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on Regulation |
| By: | Ana Espinola-Arredondo; Felix Munoz-Garcia (School of Economic Sciences, Washington State University) |
| Abstract: | This paper examines countries’ free-riding incentives in international environmental agreements (IEAs) when, first, the treaty is non-enforceable, and second, countries do not have complete information about other countries’ noncompliance cost. We analyze a signaling model whereby the country leading the negotiations of the international agreement can reveal its own noncompliance costs through the commitment level it signs in the IEA. Our results show that countries’ probability to join the IEA is increasing in the free-riding benefits they can obtain from other countries’ compliance, and decreasing in their own noncompliance costs. This paper shows that, when free-riding incentives are strong enough, there is no equilibrium in which all types of countries join the IEA. Despite not joining the IEA, countries invest in clean technologies. Finally, we relate our results with some common observations in international negotiations. |
| Keywords: | Signaling games, environmental agreements, nonbinding negotiations, noncom- pliance cost. |
| JEL: | C72 D62 Q28 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:wsu:wpaper:espinola-5&r=reg |
| By: | Rajat Acharyya; Maria D.C. Garcia-Alonso |
| Abstract: | We consider a policy game between a high-income country hosting a drug innovator and a low-income country hosting a drug imitator. The low-income country chooses whether to enforce an International Patent Regime (strict IPR) or not (weak IPR) and the high-income country chooses whether to allow parallel imports (PI) of on-patent drugs or market based discrimination (MBD). We show that, for a moderately high imitation cost, both (Strict IPR, Parallel Imports) and (Weak IPR, MBD) emerge as the Subgame Perfect Nash Equilibrium (SPNE) policy choices. For relatively smaller imitation costs, (Weak IPR, MBD) is the unique SPNE policy choice. The welfare properties reveal that although innovation may be higher at the (Strict IPR, PI), the market coverage and national welfare of the low-income country, and the total welfare are all lower. This opens up the efficiency issue of implementing TRIPS and at the same time allowing international exhaustion of patent rights. |
| Keywords: | Patent protection; TRIPS; innovation; imitation; Parallel Imports; Pharmaceuticals |
| JEL: | D4 L1 I1 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:0919&r=reg |
| By: | Agenor, Pierre-Richard; Pereira da Silva, Luiz A. |
| Abstract: | This paper analyzes the cyclical effects of bank capital requirements in a simple model with credit market imperfections. Lending rates are set as a premium over the cost of borrowing from the central bank, with the premium itself depending on firms’ effective collateral. Basel I- and Basel II-type regulatory regimes are defined and a capital channel is introduced through a signaling effect of capital buffers on the cost of bank deposits. The macroeconomic effects of various shocks (a drop in output, an increase in the refinance rate, and a rise in the capital adequacy ratio) are analyzed, under both binding and nonbinding capital requirements. Factors affecting the procyclicality of each regime (defined in terms of the behavior of the risk premium) are also identified and policy implications are discussed. |
| Keywords: | Banks&Banking Reform,Access to Finance,Economic Theory&Research,Currencies and Exchange Rates,Debt Markets |
| Date: | 2009–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5067&r=reg |
| By: | Christian Calmès (Département des sciences administratives, Université du Québec (Outaouais), et Chaire d'information financière et organisationnelle, ESG-UQAM); Raymond Théoret (Département de stratégie des affaires, Université du Québec (Montréal), et Chaire d'information financière et organisationnelle, ESG-UQAM) |
| Abstract: | The noninterest income banks generate from their off-balance-sheet activities contributes greatly to the volatility of their operating revenues. Using Canadian data, we apply a modified Hausman procedure based on higher moments instruments and revisit this phenomenon to establish that the share of noninterest income (snonin) is actually endogenous to banks returns. In 1997, after the adoption of the Value at Risk (VaR) as a measure of banks risk, the snonin sign turns positive in the returns equations, indicating the emergence of diversification gains from banks non-traditional activities. ARCH-M estimations corroborate the idea that banks have gradually adapted to their new business lines, with an adjustment process begun even before 1997. However, the banks risk premium associated to OBS activities has continuously increased since that date. |
| Keywords: | Bank Risk Measures; Diversification; Noninterest income; Hausman test; Endogeneity; ARCH-M. |
| JEL: | G20 G21 C32 |
| Date: | 2009–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:pqs:wpaper:042009&r=reg |
| By: | Luc Christiaensen |
| Abstract: | The 2008 episode of food price explosion, political turmoil, and human suffering revealed important flaws in the current global food architecture. This paper argues that to safeguard the strengths of the current system, four failures in market functioning and policymaking must be addressed. First, governments must reinvest in agriculture with a focus on public goods and subject to increased public accountability to re-ensure the global food supply. Second, the policy-induced link between food and fuel prices must be broken through a revision of EU and US agro-fuel policies. Third, better sharing of information on food stocks, stricter WTO regulation of export restrictions, and some form of globally managed buffer stock will be minimum requirements to prevent the resurgence of inefficient national food self-sufficiency policies. Fourth, a market-based food security system is only sustainable given well functioning national social safety nets. |
| Keywords: | agriculture, agro-fuels, food crisis, food security |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:2009-04&r=reg |
| By: | Barreiro-Hurle, Jesus; Gracia, Azucena; de-Magistris, Tiziana |
| Abstract: | The provision of nutrition and health information on food labels is increasing as an industry and regulation answer to the growing consumer concern with diet-health relationships. Prior research has shown that the presence of this information on food labels is valued by consumers; however there is still no clear pattern on which labelling options are more valued and how different consumers value the different options. This paper analyses the results of a choice experiment conducted to identify the effect of multiple health and nutrition information sources on consumer food choice, taking into account preference heterogeneity using a latent class approach. Results show that different consumer groups can be identified with clearly distinguishable valuation and behavioural patterns. A minority of consumers attaches high WTP to the provision of additional information in the nutrition facts panel, however this is not show for a vast majority who value claims. Moreover, not taking into account this preference heterogeneity can lead to policies that do not maximize consumer welfare. Based on the characteristics of consumers identified in each group, recommendations are made as to how both industry and public administration can move forward with the development of nutritional labelling guidelines or policies. |
| Keywords: | Nutrition facts panel, latent class, choice experiments, consumer, interactions, health claims, nutrition claims, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae9p:53338&r=reg |
| By: | Pagès, H. |
| Abstract: | The paper examines a delegated monitoring problem between investors and a bank holding a portfolio of correlated loans displaying “contagion.” Moral hazard prevents the bank from monitoring continuously unless it is compensated with the right incentive-compatible contract. The asset pool is liquidated when losses exceed a state-contingent cut-off rule. The bank bears a relatively high share of the risk initially, as it should have high-powered incentives to monitor, but its long term financial stake tapers off as losses unfold. Liquidity regulation based on securitization can replicate the optimal contract. The sponsor provides an internal credit enhancement out of the proceeds of the sale and extends protection in the form of weighted tranches of collateralized debt obligations. In compensation the trust pays servicing and rent-preserving fees if a long enough period elapses with no losses occurring. Rather than being detrimental, well-designed securitization seems an effective means of implementing the second best. |
| Keywords: | Credit risk transfer, Default Risk, Contagion. |
| JEL: | G21 G28 G32 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:253&r=reg |
| By: | Owen Barder |
| Abstract: | The political economy of aid agencies is driven by incomplete information and multiple competing objectives and confounded by principal-agent and collective-action problems. Policies to improve aid rely too much on a planning paradigm that tries to ignore, rather than change, the political economy of aid. A considered combination of market mechanisms, networked collaboration, and collective regulation would be more likely to lead to significant improvements. A “collaborative market” for aid might include unbundling funding from aid management to create more explicit markets; better information gathered from the intended beneficiaries of aid; decentralized decision-making; a sharp increase in transparency and accountability of donor agencies; the publication of more information about results; pricing externalities; and new regulatory arrangements to make markets work. The aid system is in a political equilibrium, determined by deep characteristics of the aid relationship and the political economy of aid institutions. Reformers should seek to change that equilibrium rather than try to move away from it. The priority should be on reforms that put pressure on the aid system to evolve in the right direction rather than on grand designs. |
| Keywords: | aid; aid reform; aid agencies; political economy; market mechanism; networks |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:185&r=reg |
| By: | Benito Arruñada |
| Abstract: | This paper analyzes titling institutions and the regulation of supporting conveyancing services. After examining the tradeoff of enforcement benefits and consent costs posed by property rights, it explains how different public titling systems (privacy, recording and registration) try to solve this tradeoff, and what the consequences are for the nature and regulation of private conveyancing services. The paper ends with a discussion of some empirical issues and data which are useful for comparing, designing and managing titling and conveyancing systems. |
| Keywords: | Property rights, enforcement, transaction costs, registries, lawyers, notaries |
| JEL: | D23 K11 K12 L85 Q15 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1177&r=reg |
| By: | Philip J. Cook; Jens Ludwig; Adam Samaha |
| Abstract: | The “core right†established in D.C. vs. Heller (2008) is to keep an operable handgun in the home for self-defense purposes. If the Court extends this right to cover state and local jurisdictions, the result is likely to include the elimination of the most stringent existing regulations – such as Chicago’s handgun ban – and could also possibly ban regulations that place substantial restrictions or costs on handgun ownership. We find evidence in support of four conclusions: The effect of Heller may be to increase the prevalence of handgun ownership in jurisdictions that currently have restrictive laws; Given the best evidence on the consequences of increased prevalence of gun ownership, these jurisdictions will experience a greater burden of crime due to more lethal violence and an increased burglary rate; Nonetheless, a regime with greater scope for gun rights is not necessarily inferior – whether restrictive regulations would pass a cost benefit test may depend on whether we accept the Heller viewpoint that there is a legal entitlement to possess a handgun; In any event, the core right defined by Heller leaves room for some regulation that would reduce the negative externalities of gun ownership. |
| JEL: | H21 K14 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15431&r=reg |
| By: | W. Kip Viscusi; Joni Hersch |
| Abstract: | The 1998 Master Settlement Agreement resolved the unprecedented litigation in which the states sought to recoup the cigarette-related Medicaid costs. The litigation was settled through a combination of negotiated regulatory requirements and financial payments of about $250 billion over 25 years. Settlement payments received by states are strongly related to smoking-related medical costs but are also related to political factors. The payments largely took the form of an excise tax equivalent, raising potential antitrust concerns. The regulatory restrictions imposed by the agreement also raised antitrust concerns. However, there has been no evident shift in industry concentration. The increase in advertising and marketing expenses has largely taken the form of price discounts. The settlement sidestepped the usual procedures pertaining to the imposition of taxes and the promulgation of new regulations. |
| JEL: | H2 I18 K0 K13 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15422&r=reg |
| By: | Monique Kerleau (Centre d'Economie de la Sorbonne); Anne Fretel (Centre d'Economie de la Sorbonne); Isabelle Hirtzlin (Centre d'Economie de la Sorbonne) |
| Abstract: | In France, people obtain basic health insurance coverage through a public health insurance system. Although public coverage is comprehensive, substantial co-payments and deductibles are more and more required and individuals become increasingly dependant on private complementary health insurance, to be better reimbursed. In the context of strengthened constraints to control public health spending, the market for complementary cover is indeed likely to develop. This expansion has several implications for the regulation of private health insurance. Starting in the early 2000s, public policies have emphasized tools that directly motivate employers to provide group-insurance schemes. These include subsidies to employers for offering complulsory, supplementary coverage, and mandating social partners to negociate the implementation of health coverage in every compagny, whatever its size or activity. Such changes tend, to some extent, to "re-couple" health insurance with companies. This paper explores the implications of this experience for France. |
| Keywords: | Private health care insurance, complementary employer-provided health insurance. |
| JEL: | I18 G22 G28 J33 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:09056&r=reg |
| By: | de Vries, Frans; Montagnoli, Alberto |
| Abstract: | This note tests for the efficient market hypothesis (EMH) in the market for CO2 emission allowances in Phase I and Phase II of the European Union Emissions Trading Scheme (EU ETS). As usually is the case in emerging and non-competitive markets such as the EU ETS, trading often not occurs on a frequent basis. This has adverse implications for both the gains from permit trade as well as biases the EMH tests. Variance ratio tests are employed to adjust for the thin trading effect. The results indicate that Phase I - the trial and learning period - was inefficient, whereas the first period under Phase II shows signs of restoring market effic iency. |
| Keywords: | variance ratio tests; thin trading; efficient market hypothesis; carbon trading; pollution markets |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2009-22&r=reg |
| By: | Cull, Robert; Demirguc-Kunt, Asli; Morduch, Jonathan |
| Abstract: | Using two new datasets, the authors examine whether the presence of banks affects the profitability and outreach of microfinance institutions. They find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks relying on commercial funding and using traditional bilateral lending contracts (rather than the group lending methods favored by microfinance nongovernmental organizations). The analysis considers plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment; but it fails to find strong support for these alternative hypotheses. |
| Keywords: | Access to Finance,Debt Markets,Banks&Banking Reform,Microfinance,Economic Theory&Research |
| Date: | 2009–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5078&r=reg |
| By: | Leon Vinokur (Queen Mary, University of London) |
| Abstract: | This paper investigates the impact of banking and submission constraints, set by the EU Emission Trading Scheme, on the efficiency of the carbon permits spot market using intra-daily data. My aim is to identify whether there is a Disposition effect in the spot market. I will examine a data set that includes spot prices for the First and Second Phases of the Scheme from 24 June 2005 to 07 August 2009. I find that the Disposition effect is significantly high at the beginning of each Phase and decreases close to the first compliance event. In the light of these results I propose a lifting of the ban on banking between Phases and an increased emissions information disclosure in order to increase the efficiency of the Scheme. |
| Keywords: | Carbon market, Psychological biases, Institutional constraints |
| JEL: | G11 G18 D84 Q48 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp652&r=reg |
| By: | Tina Kao; Flavio Menezes |
| Abstract: | This paper considers a model of duopoly with differentiated products to examine the welfare effects of a merger between two asymmetric firms. We find that for quantity competition, the parameter range for welfare enhancing merger widens if the products are closer substitutes. On the other hand, mergers are never welfare enhancing in this setting when firms compete in prices. |
| JEL: | L11 L12 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2009-508&r=reg |
| By: | Jason Pearcy (Tulane University); Scott J. Savage (University of Colorado at Boulder) |
| Abstract: | This paper empirically investigates the effect of international simple resale (ISR) authorization on the prices for international message telephone service (IMTS). We compile a firm-level panel data set for over 200 United States-foreign country bilateral markets from 1995 to 2004. These data provide detailed information on prices, variable costs, fixed costs and market shares for 75 firms for each bilateral market, as well as the timing of ISR authorization by the Federal Communications Commission for each bilateral market. Estimates from a difference-in-differences model show that ISR authorization, and the associated lowering of barriers to entry, almost always results in lower prices for all markets. Additionally, we find evidence that ISR authorization alters the relationship between market concentration and price. Prior to ISR authorization more concentrated markets have higher prices. ISR authorization dampens this effect and in some cases reverses the relationship so that market concentration is negatively correlated with IMTS prices set by incumbent firms. |
| Keywords: | barriers to entry, competition, international message telephone prices, international simple resale, prices |
| JEL: | L1 L13 L96 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0919&r=reg |
| By: | Greg Hannsgen; Dimitri B. Papadimitriou |
| Abstract: | Since the current recession began in December 2007, New Deal legislation and its effectiveness have been at the center of a lively debate in Washington. This paper emphasizes some key facts about two kinds of policy that were important during the Great Depression and have since become the focus of criticism by new New Deal critics: (1) regulatory and labor relations legislation, and (2) government spending and taxation. We argue that initiatives in these policy areas probably did not slow economic growth or worsen the unemployment problem from 1933 to 1939, as claimed by a number of economists in academic papers, in the popular press, and elsewhere. To substantiate our case, we cite some important economic benefits of New Deal–era laws in the two controversial policy areas noted above. In fact, we suggest that the New Deal provided effective medicine for the Depression, though fiscal policy was not sufficiently countercyclical to conquer mass unemployment and prevent the recession of 1937–38; 1933's National Industrial Recovery Act was badly flawed and poorly administered, and the help provided by the National Labor Relations Act of 1935 came too late to have a big effect on the recovery. |
| Keywords: | New Deal; Public Works Projects; NIRA; NLRA; Cartelization; Unions; Labor Relations Policy; Fiscal Policy; Fiscal Stimulus; Unemployment; Great Depression |
| JEL: | E20 E62 J58 L43 N12 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_581&r=reg |
| By: | Hong Guo (Mendoza College of Business, University of Notre Dame); Subhajyoti Bandyopadhyay (Warrington College of Business Administration, University of Florida); Hsing K. Cheng (Warrington College of Business Administration, University of Florida) |
| Abstract: | The net neutrality debate has brought out economic rationale for and against a variety of proposals of the broadband service providers to differentiate between different classes of users. Broadband users are characterized by the differing amounts of content they request online, as well as their valuation for such content. A broadband service provider (BSP) has two potential instruments for user discrimination – price discrimination and traffic prioritization (or degradation). We model six different pricing and prioritization options that cover many of the strategies that actual BSPs have adopted in the marketplace. By comparing these options, we find that imposing net neutrality increases the BSP?s profit if the BSP price discriminates different consumer groups. If net neutrality is not imposed, however, the BSP might still prefer a net neutrality outcome depending on the various parameter values. These and other results will be useful both for the broadband service providers as they mull over the introduction of the different pricing strategies and for policymakers who are dealing with the net neutrality issue. |
| Keywords: | Net neutrality, Internet access pricing, congestion pricing, traffic prioritization, public policy, market regulation |
| JEL: | R4 D4 L5 L86 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0913&r=reg |