nep-reg New Economics Papers
on Regulation
Issue of 2009‒05‒02
twelve papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Spatial Heterogeneity in Environmental Regulation Enforcement and the Firm Location Decision among U.S. Counties By O. Ashton Morgan; Simon Condliffe
  2. Incentives to Innovate and Social Harm: Laissez-Faire, Authorization or Penalties? By Immordino, Giovanni; Pagano, Marco; Polo, Michele
  3. Conceptualizing Informality: Regulation and Enforcement By Kanbur, Ravi
  4. On the Theory and Practice of Water Regulation By Tsur, Yacov
  5. Banking on politics By Braun, Matias; Raddatz, Claudio
  6. Financial Stability Frameworks and the Role of Central Banks: Lessons from the Crisis By Erlend Nier
  7. Ten Years of Product Market Reform in OECD Countries: Insights from a Revised PMR Indicator By Anita Wölfl; Isabelle Wanner; Tomasz Kozluk; Giuseppe Nicoletti
  8. Japan MRL Regulation By Takagi, Chifumi; Thornsbury, Suzanne
  9. Deleveraging After Lehman--Evidence from Reduced Rehypothecation By James Aitken; Manmohan Singh
  10. Market Structure and the Penetration of Alternative Energy Technologies By Tsur, Yacov; Zemel, Amos
  11. Structural Reforms and the Benefits of the Enlarged EU Internal Market: Much Achieved and Much to Do By Jens Arnold; Peter Hoeller; Margaret Morgan; Andreas Wörgötter
  12. Private Pensions and Policy Responses to the Financial and Economic Crisis By Pablo Antolín; Fiona Stewart

  1. By: O. Ashton Morgan; Simon Condliffe
    Abstract: We estimate a negative binomial model with fixed effects to examine the impact of spatial differences in environmental regulation on manufacturing capital flows. Using a newly available data set, we find that stricter air quality standards deter births of polluting plants, suggesting heterogeneity in regulatory standards may create a temporal browning process. We also find that spatial differences in environmental regulation do not play a role in the location decision of non-pollution intensive plants. Key Words: Environmental regulation, firm location, air pollution
    JEL: R38 Q28 Q53
    Date: 2009
  2. By: Immordino, Giovanni; Pagano, Marco; Polo, Michele
    Abstract: We analyze optimal policy design when firms' research activity may lead to socially harmful innovations. Public intervention, affecting the expected profitability of innovation, may both thwart the incentives to undertake research (average deterrence) and guide the use to which innovation is put (marginal deterrence). We show that public intervention should become increasingly stringent as the probability of social harm increases, switching first from laissez-faire to a penalty regime, then to a lenient authorization regime, and finally to a strict one. In contrast, absent innovative activity, regulation should rely only on authorizations, and laissez-faire is never optimal. Therefore, in innovative industries regulation should be softer.
    Keywords: authorization; deterrence; innovation; liability for harm; safety regulation
    JEL: D73 K21 K42 L51
    Date: 2009–04
  3. By: Kanbur, Ravi
    Abstract: The informality discourse is large, vibrant and expanding fast. But there is a certain conceptual incoherence to the literature. New definitions of informality compete with old definitions leading to a plethora of alternative conceptualisations. While some individual studies may apply a tight definition consistently, the literature as a whole is in a mess. This paper proposes that informality and formality should be seen in direct relation to economic activity in the presence of specified regulation(s). Relative to the regulation(s), four conceptual categories that can help frame the analysis are: (A) regulation applicable and compliant, (B) regulation applicable and non-compliant, (C) regulation non-applicable after adjustment of activity and (D) regulation non-applicable to the activity. Rather than use the generic labels informal/formal, it would be preferable if the analysis focused on these four categories (or even more disaggregated as appropriate). A central determining factor in the impacts of regulation on economic activity across these four categories is the nature and intensity of enforcement. While lack of enforcement is well documented, understanding of its determinantsâwhy and to what extent a government would not enforce a regulation that is has itself passed, and why non-enforcement varies from one context to another, is relatively neglected in the literature. Thus specificity on regulation and on enforcement is the key to achieving conceptual clarity in the analytical literature and in the policy discourse on informality.
    Keywords: Food Security and Poverty, Health Economics and Policy, International Development, International Relations/Trade, Political Economy,
    Date: 2009–02
  4. By: Tsur, Yacov
    Abstract: We study water regulation for a schematic water economy representing a wide range of real world situations. A water policy has inter- and intra-temporal components. The first determines the limits on extractions from the naturally replenished sources, given the stochastic nature of recharge processes associated with uncertain precipitation. The intra-temporal regulation is concerned mainly with the allocating of the extracted and produced water among the end-users. The prices that implement the optimal intra-temporal allocation are derived. Regulation issues associated with cost recovery and asymmetric information are discussed.
    Keywords: scarcity, pricing, optimal allocation, water economy, C61, D82, Q11, Q25,
    Date: 2009–01–15
  5. By: Braun, Matias; Raddatz, Claudio
    Abstract: This paper presents new data from 150 countries showing that former cabinet members, central bank governors, and financial regulators are many orders of magnitude more likely than other citizens to become board members of banks. Countries where the politician-banker phenomenon is more prevalent have higher corruption and more powerful yet less accountable governments, but not better functioning financial systems. Regulation becomes more pro-banker where this happens more often. Furthermore, a higher fraction of the rents that are created accrue to bankers, former politicians are not more likely to be directors when their side is in power, and banks are more profitable without being more leveraged. Rather than supporting a public interest view, the evidence is consistent with a capture-type private interest story where, in exchange for a non-executive position at a bank in the future, politicians provide for beneficial regulation.
    Keywords: Banks&Banking Reform,Public Sector Corruption&Anticorruption Measures,,Access to Finance,Corporate Law
    Date: 2009–04–01
  6. By: Erlend Nier
    Abstract: This paper sets out general principles for the design of financial stability frameworks, starting from an analysis of the objectives and tools of financial regulation. The paper then offers a comprehensive analysis of the costs and benefits of the two main models that have emerged for modern financial systems: the integrated model, with a single supervisor outside of the central bank, and the twin-peaks model, with a systemic risk regulator (central bank) on the one hand and a conduct of business regulator on the other. The paper concludes that the twin-peaks model may become more attractive when regulatory structures are geared more explicitly towards the mitigation of systemic risk-including through the introduction of new macroprudential tools that could be used alongside monetary policy to contain macro-systemic risks; through enhanced regulation and special resolution regimes for systemically important institutions; and a more holistic approach to the oversight of clearing and settlement systems. Since the optimal solution may well be path-dependent and specific to the development of financial markets in any given country, a number of hybrid models are also discussed.
    Keywords: Central banks , Financial crisis , Monetary policy , Financial stability , Financial systems , Financial sector , Bank supervision , Bank regulations , Bank resolution , Credit risk , Risk management ,
    Date: 2009–04–10
  7. By: Anita Wölfl; Isabelle Wanner; Tomasz Kozluk; Giuseppe Nicoletti
    Abstract: This paper describes patterns and developments of regulation that potentially affect product market competition in OECD countries over the past decade. It uses the 2008 update and revision of the OECD indicators of product market regulation (PMR) that integrate to a larger extent than in the past information on sector-specific regulation and adapt a simpler and more transparent aggregation technique. The results show that OECD countries have extensively liberalised product markets over the past ten years and – as a consequence - convergence of regulation across OECD countries can be observed. However, reforms appear to have slowed in the most recent period (2003-2008) as compared with the earlier period (1998- 2003). Easing of product market regulation appears to have been driven to a considerable extent by reforms in sector-specific regulation, notably as regards the gas, electricity and telecommunications markets. Countries appear also to have followed consistent reform approaches. However, scope for further reform remains, especially as regards controls of governments over businesses, and as regards certain sectors such as professional services and retail trade.<P>Dix ans de réformes sur le marché des produits dans les pays de l’OCDE : Un aperçu sur la base d’un indicateur RMP révisé<BR>Ce papier décrit les évolutions observées en matière de réglementation potentiellement entravant le jeu de la concurrence sur les marchés de produits des pays de l'OCDE au cours des dix dernières années. On utilise une version actualisée et révisée des indicateurs de réglementation des marchés de produits (RMP) qui intègre dans des proportions plus vastes que par le passé des informations sur les réglementations sectorielles et utilise une technique d'agrégation plus simple et transparente. D'après les résultats, les pays de l’OCDE ont considérablement libéralisé leurs marchés de produits depuis dix ans et – par conséquence – la convergence des réglementations peut être observée. Cependant, le rythme des réformes semble avoir ralenti ces dernières années (de 2003 à 2008) par rapport à la période précédente (de 1998 à 2003). Sur l’ensemble de la période, les réformes de la réglementation semblent avoir reposé considérablement sur la réforme des réglementations sectorielles, notamment dans les marchés du gaz, de l’électricité et des télécommunications. Les pays semblent avoir également introduit des réformes d'une façon cohérente. Cependant, il existe encore des marges de manœuvre considérables, notamment en termes du contrôle exercé par l'État, et dans quelques secteurs, tels que les services professionnels et le commerce de détail.
    Keywords: indicators of product market regulation, indicateurs de réglementation des marchés de produits
    JEL: K2 L5
    Date: 2009–04–23
  8. By: Takagi, Chifumi; Thornsbury, Suzanne
    Keywords: MRL, apple, cherry, export, Farm Management, International relations/trade, crop production/industries,
    Date: 2008–07
  9. By: James Aitken; Manmohan Singh
    Abstract: Rehypothecation is the practice that allows collateral posted by, say, a hedge fund to their prime broker to be used again as collateral by that prime broker for its own funding. In the United Kingdom, such use of a customer’s assets by a prime broker can be for an unlimited amount of the customer’s assets. And moreover, there are no customer protection rules (such as in the United States under the Securities Act of 1933). The paper shows evidence that, following Lehman’s bankruptcy, the extent of rehypothecation has declined substantially, in part because investment firms fear losing collateral if their prime broker becomes insolvent. While less rehypothecation reduces counterparty risk in the system, it also reduces market liquidity.
    Keywords: Financial institutions , United States , United Kingdom , Capital markets , Securities markets , Hedge funds , Financial risk , Bankruptcy , Securities regulations ,
    Date: 2009–03–17
  10. By: Tsur, Yacov; Zemel, Amos
    Abstract: Energy market prices ignore external effects, hence miss-allocate energy generation between (polluting) fossil fuels and (clean) solar technologies. Correcting the failure requires understanding the market allocation forces at hand. An important feature of solar energy is that its cost of supply is predominantly due to upfront investments in capital infrastructure (rather than to the actual supply rate) and this feature has far reaching implications for the market allocation outcome. Studying the market allocation process, we specify the conditions under which solar technologies penetrate the energy sector. The framework is then used to analyze policy regulation in the form of taxing fossil energy and subsidizing investments in solar energy. The first policy measure addresses undesirable environmental effects associated with the use of fossil fuels and the second internalizes the benefits of learning by doing in the solar industry. Under certain conditions, a temporary subsidy on solar energy investments gives rise to a flourishing, self-sustained solar industry that will (eventually) drive fossil energy out of production.
    Keywords: energy, solar technologies, fossil fuels, price thresholds, regulation, environmental damage, learning by doing, C61, Q42, Q58,
    Date: 2009–01–31
  11. By: Jens Arnold; Peter Hoeller; Margaret Morgan; Andreas Wörgötter
    Abstract: High expectations surrounded the two waves of eastward EU enlargement in 2004 and 2007, with the extension of the EU Internal Market being expected to deliver a substantial boost to economic growth in new and old member States alike. Indeed, considerable progress has been made, with existing evidence pointing to increased trade and FDI flows, enhanced east-west migration and a more stable macroeconomic environment. However, completion of the internal market is progressing at an uneven pace, and comparatively less progress can be seen in services industries, which provide over two-thirds of jobs and value added in the economy. Empirical estimates suggest that competition and trade-enhancing reforms in services industries could generate substantial productivity improvements across EU member economies. Over a period of 10 years, the predicted increase in labour productivity resulting from a bold reform package is around 10% for the average EU country, and new member States stand to gain even more. In addition to service-sector reform, priorities towards a more integrated EU internal market should include removing remaining barriers to labour mobility, improving transport infrastructure, mutual recognition of qualifications, and enhanced market integration of network industries. Finally, a more explicit use of benchmarking may help to enhance the momentum of future internal market reforms.<P>Les réformes structurelles et les avantages du marché intérieur élargi de l’UE : Beaucoup a été fait, mais beaucoup reste à faire<BR>On attendait beaucoup des deux vagues d’élargissement de l’UE à l’est en 2004 et 2007, et le développement du marché intérieur de l’UE devait grandement dynamiser la croissance économique dans les nouveaux et dans les anciens États membres. Effectivement, d’énormes progrès ont été accomplis, les données actuelles indiquant une intensification des échanges et des flux d’IDE, un renforcement des migrations est-ouest et un environnement macroéconomique plus stable. Mais l’achèvement du marché intérieur progresse à un rythme inégal et on a comparativement moins avancé dans les activités de services, qui représentent plus des deux tiers des emplois et de la valeur ajoutée dans l’économie. Les simulations effectuées à partir d’un modèle empirique montrent que des réformes qui amélioreraient la concurrence et renforceraient les échanges dans les activités de services pourraient se traduire par des gains substantiels de productivité dans les États membres de l’UE. Sur une période de dix ans, la croissance prédite de la productivité du travail qui résulterait d’un ambitieux programme de réformes est de l’ordre de 10 % pour le pays moyen de l’UE, et les nouveaux États membres tireraient encore davantage profit de ces réformes. De plus, les priorités de la réforme structurelle en vue d’un marché intérieur de l’UE plus intégré devraient être les suivantes : l’élimination des obstacles qui subsistent à la mobilité des travailleurs, l’amélioration des infrastructures de transport, la reconnaissance mutuelle des qualifications et une intégration plus étroite des marchés dans les industries de réseau. Enfin, une utilisation plus explicite de l’évaluation comparative pourrait contribuer à accélérer les réformes futures concernant le marché intérieur.
    Keywords: productivity, croissance économique, productivité, réglementation, réforme structurelle, regulation, integration, intégration, structural reforms, economic growth
    JEL: D24 E23 F15 K23 L11 L51
    Date: 2009–04–24
  12. By: Pablo Antolín; Fiona Stewart
    Abstract: This paper discusses responses to current financial and economic crisis by regulators, supervisors and policy makers in the area of private pensions. These responses are examined in the light of international guidelines, best practices and recommendations to improve the design of private pensions.<P>Pensions privées et réponses politiques à la crise financière et économique<BR>Ce document examine les réponses apportées à la crise financière et économique par les régulateurs, les superviseurs et les responsables politiques dans le domaine des pensions privées. Ces réponses sont examinées à la lumière des meilleures pratiques, des recommandations et des principes internationaux en vue d‘améliorer la conception des systèmes de pensions privées.
    Keywords: pensions de retraite, regulation, supervision, supervision, régulation, private pensions, pensions privées, risk management, gestion des risques, defined benefit, defined contribution, funding and solvency rules, plans de retraite à cotisations définies et à prestations définies, règles de financement et de solvabilité
    JEL: D14 D91 E21 G11 G38 J14 J26
    Date: 2009–04

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