nep-reg New Economics Papers
on Regulation
Issue of 2009‒10‒17
eleven papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Measuring the Quality of Banking Regulation in Egypt By Silvia Rashad Gad Tadros
  2. Trust and Regulation: Addressing a Cultural Bias By Paolo Pinotti
  3. Terms of Trade Effects: Theory and Methods of Measurement By Marshall Reinsdorf
  4. The design of the Internal Energy Market in relation energy supply security and climate change By Vincent Rious
  5. "Government Intervention to Prevent Bankruptcy: The Effect of Blind-Bidding Laws on Movie Theaters" By James G. Mulligan; Daniel J. Wedzielewski
  6. Free Entry Bertrand Competition By Roy Chowdhury, Prabal
  7. Risk Concentration and Diversification: Second-Order Properties By Matthias Degen; Dominik D. Lambrigger; Johan Segers
  8. Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules By Raouf Boucekkine; Jacek B. Krawczyk; Thomas Vallée
  9. Paradox for Agro-Environmental Land Policy, A By Hennessy, David A.; Feng, Hongli
  10. The effects of privatization and consolidation on bank productivity: comparative evidence from Italy and Germany By Elisabetta Fiorentino; Alessio De Vincenzo; Frank Heid; Alexander Karmann; Michael Koetter
  11. Collective Moral Hazard, Maturity Mismatch and Systemic Bailouts By FARHI, Emmanuel; TIROLE, Jean

  1. By: Silvia Rashad Gad Tadros (Faculty of Management Technology, The German University in Cairo)
    Abstract: The free market economy most countries pursue nowadays is never entirely free from government intervention. Policy makers devote special attention to the regulation of financial markets and with the current financial crisis, the quality of the banking regulations need to be reconsidered. This paper aims to provide a tool to measure the quality of banking regulation and supervision. This is usually a difficult task because it is a qualitative analysis and is arbitrary. However, a regulation index has been modelled that is similar to the concept of a cost-benefit analysis. The input index resembles the cost signifying the efforts made by governments and supervisors to measure the intensity of the regulation. The output index resembles the benefit which shows the outcome of the governments’ efforts. Finally, applying this index on Egypt filled a research gap in this area.
    Keywords: Banking regulation, Quality index, Egypt
    JEL: G28 G21 L51
    Date: 2009–10
  2. By: Paolo Pinotti (Bank of Italy JEL classification:L51, Z10, D02, K42)
    Abstract: Cultural traits shape both the scope and the consequences of government intervention. Failing to account for cultural differences may therefore bias the estimated effects of regulation. This paper investigates the direction and the magnitude of this bias, from both a theoretical and an empirical point of view. It presents a simple model in which agents differ in terms of trust and trustworthiness, and average trust predicts average trustworthiness across countries. Entrepreneurial activity by the untrustworthy imposes negative externalities on the whole economy and burdensome entry regulations may lower these externalities at the cost of limiting economic activity by all agents. The model delivers two main predictions: within each country, preferences for regulations depend negatively on individual trust; across countries, lower trustworthiness drives higher levels of unofficial activity, negative externalities and government regulation, thus inducing a positive spurious correlation between all these variables. Evidence from individual level and cross-country data is consistent with these implications of the model. In particular, it suggests that a large part of the previously estimated negative effects of regulation can be attributed to omitted variation in cultural traits.
    Keywords: trust, regulations, unofficial economy, externalities
    Date: 2009–09
  3. By: Marshall Reinsdorf (Bureau of Economic Analysis)
    Abstract: Changes in export and import prices that increase the opportunity for trading gains raise real income, and changes in these prices that reduce trading gains reduce real income. Even though trade is less important for the US economy than it is for many other economies, trading gains have a median absolute effect on US real GDI of 0.2 percentage points in annual data.
    JEL: E60
    Date: 2009–01
  4. By: Vincent Rious (SUPELEC-Campus Gif - SUPELEC)
    Abstract: The Clingendael International Energy Programme (CIEP), the Loyola de Palacio Chair on EU Energy Policy of the Robert Schuman Centre of Advanced Studies (European University Institute), the Fondazione Eni Enrico Mattei (FEEM) and Wilton Park Conferences (WPC) organize a four-tier program for discussing the potential for a smart EU Energy Policy. The Florence workshop is then the first one in a series of four where academics will discuss the various interactions between the three objectives of the EU Energy Policy with stakeholders from governments, regulators and the industry. This workshop adressed the internal energy market design and its consequences for energy supply security and climate change policies. The workshop gathered over on day and a half 42 experts to discuss current problems and possible solutions for a smart EU Energy Policy.
    Keywords: Smart energy policy; 3rd EU directive; Market design; Renewable energy; gas reform
    Date: 2009–07–31
  5. By: James G. Mulligan (Department of Economics,University of Delaware); Daniel J. Wedzielewski (JPMorganChase)
    Abstract: In the 1970s motion picture studios used blind bidding and non-refundable guarantees to reduce the risks of producing large budget films. However, theater owners claimed that blind bidding and guarantees shifted the risk to them and increased the likelihood of bankruptcy. In response to lobbying by theater owners, twenty-four states passed laws banning blind bidding between 1978 and 1984, while seven states also banned non-refundable guarantees. We find that the laws were not only ineffective in keeping theater owners from exiting the market; they may have been detrimental to theater owners converting to multiplexes at that time.
    Keywords: bankruptcy, blind bidding, vertical contractual relationships, government intervention.
    JEL: L1 L2
    Date: 2009
  6. By: Roy Chowdhury, Prabal
    Abstract: This paper examines Bertrand competition under free entry, when firm size vis-a-vis market size is exogenously given. A free entry Bertrand Nash equilibrium (FEBE) exists if and only if relative market size is sufficiently large. Further, there is a unique coalition-proof Nash equilibrium price that corresponds to the minimum FEBE price, leads to average cost pricing for all active firms and is decreasing in market size.
    Keywords: Bertrand competition; free entry; coalition-proof; contestability.
    JEL: D5 L3
    Date: 2009–10
  7. By: Matthias Degen; Dominik D. Lambrigger; Johan Segers
    Abstract: The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a quantifiable reduction of risk concentration a challenging task. In the present paper we discuss some of the issues that may arise. The theory of second-order regular variation and second-order subexponentiality provides the ideal methodological framework to derive second-order approximations for the risk concentration and the diversification benefit.
    Date: 2009–10
  8. By: Raouf Boucekkine (Department of economics and CORE - Université Catholique de Louvain); Jacek B. Krawczyk (Victoria University of Wellington - University of Wellington); Thomas Vallée (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: Consider a country with two regions that have developed differently so that their current levels of energy efficiency differ. Each region's production involves the emission of pollutants, on which a regulator might impose restrictions. The restrictions can be related to pollution standards that the regulator perceives as binding the whole country (e.g., imposed by international agreements like the Kyoto Protocol). We observe that the pollution standards define a common constraint Upon the joint strategy space of the regions. We propose a game theoretic model with a coupled constraints equilibrium as a solution to the regulator's problem of avoiding excessive pollution. The regulator can direct the regions to implement the solution by using a political pressure, or compel them to employ it by using the coupled constraints' Lagrange multipliers as taxation coefficients. We specify a stylised model of the Belgian regions of Flanders and Wallonia that face a joint constraint, for which the regulator wants to develop a sharing rule. We analytically and numerically analyse the equilibrium regional production levels as a function of the pollution standards and of the sharing rules. We thus provide the regulator with an array of equilibria that he (or she) can select for implementation. For the computational results, we use NIRA, which is a piece of software designed to min-maximise the associated Nikaido-Isoda function.
    Date: 2009
  9. By: Hennessy, David A.; Feng, Hongli
    Abstract: A regulator with a fixed budget to spend on securing environmental benefits from farmed land has to choose between how many acres to enroll and the extent of benefits to require of each enrolled acre. Here we consider, given heterogeneous land, what properties of the environmental benefit-to-cost ratio imply for the choice of optimal program as the available budget varies. Conditions are found such that a program of high benefits on few acres is preferred for any budget level. It is also possible that a program delivering low benefits per acre at low cost is preferred on each land type, and yet a high benefit program is optimal policy, a variant of Simpson’s paradox.
    Keywords: benefit-to-cost ratio, environmental policy, land heterogeneity, Simpson’s paradox.
    Date: 2009–10–05
  10. By: Elisabetta Fiorentino (Deutsche Bundesbank); Alessio De Vincenzo (Bank of Italy); Frank Heid (Deutsche Bundesbank); Alexander Karmann (Technische Universität Dresden); Michael Koetter (University of Groningen)
    Abstract: The Italian and German banking systems shared similar characteristics early in the 1990s but have evolved in different directions since then: Italy privatized its publicly-owned banks while Germany has maintained a large share of state-owned savings banks. Contemporaneously, banks in both markets engaged heavily in mergers and acquisitions. We analyze how these activities have affected banksÂ’ productivity in the period 1994-2004, differentiating between technical change, efficiency change and scale economies. We find that privatized banks experienced a significant increase in productivity, especially if they subsequently merged with other banks. German banks were still able to increase their productivity through consolidation.
    Keywords: banking market integration, deregulation, total factor productivity, Italy, Germany
    JEL: D24 G21 G28 L33
    Date: 2009–09
  11. By: FARHI, Emmanuel; TIROLE, Jean
    JEL: E44 E52 G28
    Date: 2009–06

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