nep-reg New Economics Papers
on Regulation
Issue of 2009‒05‒16
thirteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Market Concentration and Business Survival in Static v Dynamic Industries By Andrew Burke; Aoife Hanley
  2. Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production By Michael I. Cragg; Matthew E. Kahn
  3. Optional linear input prices in vertical relations By Claudia Salim
  4. Taxation and Regulation of Smoking, Drinking and Gambling in the European Union By Sijbren Cnossen; David Forrest; Stephen Smith
  5. Environmental Regulations and the Structure of U.S. Hog Farms By Nene, Gibson; Azzam, Azzeddine M.; Schoengold, Karina
  6. Impact of Government-Sponsored Pollution Prevention Practices on Environmental Compliance and Enforcement: Evidence from a Sample of US Manufacturing Facilities By Sam, Abdoul G.
  7. Competition, innovation and intellectual property rights in software markets By Michiel Bijlsma; Paul de Bijl; Viktoria Kocsis
  8. Implications of the Air Compliance Agreement for Livestock Producers By Hadrich, Joleen C.; Wolf, Christopher A.
  9. Fuel versus Food By Chakravorty, Ujjayant; Hubert, Marie-Helene; Nostbakken, Linda
  10. The Effect of Employment Protection Legislation and Financial Market Imperfections on Investment: Evidence from a Firm-Level Panel of EU countries By Federico Cingano; Marco Leonardi; Julian Messina; Giovanni Pica
  11. Structural Policies to Overcome Geographic Barriers and Create Prosperity in New Zealand By Yvan Guillemette
  12. Efficient monitoring and control in intangibles-driven economies: is full independence always required? By Y. Biondi; P. Giannoccolo; A. Reberioux
  13. GMO Testing Strategies and Implications for Trade: A Game Theoretic Approach By Konduru, Srinivasa; Kalaitzandonakes, Nicholas; Magnier, Alexandre

  1. By: Andrew Burke; Aoife Hanley
    Abstract: We propose that the effect of market concentration on firm survival is different according to whether an industry is static (low entry and exit) or dynamic. In our empirical analysis we find support for this hypothesis. Industry concentration rates reduce the survival of new plants but only in markets marked by low entry and exit rates. Specifically, a 10 percent increase in the 5-firm concentration ratio in a dynamic market raises the survival rate of new ventures by approximately 2 percent. Our results have implications for the antitrust/competition law indicating less need for regulation of dominant firms in dynamic industries characterized by high entry and exit rates. We use a unique dataset comprising the population of new ventures that enter the UK market in 1998
    Keywords: new firms, start-ups, survival, dynamism, competition policy, industry concentration
    JEL: L11 L25 M13 M40
    Date: 2009–05
  2. By: Michael I. Cragg; Matthew E. Kahn
    Abstract: Stringent regulation for mitigating greenhouse gas emissions will impose different costs across geographical regions. Low-carbon, environmentalist states, such as California, would bear less of the incidence of such regulation than high-carbon Midwestern states. Such anticipated costs are likely to influence Congressional voting patterns. This paper uses several geographical data sets to document that conservative, poor areas have higher per-capita carbon emissions than liberal, richer areas. Representatives from such areas are shown to have much lower probabilities of voting in favor of anti-carbon legislation. In the 111th Congress, the Energy and Commerce Committee consists of members who represent high carbon districts. These geographical facts suggest that the Obama Administration and the Waxman Committee will face distributional challenges in building a majority voting coalition in favor of internalizing the carbon externality.
    JEL: Q4 Q54 R1
    Date: 2009–05
  3. By: Claudia Salim (Free University of Berlin)
    Abstract: This paper examines how the option of a regulated linear input price affects vertical contracting, where a monopolistic upstream supplier sequentially offers supply contracts to two symmetric downstream firms. We find that equilibrium contracts vary with production cost and regulated price level: If the regulated price is not too high, the option allows for price discrimination, but prevents foreclosure in the intermediary market. Indeed, if both cost and optional price are rather low, non-discriminatory input prices below cost may arise. Optional input prices are socially more desirable than a flat ban on price discrimination, as consumers benefit from more intense downstream competition.
    Keywords: price discrimination, vertical contracting, exclusion, regulatory outside option
    JEL: D42 L11 L42
    Date: 2009–04
  4. By: Sijbren Cnossen; David Forrest; Stephen Smith
    Abstract: Smoking is the single largest cause of avoidable death in the European Union accounting for over half a million deaths each year. One in ten of all 11-year olds have been drunk twice or more times, possibly causing lasting physical and mental harm. Electronic gaming machines are the crack cocaine of gambling. Consumer sovereignty, on the other hand, indicates that people should be allowed to smoke as long as they do not harm others. There is sound medical evidence, furthermore, that a drink each day keeps the doctor away, while recreational gambling can be an enjoyable form of entertainment for many people. These and other salient facts about the harmful and positive effects of smoking, drinking and gambling provide the background for a dispassionate economic analysis of the taxation and regulation of these activities. The main message the studies convey is that it would be unrealistic to rely solely on duty levels and differentiation to curb abusive use. Duty levels do have a clear impact in restraining consumption by children and young adults - an important priority for policy. But complementary policies - including direct regulation and provision of information - also have a meaningful role to play in each of the markets for tobacco, alcohol and gambling.
    Keywords: taxation; tobacco; alcohol; gambling; regulation; externalities; European Union
    JEL: H2 H8 H23 I18 L83
    Date: 2009–02
  5. By: Nene, Gibson; Azzam, Azzeddine M.; Schoengold, Karina
    Abstract: The U.S hog production industry has been continually subjected to rapid structural changes since the early 1990s. The industryâs move towards more concentrated large hog farms and geographical concentration of such farms, have triggered public concerns over the dangers such big animal feeding operations are likely to pose to the waters of the country. This study investigates the implications of state-level environmental regulations on the structure of hog farms. The results of this study suggest that environmental regulations will result in one of three possible scenarios: (1) a more competitive industry in which small hog operations are not adversely affected which will allow more small operations to enter rather than exit the industry; (2) a more concentrated hog production industry in which large operations survive while small operations exit the industry; (3) no change in the structure of the industry where both sizes of operations are not significantly affected by environmental stringency.
    Keywords: Perfect competition, U.S. hog production industry, Environmental regulations, Environmental Economics and Policy, Livestock Production/Industries,
    Date: 2009
  6. By: Sam, Abdoul G.
    Abstract: A two-way fixed effects Poisson model is used to investigate the impact of 43 EPA-sponsored pollution prevention (P2) practices on compliance and enforcement for a sample of facilities in the US manufacturing sector. I find that P2 adoption reduces environmental violations in three industries while increasing violations in two others. P2 adoption also spurs fewer enforcement actions in three industries. I further partition the P2 practices into three categories based on their approach to improve environmental performance. In doing so, I find that practices that involve changes in operating procedures--about a third of adopted P2 practices--such as instituting a self-inspection and monitoring program to discover spills or leak sources, improving maintenance scheduling and/or labeling procedures, are effective in reducing violations while practices that involve equipment or material changes are not. I also find that adopters of practices that require changes in either procedures or manufacturing equipment--about half of adopted practices--are rewarded with a more cooperative treatment of environmental infractions with fewer enforcement actions.
    Keywords: Pollution Prevention Act, P2 practices, compliance, enforcement, Poisson models, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q53, L51, C23,
    Date: 2009
  7. By: Michiel Bijlsma; Paul de Bijl; Viktoria Kocsis
    Abstract: This study analyzes under which circumstances it may be desirable for the government to stimulate open source software as a response to market failures in software markets. To consider whether policy intervention can increase dynamic efficiency, we discuss the differences between proprietary software and open source software with respect to the incentives to innovate and market failures that may occur. The document proposes guidelines to determine which types of policy intervention may be suitable. Our most important finding is that directly stimulating open source software, e.g. by acting as a lead customer, can improve dynamic efficiency if (i) there is a serious customer lock-in problem, while (ii) to develop the software, there is no need to purchase specific, complementary inputs at a substantial cost, and (iii) follow-on innovations are socially valuable but there are impediments to contractual agreements between developers that aim at realizing such innovations.
    Keywords: Software markets; Intellectual property rights; Open source software; Public policy
    JEL: L17 L52 L86 O34
    Date: 2009–03
  8. By: Hadrich, Joleen C.; Wolf, Christopher A.
    Abstract: Nutrient management and air emissions continue to be an area of increased management control on all livestock operations as environmental regulations become more stringent. Agricultural producers must consider uncertainty surrounding the timing of and potential increases of environmental policy controls, such as emission taxes, when making future investment decisions. An optimal control theory framework was applied to a dairy farm facing an uncertain increase in emission taxes and an unknown date at which emission taxes will take effect. The optimal investment path considering these uncertainties was solved implicitly and compared to a full certainty case.
    Keywords: air emissions, environmental regulations, irreversible investment, uncertainty, Environmental Economics and Policy, Livestock Production/Industries,
    Date: 2009
  9. By: Chakravorty, Ujjayant (University of Alberta, Department of Economics); Hubert, Marie-Helene (University of Alberta School of Business); Nostbakken, Linda (University of Alberta School of Business)
    Abstract: Many countries are actively encouraging the supply of biofuels as a low carbon alternative to the use of fossil fuels for transportation. To what extent do these trends imply a reallocation of scarce land away from food to fuel production? This paper critically reviews the small but growing literature in this area. We find that an increase in biofuel production may have a significant effect on food prices and in certain parts of the world, in speeding up deforestation through land conversion. However, more work needs to be done to examine the effect of newer generation biofuel technologies that are less land-intensive as well as the effect of environmental regulation and trade policies on land allocation between fuel and food.
    Keywords: agricultural production; biofuel economics; climate policy; environmental regulation; land allocation
    Date: 2009–04–01
  10. By: Federico Cingano (Bank of Italy); Marco Leonardi (University of Milan and IZA); Julian Messina (University of Girona, FEDEA and IZA); Giovanni Pica (Università di Salerno and CSEF)
    Abstract: This paper analyzes the joint effect of EPL and financial market imperfections on investment, capital-labour substitution, labour productivity and job reallocation in a cross-country framework. In the spirit of Rajan and Zingales (1998) and Ciccone and Papaioannou (2006), we exploit variation in the need for reallocation at the sectoral and aggregate level to assess the average effect of EPL on firms’ policies. Then, exploiting firm-level information we study if the effect of EPL is stronger in firms with lower levels of internal resources. We find that, on average, EPL reduces investment per worker, capital per worker and value added per worker in high reallocation sectors relative to low reallocation sectors. The reduction in the capital-labour ratio is less pronounced in firms with higher internal resources, suggesting that financial constraints exacerbate the negative effects of EPL on capital deepening.
    Date: 2009–05–01
  11. By: Yvan Guillemette
    Abstract: New Zealand’s living standards remain well below the OECD average. This is entirely attributable to persistently low labour productivity, which in turn is related to economic geography as well as structural policy factors. The small size and remoteness of the economy diminish its access to world markets, the scale and efficiency of domestic businesses, the level of competition and proximity to the world’s technology frontier. This points to the need for a “New Zealand policy advantage”, that is, a set of structural policies attractive and welcoming enough to overcome the geographic handicap and attract the drivers of prosperity – investment, skills and ideas – to New Zealand. The reforms of the 1980s and 1990s laid much of the groundwork for creating this advantage and for a pick-up in productivity growth. But in recent years, New Zealand has lost ground relative to its OECD peers. The reform focus shifted away from growth and the government introduced much often poor quality regulation. Policies should be refocused around the productivity goal in a number of areas, beginning with those covered in this paper, namely international trade, the business climate for domestic and foreign investment, public sector efficiency, infrastructure, innovation and natural resources management. This paper also evaluates the recently legislated emissions trading scheme through a productivity lens. This Working Paper relates to the 2009 OECD Economic Survey of New Zealand (<P>Les politiques structurelles requises pour surmonter les obstacles géographiques et promouvoir la prospérité en Nouvelle-Zélande<BR>Les niveaux de vie en Nouvelle-Zélande restent bien inférieurs à la moyenne de l’OCDE. Cet écart est entièrement attribuable à une croissance durablement faible de la productivité du travail, qui s’explique pour sa part par la géographie économique ainsi que par des facteurs liés à la politique structurelle. La petite taille et l’éloignement de l’économie limitent son accès aux marchés mondiaux ainsi que l’échelle et l’efficacité des entreprises intérieures, et influent sur le degré de concurrence et la situation par rapport à la frontière technologique mondiale. Il faut, dans ces conditions, élaborer des politiques qui représentent un avantage pour la Nouvelle-Zélande, c’est à dire un ensemble de politiques structurelles suffisamment attrayantes pour surmonter le handicap géographique et attirer dans le pays les moteurs de la prospérité – investissements, compétences et idées. Les réformes des années 80 et 90 ont largement préparé le terrain à la mise en oeuvre de telles politiques et à un redressement de la croissance de la productivité dans les années à venir. Ces dernières années, cependant, les autorités ont grignoté une partie des progrès réalisés durant la période de réformes, notamment en introduisant de nombreuses réglementations, souvent mal conçues. Les politiques devraient être recentrées autour de l’objectif de productivité dans plusieurs domaines, à commencer par ceux couverts dans la présente étude, à savoir le commerce international, les conditions de l’investissement national et étranger, l’efficacité du secteur public, l’infrastructure, l’innovation et la gestion des ressources naturelles. Le système d’échange de droits d’émissions, qui a récemment fait l’objet d’un texte de loi, est aussi examiné ici dans l’optique de la productivité. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Nouvelle-Zélande 2009 (
    Keywords: taxation, productivity, productivité, croissance, investment, investissement, réglementation, productivity growth, innovation, innovation, regulation, investissement direct étranger, infrastructure, infrastructure, natural resources, ressources naturelles, eau, water, living standards, taxation, economic geography, foreign investment, emissions trading scheme, système de droits d’émissions, ETS, copyright, regulatory, géographie, standard of living, niveau de vie
    JEL: O16 O24 O38 O43 O56
    Date: 2009–04–30
  12. By: Y. Biondi; P. Giannoccolo; A. Reberioux
    Date: 2009–03
  13. By: Konduru, Srinivasa; Kalaitzandonakes, Nicholas; Magnier, Alexandre
    Abstract: Since their commercial introduction in 1996, genetically modified (GM) crops have been quickly adopted world wide, but some GM crops/varieties have not received regulatory approval for use in some importing countries, leading to asynchronicity in regulatory approvals. In this context, the international agricultural trade relied on analytical GMO testing which is a statistical process, along with identity preserved systems to segregate GM and non-GM crops. This led to a situation where measurement uncertainty became an important issue as it can lead to potential holdups at the point of import. In this background, this paper examines the implications of measurement uncertainty associated with GMO testing on the behavior of importers and exporters in a game theoretic framework. The results indicate that relative size of identity preservation costs, testing and rejection costs, the premiums offered in the non- GM markets and measurement uncertainty all have direct impacts on the behavior of importers and exporters.
    Keywords: GMO testing, measurement uncertainty, identity preservation systems, agricultural trade, International Relations/Trade,
    Date: 2009

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