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on Regulation |
| By: | Benjamin Lorent |
| Abstract: | In this paper we compare the main regulatory frameworks: American (US RBC, Risk-Based-Capital), Swiss (SST, Swiss Solvency Test) and European (Solvency II). We improve on the existing literature by focusing on technical aspects of regulation schemes, particularly the capital requirements’ calculation and by including latest quantitative and qualitative improvements of the Solvency II project. The comparison concludes that Swiss and European systems are advanced regulatory processes in comparison with American regulation although the latter system was perceived as a revolution some years ago. Even if the Swiss regime and the future European directive are quite similar, there are also some key differences to highlight. European approach to determine regulatory capital is mainly risk-sensitive, based on risk measures, whereas US RBC is mainly based on static factors and accounting data reported in the audited statutory annual statement. The three systems also differ with regards to the use of different risk measures, the consideration of operational and catastrophe risks, the use of internal models, the treatment of diversification effect, the limits imposed to investments, and the consideration of qualitative aspects. |
| Keywords: | Solvency II; Swiss Solvency Test; US RBC; Insurance Regulation |
| JEL: | G22 G28 G32 K23 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/61180&r=reg |
| By: | Berck, Peter; Braennlund, Runar |
| Abstract: | California and Sweden are both leaders in green regulations and actions. In both there is a substantial political base for environmental regulation, yet the path to regulation in these two political entities is quite different. California emphasizes command and control regulations while Sweden makes heavy use of taxes. We show that both underlying economic factors and the constraints of the larger systems in which these economies are embedded contribute to their choice of control methods. |
| Keywords: | energy policy, environmental aspects, climate change, automobiles, regulations |
| Date: | 2010–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:agrebk:1266490&r=reg |
| By: | Anderson, Michael L.; Matsa, David A. |
| Abstract: | While many researchers and policymakers infer from correlations between eating out and body weight that restaurants are a leading cause of obesity, a basic identification problem challenges these conclusions. We exploit the placement of Interstate highways in rural areas to obtain exogenous variation in the effective price of restaurants and examine the impact on body mass. We find no causal link between restaurant consumption and obesity. Analysis of food-intake micro-data suggests that consumers offset calories from restaurant meals by eating less at other times. We conclude that regulation targeting restaurants is unlikely to reduce obesity but could decrease consumer welfare. |
| Keywords: | economics of regulation, health production, obesity, fat tax |
| Date: | 2010–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:agrebk:519176&r=reg |
| By: | Tatom, John |
| Abstract: | On November 12, 1999, President Clinton signed the most significant piece of financial services regulation to be enacted since the Great Depression, at least up to that time. When the Financial Service Modernization Act of 1999, better known as the Gramm-Leach-Bliley Act (GLBA), was signed, the financial services industry faced strong pressures for deregulation of the rigid structure imposed during the Great Depression. During the 2007-08 financial crises and ensuing debate regarding financial services regulation, the GLBA became a target as members of the financial sector, academia and government considered possible triggers that may have precipitated the crisis. |
| Keywords: | Glass-Steagall Act; Dodd-Frank Act; financial regulation; financial crisis. |
| JEL: | K20 G18 E50 |
| Date: | 2010–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24609&r=reg |
| By: | Markus Ohndorf (Chair of Economics, Institute for Environmental Decisions IED, ETH Zurich) |
| Abstract: | Project-based Emissions Trading Schemes, like the Clean Development Mechanism, are particularly prone to problems of asymmetric information between the project parties and the regulator. Given the specificities of these schemes, the regulator’s optimal monitoring strategy significantly differs from the one to be applied for capand- trade schemes or environmental taxes. In this paper, we extend the general framework on incomplete enforcement of policy instruments to reflect these specificities. The main focus of the analysis is to determine the regulator’s optimal spot-check frequency under the plausible assumption that the submitted projects vary with respect to their verifiability. We find that, given a limited monitoring budget, the optimal monitoring strategy is discontinuous, featuring a jump within the set of projects with lower verifiability. In this region, actual abatement is low and can fall to zero. For these cases, the sign of the slope of the strategy function depends on the actual relationship of the abatement cost and the penalty function. We conclude that, in a real-world context, project admission should ultimately be based on the criterion of verifiability. |
| Keywords: | environmental regulation, emissions trading systems, audits and compliance |
| JEL: | K32 D42 D82 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:ied:wpsied:10-13&r=reg |
| By: | Andreas Polk (Berlin School of Economics and Law); Armin Schmutzler (Socioeconomic Institute, University of Zurich); Adrian Muller (Socioeconomic Institute, University of Zurich) |
| Abstract: | Are national or multinational firms better lobbyists? This paper analyzes the extent of national environmental regulation when policy is determined in a lobbying game between a government and firm. We compare the resulting regulation levels for national and multinational firms. We identify three countervailing forces, the easier-to-shut-down effect, the easier-to-curb-exports effect and the multiple-plant effect. The interplay of these three forces determines whether national or multinational firms produce more, depending on such parameters as the potential environmental damages, transportation costs and the in uence of the firm. We also show that welfare levels are higher with multinational firms than with national firms when there is no lobbying, but that lobbying can reverse the welfare ordering. |
| Keywords: | Multinational enterprises, regulation, policy formation, lobbying, interest groups, foreign direct investment |
| JEL: | D72 F23 L51 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:soz:wpaper:1008&r=reg |
| By: | Nicolas Véron |
| Abstract: | Financial regulation at global level has been high on the G20 agenda. However, financial multipolarity, with the rise of emerging economies, and its impact on decision-making at global level has made global convergence difficult. In this policy brief, the authors, Bruegel Senior Fellow Nicolas Véron and Stéphane Rottier, National Bank of Belgium, explain why now is the time to focus on building stronger global public institutions, ensuring globally consistent financial information, creating globally integrated capital-markets infrastructure and addressing competitive distortions among global capital-market intermediaries to set the foundation for global harmonisation of all aspects of financial regulation. |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polbrf:449&r=reg |
| By: | Michel Fok (SCA - Systemes de cultures annuelles - CIRAD : UPR102) |
| Abstract: | Ex-ante regulation of transgenic crop use generally prevails, before the authorization of commercial release. This kind of regulation addresses the concerns of biosafety and coexistence, under pressure of pros and/or cons of GMO. After fifteen years of large scale use of transgenic crops (notably soybean and cotton) in various countries (USA, China, Brasil, India...), ecological and economic phenomena are observed and which could threaten the sustainable use of transgenic varieties. I advocate that the regulation scope must be extended so as to a) promote a systemic and coordinated approach of transgenic crop use, b) ensure seed purity with regard to the transgenic trait, c) maintain research on non-transgenic varieties, and d) warrant fair pricing of transgenic seeds. |
| Keywords: | regulation; coordination; GMO; biotechnology; seed price; research; weed resistance; pest complex shift |
| Date: | 2010–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00514304_v2&r=reg |
| By: | Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Marc Laperrouza (Management of Network Industries, Swiss Federal Institute of Technology Lausanne (EPFL)); Matthias Finger (Management of Network Industries, Swiss Federal Institute of Technology Lausanne (EPFL)) |
| Abstract: | This paper presents a game-theoretic model of a liberalized railway market in which train operation and ownership of infrastructure are fully vertically separated. The objective of this paper is to analyze how the regulatory agency will socially optimally set the charges that operators have to pay to the infrastructure manager for access to the tracks and how these charges change with increased competition in the railway market. Our analysis shows that an increased number of competitors in the freight and/or passenger segment reduces prices per kilometer and increases total output in train kilometers. The regulatory agency reacts to more competition with a reduction in access charges in the corresponding segment. Consumers benefit through lower prices while the effect on the operators' profits is ambiguous and depends on the degree of competition. We further show that social welfare always increases through more competition in the freight and/or passenger segment. Finally, social welfare is higher under two-part tariffs than under one-part tariffs if rising public funds is costly to society. |
| Keywords: | Access charges, optimal pricing, railways, regulation, vertical integration |
| JEL: | D40 L22 L51 L92 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0131&r=reg |
| By: | Selim, Tarek; Salem, Ahmed |
| Abstract: | The cement industry is a capital intensive, energy consuming, and vital industry for sustaining infrastructure of nations. The international cement market –while constituting a small share of world industry output—has been growing at an increasing rate relative to local production in recent years. Attempts to protect the environment in developed countries –especially Europe—have caused cement production plants to shift to countries with less stringent environmental regulations. Along with continually rising real prices, this has created a concerning pattern on economic efficiency and environmental compliance. This paper attempts to critically analyze the forces affecting pricing and production of cement from two perspectives. Porter’s five forces serve as our tool to analyze the competitive forces that move the industry from a market economy standpoint. On the other hand, the institutional economics framework serves to explain how governments and policymakers influence the structure and production distribution in the global market. Our findings suggest that the cement industry does not follow expected patterns of a market economy model. Additionally, it does not fully behave along the institutional economics paradigm. Hence, neither perspective explains the pricing or nature of the market on its own. Combining market forces within an institutional setting provides a more clear understanding of price dynamics and industry performance. We find that local regulation alone is insufficient to ensure market efficiency due to weak institutional governance in developing countries aligned with private business interests of global cement firms. Moreover, the global impact of local environmental non-compliance generates economic spillover effects that cannot be corrected by market forces alone. Due to asymmetries in governance and structure, this paper recommends the establishment of an independent international regulatory body for the cement industry that serves to provide sustainable industry development guidelines within a global context. |
| Keywords: | Keywords: cement – global industry– institutional economics – Porter competition – market niche |
| JEL: | F18 L61 D43 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24464&r=reg |
| By: | Finkelshtain, Israel; Kan, Iddo; Kislev, Yoav |
| Abstract: | Direct commands, market based, or combined, whichever is the government's mean of intervention, is expected to raise political lobbying and pressure. This study offers a political-economic model of an industry, which is regulated by an integrated system of both direct and market based policies. The model is used for a normative theoretical analysis and as a basis for a structural econometric framework. Exploiting a unique data set that describes the regulations of irrigation water in Israel during the mid eighties by means of quotas and prices, the political and technological parameters of the model are structurally estimated and used to assess the relative efficiency of quotas, prices and integrated regulation regimes. |
| Keywords: | Political Economy, Natural Resources, Water, Political Economy, D72, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ags:huaedp:93133&r=reg |
| By: | Ulrich Kaiser (University of Zurich); Susan J. Mendez (University of Zurich); Thomas Rønde (Copenhagen Business School) |
| Abstract: | On April 1, 2005, Denmark changed the way references prices, a main determinant of reimbursements for pharmaceutical purchases, are calculated. The previous reference prices, which were based on average EU prices, were substituted to minimum domestic prices. Novel to the literature, we estimate the joint effects of this reform on prices and quantities. Prices decreased more than 26 percent due to the reform, which reduced patient and government expenditures by 3.0 percent and 5.6 percent, respectively, and producer revenues by 5.0 percent. The prices of expensive products decreased more than their cheaper counterparts, resulting in large differences in patient benefits from the reform. |
| Keywords: | pharmaceutical markets; regulation; co-payments; reference pricing; asymmetric welfare effects |
| JEL: | I18 C23 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuieci:2010-01&r=reg |
| By: | Nicole Ahner; Jean-Michel Glachant and Adrien de Hauteclocque |
| Abstract: | European energy policy is characterized by a complex allocation of authority between the European Union and its Member States which results in an intricate interplay of regulatory competence. Knowing the difficulties European countries face in coordinating and proposing common solutions in the area of energy, there is the urgent need to question the legal foundations underlying the decisionmaking process. Institutional paralysis, low reactivity to events and changes as well as systematic political horse-trading across all questions call for an alternative framework allowing some pioneering Member States to promote ad hoc common policies escaping the formal and procedural requirements of EU law. Our paper assesses the legal feasibility of short-run differentiation by means of partial international agreements inspired by the Schengen regime, namely entirely outside the EU framework. The key challenge from a legal point of view is to assess the substantive compatibility of such agreements in energy with the existing rules of the Union. Short run differentiation in energy cannot indeed be assessed at a high level of generalities. We therefore take two areas where legally-binding coordination at the sub-Union level is often called for: nuclear policy and gas security of supply. The possible substantive content of such cooperation is derived from the economic and political literature before legal feasibility is assessed. Our findings suggest that the scope for such agreements is limited for security of gas supply whereas it could be an improved cooperation device in certain areas of nuclear policy. |
| Keywords: | Schengen |
| Date: | 2010–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:erp:euirsc:p0255&r=reg |
| By: | Hattori, Keisuke |
| Abstract: | This paper investigates firm incentives for developing environmentally clean technologies in a simple two-country model with international oligopoly, and compares them under price and quantity regulations with and without policy cooperation between governments. Under any policy regime, whether firm incentives are either excessive or insufficient from a welfare point of view depends on the marginal environmental damage and the degree of emission spillovers. If the marginal damage is relatively large, a quantity instrument encourages innovation more than a price instrument. In addition, under either regime of price and quantity regulations, policy cooperation (harmonization) necessarily enhances welfare in each country, but it does not necessarily increase firms' innovation incentives. |
| Keywords: | Technology innovation; International oligopoly; Environmental policy; Policy harmonization |
| JEL: | D62 L13 Q55 Q58 |
| Date: | 2010–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24754&r=reg |
| By: | Matthew A. Cole (Department of Economics, University of Birmingham, UK); Robert J.R. Elliott (Department of Economics, University of Birmingham, UK); Toshihiro Okubo (Research Institute for Economics and Business Administration, Kobe University) |
| Abstract: | This paper contributes to the small but growing body of literature which tries to explain why, despite the predictions of some theoretical studies, empirical support for the pollution haven hypothesis remains limited. We break from the previous literature, which tends to concentrate on US trade patterns, and focus on Japan. In common with Ederington et al.’s (2005) US study, we show that pollution haven effects are stronger and more discernible when trade occurs with developing countries, in industries with the greatest environmental costs and when the geographical immobility of an industry is accounted for. We also go one step further and show that our findings relate not only to environmental regulations but also to industrial regulations more generally. |
| Keywords: | Environmental regulations, trade, agglomeration, immobility, industry |
| JEL: | F18 L51 L60 Q56 R3 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2010-22&r=reg |
| By: | Halkos, George |
| Abstract: | Traditional economic theory, up to the middle of the twentieth century, builds up the production functions regardless the inputs’ scarcity. In the last few decades has been clear that both the inputs are depletable quantities and a lot of constraints are imposed in their usage in order to ensure economic sustainability. Furthermore, the management of exploitation and use of natural resources (either exhaustible or renewable) has been discussed by analyzing dynamic models applying methods of Optimal Control Theory. This theory provides solutions that are concerned with a single decision maker who can control the model dynamics facing a certain performance index to be optimized. In fact, market structures or exploitation patterns are often oligopolistic, i.e. there are several decision makers whose policies influence each other. So, game theoretical approaches are introduced into the discussion. According to the theory of continuous time models of Optimal Control, the appropriate analogue of differential games is used. Roughly, this is the extension of Optimal Control, when there is exactly one decision maker, to the case of N(N≥ 2) decision makers interacting with each other. |
| Keywords: | Nonrenewable resources; dynamic interaction; economic regulation;differential games |
| JEL: | Q32 C61 C62 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24774&r=reg |
| By: | Gilbert, Richard |
| Abstract: | In their recent book, Against Intellectual Monopoly, Michele Boldrin and David Levine conclude that patents and copyrights are not necessary to provide protection for either innovation or creative expression and should be eliminated. The authors note the many flaws of the U.S. system of intellectual property protection and argue that other means are available to appropriate the benefits of invention and creative expression. However, the authors overlook important functions of intellectual property. Their efforts would be put to better use by more carefully analyzing policy proposals that may improve our system of intellectual property rights and have some potential to be implemented. |
| Keywords: | intellectual property, patent, copyright |
| Date: | 2010–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:compol:1141498&r=reg |
| By: | Titus O. Awokuse (Department of Food and Resource Economics, University of Delaware); Weishi Grace Gu (Graduate Student, Cornell University) |
| Abstract: | Using GMM models on a panel data of fifty-three countries, we examine whether stronger foreign IPR protection stimulates international transactions of U.S. multinational firms. The empirical results suggest that foreign countries that strengthen their IPR protection, especially those with strong imitative ability, can attract more international transactions from U.S. multinational firms. |
| Keywords: | export, FDI, intellectual property rights, GMM |
| JEL: | F23 O34 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dlw:wpaper:10-10.&r=reg |