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on Regulation |
| By: | Johan den Hertog |
| Abstract: | This paper reviews the economic theories of regulation. It discusses the public and private interest theories of regulation, as the criticisms that have been leveled at them. The extent to which these theories are also able to account for privatization and deregulation is evaluated and policies involving re-regulation are discussed. The paper thus reviews rate of return regulation, price-cap regulation, yardstick regulation, interconnection and access regulation, and franchising or bidding processes. The primary aim of those instruments is to improve the operating efficiency of the regulated firms. Huge investments will be needed in the regulated network sectors. The question is brought up if regulatory instruments and institutions primarily designed to improve operating efficiency are equally well-placed to promote the necessary investments and to balance the resulting conflicting interests between for example consumers and investors. |
| Keywords: | Regulation, Deregulation, Public Interest Theories, Private Interest Theories, Interest Groups, Public Choice, Market Failures, Price-cap Regulation, Rate of Return Regulation, Yardstick Competition, Franchise Bidding, Access Regulation. |
| JEL: | D72 D78 H10 K20 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:1018&r=reg |
| By: | Linda Bui (Department of Economics, Brandeis University) |
| Abstract: | To date, there is little convincing evidence on the effectiveness of “quasi-regulatory” mechanisms. Here I investigate how quasi-regulatory policies known as pollution prevention (“P2”) programs affect toxic pollution. I construct a data base on state-level P2 programs as well as the 1990 federal Pollution Prevention Act (PPA) and exploit variation in state adoption dates and program characteristics to study their effects on facility-level toxic releases. I find strong evidence that these mechanisms can affect pollution outcomes. In particular, I find that (1) the 1990 PPA has had a significant effect on toxic releases; (2) state programs geared to reducing the costs of P2 activities led to significant reductions in toxic releases; and (3) the response to P2 programs that increased the regulators’ ability to monitor polluting behavior could either increase or decrease reported releases, depending on the regulators’ ability to verify the accuracy of the reported releases. |
| Keywords: | TRI, Quasi-Regulation, Voluntary Programs, Toxic Pollution |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:brd:wpaper:26&r=reg |
| By: | Gabriele Galati; Richhild Moessner |
| Abstract: | The recent financial crisis has highlighted the need to go beyond a purely micro approach to financial regulation and supervision. In recent months, the number of policy speeches, research papers and conferences that discuss a macro perspective on financial regulation has grown considerably. The policy debate is focusing in particular on macroprudential tools and their usage, their relationship with monetary policy, their implementation and their effectiveness. Macroprudential policy has recently also attracted considerable attention among researchers. This paper provides an overview of research on this topic. We also identify important future research questions that emerge from both the literature and the current policy debate. |
| Keywords: | macroprudential policy |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:337&r=reg |
| By: | AGRELL, Per (Université catholique de Louvain, CORE & Louvain School of Management, B-1348 Louvain-la-Neuve, Belgium); GAUTIER, Axel (CREPP, HEC-Université de Liège, B-4000 Liège, Belgium; Université catholique de Louvain, CORE, B- 1348 Louvain-la-Neuve, Belgium) |
| Abstract: | In this paper, wee propose a model for regulatory capture that is based on information transmission and asymmetric information. In a three- tier model, a regulator is charged by a political principal to provide a signal for the type of a regulated firm. Only the firm can observe his type and the production of a correlated signal with a given accuracy is costly for the regulator. The firm can costlessly provide an alternative signal of lower accuracy that is presented to the regulator. In a self-enforcing equilibrium, the regulator transmits the firm-produced signal, internalizes its own savings in information cost and the firm enjoys higher information rents. The main feature of soft capture is that it is not based on a reciprocity of favors but on a congruence of interests between the firm and the regulator. |
| Keywords: | regulation, capture, information |
| JEL: | D72 L51 |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010084&r=reg |
| By: | Kurt R. Brekke (Department of Economics and Helth Economics Bergen, Norwegian School of Economics and Business Administration); Luigi Siciliani (Department of Economics and Centre for Health Economics, University of York, Heslington); Odd Rune Straume (Universidade do Minho - NIPE) |
| Abstract: | In many markets, such as education, health care and public utilities, firms are often profit-constrained either due to regulation or because they have non-profit status. At the same time such firms might have altruistic concerns towards consumers. In this paper we study semi-altruistic firms’ incentives to invest in quality and cost-reducing effort when facing constraints on the distribution of profits. Using a spatial competition framework, we derive the equilibrium outcomes under both quality competition with regulated prices and quality price competition. Profit constraints always lead to lower cost-efficiency, whereas the effects on quality and price are ambiguous. If altruism is high (low), profit-constrained firms offer higher (lower) quality and lower (higher) prices than firms that are not profit-constrained. Compared with the first-best outcome, the cost-efficiency of profit-constrained firms is too low, while quality might be over- or underprovided. Profit constraints may improve welfare and be a complement or substitute to a higher regulated price, depending on the degree of altruism. |
| Keywords: | Profit constraints, Quality competition, Semi-altruistic providers |
| JEL: | D21 D43 L13 L30 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:05/2011&r=reg |
| By: | Alain-Désiré Nimubona (Department of Economics, University of Waterloo, and CIRANO); Bernard Sinclair-Desgagné (HEC Montréal, CIRANO and École polytechnique) |
| Abstract: | To comply with laws, regulations and social demands, polluting firms increasingly purchase the needed means from specialized suppliers. This paper analyzes this relatively recent phenomenon. We show how environmental regulation, the size of the output market, the elasticity of demand for abatement goods and services, and the fact that in-house and outsourced abatement expenses are substitutes or complements can influence a polluter’s make-or-buy decision. Specific features of abatement outsourcing are highlighted, qualifications and refinements of the theory of vertical integration are then proposed, and some consequences for environmental policy are briefly discussed. |
| Keywords: | Eco-industry, Make-or-buy Decision, Outsourcing, Vertical Integration |
| JEL: | L23 L24 Q52 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.146&r=reg |
| By: | Batiz-Lazo, Bernardo; Noguchi, Masayoshi |
| Abstract: | Following the previous research conducted in Noguchi and Bátiz-Lazo (2010), this study aims to analyzes how the system of internal control entailing the effectiveness of the management and governance of building societies were improved within individual societies following the Building Societies Act, 1960 (BSA60). By specifically focusing on and comparing the process to reform the systems of internal control executed at two small-sized building societies, i.e. Lloyds Permanent and Eagle Building Societies, this study also purports to analyze how the improvement of the system of internal control affected the management and governance of both societies. The two cases examined in this study prove that an order, forbidding some activities by a building society, recognized to the CRFS under the regulation of BSA60 provided an important opportunity for the building societies to reform their systems of internal control and that the improvement of the system of internal control could have an important impact upon the management of the small-sized building societies in the UK, as a necessary condition for the withdrawal at an early stage of the order once made. |
| Keywords: | the system of internal control; BSA60; the Chief Registrar of Friendly Societies (CRFS); the Treasury; building societies; supervision of retail financial intermediaries; delegated monitoring; UK |
| JEL: | N8 M41 N24 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28564&r=reg |
| By: | Toufic M. El Masri (Institute of Economics, Leuphana University of Lüneburg, Germany) |
| Abstract: | Several studies have been conducted to analyze whether a regulation of the postal sector as a monopoly is actually efficient by examining its cost structure. The authors detected significant scale economies only in the delivery function and hence demonstrated a necessity for competition in the upstream operations. The primary purpose of this paper is to summarize the basic conditions of natural monopoly theory and to review the approaches and results of the studies dealing with this topic. Despite the importance of contestability in this context, previous literature concentrates only on the subadditivity aspect. The existence of economies of scale does not inevitably justify a governmental maintenance of the monopoly if the market is contestable. In this respect, further research is needed in order to account for contestability. |
| Keywords: | Postal Sector, Scale Economies, Subadditivity, Contestability |
| JEL: | D24 L51 L97 L22 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:195&r=reg |
| By: | Joachim Fünfgelt (Sustainability Economics Group, Leuphana University of Lüneburg, Germany); Günther G. Schulze (Dept. of International Economic Policy, University of Freiburg, Germany) |
| Abstract: | We analyze the formation of environmental policy to regulate transboundary pollution if governments are self-interested. In a common agency framework, we portray the environmental policy calculus of two political supportmaximizing governments that are in a situation of strategic interaction with respect to their environmental policies, but too small to affect world market prices. We show how governments systematically deviate from socially optimal environmental policies. Taxes may be too high if environmental interests and pollution-intensity of production are very strong; under different constellations they may be too low. Governments may actually subsidize the production of a polluting good. Politically motivated environmental policy thus may be more harmful to the environment as compared to the benevolent dictators’ solution. In other cases it may enhance environmental quality and welfare beyond what a benevolent government would achieve. |
| Keywords: | Political economy, environmental policy, transboundary pollution, common agency, strategic interaction |
| JEL: | Q F |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:196&r=reg |
| By: | Marvin Kraus (Boston College) |
| Abstract: | This paper asks the question, "How should the level of mass transit service be adjusted when road pricing is introduced for a substitute auto mode?" The reference point for the introduction of road pricing is second-best optimization in transit. Because this involves below- marginal-cost pricing in transit, it is efficient for road pricing to be accompanied by an increase in the transit fare and a reduction in service. This runs counter to the usual view of using the toll revenue generated by road pricing to provide a higher level of transit service. |
| Keywords: | congestion pricing; road pricing |
| JEL: | R4 |
| Date: | 2011–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:771&r=reg |
| By: | BRECHET, Thierry (Université catholique de Louvain, CORE & Louvain School of Management, Chair Lhoist Berghmans in Environmental Economics and Management, B-1348 Louvain-la-Neuve, Belgium.); PICARD, Pierre M. (University of Luxembourg, CREA, Luxembourg; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium) |
| Abstract: | Noise-induced pollution constitutes a hot and topical societal problem for all major airports. This paper discusses various issues in the implementation of a market for noise licenses as a solution to solve the noise externality between the residents located around airports and the aircrafts moving in and to airports. |
| Keywords: | airport, environment, noise, licenses |
| JEL: | Q5 R4 D4 D6 D78 D82 L5 L93 |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010086&r=reg |
| By: | Philippe Bacchetta, Cédric Tille, Eric van Wincoop (IHEID, The Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | There has been a long debate about whether speculators are stabilizing or not. We consider a model where speculators have a stabilizing role in normal times, but may also provoke large risk panics. The very feature that makes arbitrageurs liquidity providers in normal times, namely their tolerance of risk, enables a large increase in asset price risk during a financial panic. We show that a policy that discourages balance sheet risk reduces the magnitude of financial panics, as well as asset price risk in both normal and panic states. |
| Keywords: | Asset Pricing, Risk Management, Leverage. |
| JEL: | E44 G11 G18 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp02-2011&r=reg |