legislation |
| JEL: | D20 D82 |
| Date: | 2008–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vxcafo:2009_004&r=reg |
| By: | Doepke, Matthias; Zilibotti, Fabrizio |
| Abstract: | Child labor is a persistent phenomenon in many developing countries. In recent years, support has been growing among rich-country governments and consumer groups for the use of trade policies, such as product boycotts and the imposition of international labor standards, to reduce child labor in poor countries. In this paper, we discuss research on the long-run implications of such policies. In particular, we demonstrate that such measures may have the unintended side effect of lowering domestic support for banning child labor within developing countries, and thus may contribute to the persistence of the child-labor problem. |
| JEL: | J20 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7196&r=reg |