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on Regulation |
| By: | Paula Sarmento (CEF.UP and Faculty of Economics of University of Porto) |
| Abstract: | We study the impact of vertical separation between an upstream firm and its subsidiary, which competes in the retail market with an independent firm, with the incentive to invest in network upgrade. This question is discussed under two alternative regimes concerning the price of the vital input sold by the upstream firm: cost orientation regulation and absence of access price regulation. We show that the investment incentive decreases with vertical separation under both regimes. However, it is not always true that the investment incentive is higher without regulation. |
| Keywords: | access price regulation, vertical integration, investment incentives |
| JEL: | L51 L96 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:410&r=reg |
| By: | Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Tobias Duschl (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich) |
| Abstract: | Executive pay regulation is widely discussed as a measure to reduce financial mismanagement in corporations. We show that the professional team sports industry, the only industry with substantial experience in the regulation of compensation arrangements, provides valuable insights for the regulation of executive pay. Based on the experience from professional sports leagues, we develop implications for the corporate sector regarding the establishment and enforcement of executive pay regulation as well as the level, structure, and rigidity of such regulatory measures. |
| Keywords: | Salary Caps, Executive Compensation, Corporate Governance, Financial Crisis, Financial Regulation |
| JEL: | G38 K23 L83 M52 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:spe:wpaper:1106&r=reg |
| By: | Lefebvre, J.J.G. (Tilburg University) |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ner:tilbur:urn:nbn:nl:ui:12-4643185&r=reg |
| By: | Ongena, S.; Popov, A.; Udell, G.F. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper provides the first empirical evidence on how home-country regulation and supervision affects bank risk-tailing in host-country markets. We analyze lending by 136 banks to 8,253 firms in 1,513 different localities across 13 countries. We find strong evidence that laxer regulatory restrictions in the home country are associated with higher loan rejection rates by banks in host-country markets, but that the resulting loans are mostly to small, unaudited, nonexporting, and innovative firms. The results are stronger when banks are less efficiently supervised at home, and they are observed independently from the effect that bank balance sheet have on lending. These findings imply that loose home-country regulation and supervision are associated with important negative externalities for the host-country in terms of more risk-taking by cross-border banks. |
| Keywords: | bank regulation;cross-border financial institutions;financial risk. |
| JEL: | G21 G28 G32 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011032&r=reg |
| By: | Raffaele Fiocco; Mario Gilli |
| Abstract: | We consider the regulation of a monopolistic market when the prin- cipal delegates to a regulatory agency two tasks: the supervision of the firm's unknown costs and the arrangement of a pricing mechanism. As usual, the agency may have an incentive to hide information from the principal to share the informative rent with the firm. The novelty of this paper is that both the regulatory mechanism and the side con- tracting between the agency and the firm are modelled as a bargaining process. This negotiation between the regulator and the monopoly induces a radical change in the extraprofit from private information, which is now equal to the standard informational rent weighted by the agency’ bargaining power. This in turn a¤ects the collusive stage, in particular the firm has the greatest incentive to collude when fac- ing an agency with the same bargaining power. Then, we focus on the optimal organizational responses to the possibility of collusion. In our setting, where incompleteness of contracts prevents the design of a screening mechanism between the agency’ types and thus Tirole’ equivalence principle does not apply, we prove that the stronger the agency in the negotiation process, the greater the incentives for the principal to tolerate collusion in equilibrium. |
| Keywords: | regulation, bargaining, collusion. |
| JEL: | D73 D82 L51 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:207&r=reg |
| By: | Evita Paraskevopoulou |
| Abstract: | This paper contributes to research addressing interrelationships between technological and policy changes by exploring the co-evolution of sectoral regulation and technological innovation in the detergents industry in Europe. We view as regulation an endogenously created institution that evolves over time and in alignment with other socioeconomic factors, among which we focus on technological change. We argue that the innovation and regulation processes are evolutionary processes that interact overtime and their co-evolution is facilitated by knowledgeable and purposeful agents who wish to influence their institutional environment. Given our empirical context we find that the opportunity provided to private actors to participate in the policy process, share information and collaborate, contributes to the improvement of their knowledge. In turn, improved knowledge increases the innovative potential of actors while it builds their bargaining power and increases the possibilities private actors have to influence their institutional environment. Favorable institutional conditions have been recognized as a factor conductive to innovation and in this sense, we can witness a circular and interactive relationship between the regulatory and innovation process. |
| Keywords: | regulation, technological innovation, private-public interactions |
| Date: | 2011–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2011/10&r=reg |
| By: | Renuka Sane (Indira Gandhi Institute of Development Research); Susan Thomas (Indira Gandhi Institute of Development Research) |
| Abstract: | Recent events in India have brought a fresh focus upon the problem of regulation in the field of micro-finance. This paper delineates the three distinct aspects where government needs to play a role. The first is to protect the rights of the micro-borrower, the consumer of micro-financial services. The second is that of prudential oversight of risk-taking by firms operating in micro-finance, since this could have systemic implications. The third is a developmental role, emphasising scale-up of the micro-finance industry where the key issues are diversification of access to funds, innovations in distribution and product structure, and the use of new technologies such as credit bureaus, the UID and mobile-based payments. Each of these roles need to be placed in an existing or a new regulatory agency. There is a case for creating a new regulatory agency which unifies the consumer protection function across all financial products. |
| Keywords: | financial services distribution, consumer protection, credit bureaus, securitisation |
| JEL: | G20 G21 G28 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2011-007&r=reg |
| By: | John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); Carlos A. Chavez (Departmento de Economics, Universidad de Concepcion Chile) |
| Abstract: | All environmental policies involve administrative costs, the costs of implementing and managing policies that extend beyond abatement costs. We examine theoretically the optimal distribution of these costs between the public and regulated sources of pollution. The distribution of administrative costs affects social welfare only if public funds are more expensive than private funds, or if the distribution of administrative costs affects the size of a regulated industry. If having the public take on a larger part of administrative costs increases the size of the industry and this does not lead to lower emissions for a given emissions tax, then it is optimal to make the pollution sources bear all of the administrative costs. A necessary, but not sufficient, reason for having the public bear part of the cost burden is if aggregate emissions decrease as a result. |
| Keywords: | Emissions Taxes, Pigouvian Taxes, Administrative Costs, Pollution Control |
| JEL: | L51 Q58 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:dre:wpaper:2011-3&r=reg |
| By: | Michael Greenstone; Elizabeth Kopits; Ann Wolverton |
| Abstract: | The United States Government recently concluded a year-long process to develop a range of values representing the monetized damages associated with an incremental increase in carbon dioxide (CO2) emissions, commonly referred to as the social cost of carbon (SCC). These values are currently used in benefit-cost analyses to assess potential federal regulations. For 2010, the central value of the SCC is $21 per ton of CO2 emissions and sensitivity analyses are to be conducted at $5, $35, and $65 (2007$). This paper summarizes the methodology and process used to develop the SCC values, complemented with our own commentary about how the SCC can be used to inform regulatory decisions and areas where further research would be particularly useful. |
| JEL: | Q51 Q54 Q58 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16913&r=reg |
| By: | Marie-Laure Allain; Marcel Boyer; Rachidi Kotchoni; Jean-Pierre Ponssard |
| Abstract: | The determination of optimal fines to deter the formation or continuation of cartels is a major objective of competition policy. We provide a game theoretic discussion of the restitution and deterrence properties of fines static and dynamic frameworks: cartel stability depends on their ability to prevent deviation by firms and the benefit of a deviation depends on the fines to be imposed in case of detection by the antitrust authority. We show that the proper consideration of the dynamics of competition has a major impact on the determination of optimal dissuasive fines: our results suggest that a clear majority of fines imposed by the European Commission in recent years meet the deterrence objective. <P>La détermination d’amendes optimales pour dissuader la formation ou la poursuite des cartels est au cœur des politiques de concurrence. Nous définissons un cadre stratégique pour caractériser le caractère restitutif et dissuasif des amendes dans des contextes statique et dynamique : la stabilité d’un cartel dépend de sa capacité à prévenir les déviations dont la profitabilité est fonction des amendes imposées lorsque le cartel est découvert. Nous montrons que la prise en compte appropriée de la dynamique de la concurrence a un impact majeur sur la détermination des amendes dissuasives optimales : nos résultats suggèrent qu’une nette majorité des amendes infligées par la Commission Européenne ces dernières années rencontrent l'objectif de dissuasion. |
| Keywords: | Optimal fines, cartels, Amendes optimales, cartels |
| Date: | 2011–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2011s-34&r=reg |
| By: | John Quiggin (School of Economics, University of Queensland) |
| Abstract: | One of the most striking developments of the late 20th century was the explosion in the volume, speed and complexity of international financial transactions, and the resulting breakdown of effective regulatory control over the global financial system. The speed with which this process has gone into reverse since the onset of the financial crisis has been equally striking. Transactions in the global foreign exchange market, once confined to financing trade flows, peaked at around $4 trillion per day in mid-2008. At that pace, two days of foreign exchange trading would be sufficient to finance an entire year’s trade flows. The growth of private credit reached an annualised rate of $10 trillion at the same time. |
| Keywords: | Economics as a Social Science |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:rsm:riskun:r10_4&r=reg |
| By: | Elettra Agliardi; Luigi Sereno |
| Abstract: | The effects of two environmental policy options for the reduction of pollution emissions, i.e. taxes and non-tradable quotas, are analyzed. In contrast to the prior literature this work endogenously takes into account the level of emissions before and after the adoption of the new environmental policy. The level of emissions is determined by solving the firm's profit maximization problem under taxes and fixed quotas. We find that the optimal adoption threshold under taxes is always larger than the adoption threshold under fixed quota, even in a setting characterized by ecological uncertainty and ambiguity - in the form of Choquet-Brownian motions - on future costs and benefits over adopting environmental policies. |
| Keywords: | Environmental taxation; Non-tradable quotas; Optimal implementation time; Choquet-Brownian uncertainty; Real options |
| JEL: | Q28 Q L51 H23 |
| Date: | 2011–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:pie:dsedps:2011/109&r=reg |
| By: | Marrouch, W.; Ray Chaudhuri, A. (Tilburg University, Center for Economic Research) |
| Abstract: | We show that adaptive measures undertaken by countries in the face of climate change, apart from directly reducing the damage caused by climate change, may also indirectly mitigate greenhouse gas emissions by increasing the stable size of international agreements on emission reductions. Moreover, we show that the more effective the adaptive measure in terms of reducing the marginal damage from emissions, the larger the stable size of the international environmental agreement. In addition, we show that larger coalitions, in the presence of adaptation, may lead to lower global emission levels and higher welfare. |
| Keywords: | international environmental agreements;adaptation;coalition formation;cli- mate change. |
| JEL: | Q54 Q59 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011023&r=reg |
| By: | Sara Markowitz; Alison Evans Cuellar; Ryan M. Conrad; Michael Grossman |
| Abstract: | The purpose of this paper is to empirically estimate the propensity for alcohol-related policies to influence rates of entry into foster care and the length of time spent in foster care. Alcohol consumption is believed to be major contributing factor to child maltreatment, associated with an increased likelihood of abuse and longer durations once in foster care. We analyze a panel of state-level foster care entry rates over time, followed by a duration analysis of individual-level cases. The alcohol regulations of interest include beer, wine, and liquor taxes and prices, and a measure of alcohol availability. Overall, these alcohol control policies appear to have limited power to alter foster care entry rates and duration once in care. We find that higher alcohol taxes and prices are not effective in reducing foster care entry rates, however, once in foster care, the duration of stay may be influenced with higher taxes, particularly when the entry was a result of an alcohol abusing parent. |
| JEL: | I0 J1 K0 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16915&r=reg |
| By: | Jianquiao Liu (Department of Economics, University of Ottawa, Ottawa, ON); Leslie Shiell (Department of Economics, University of Ottawa, Ottawa, ON) |
| Abstract: | We test whether the principle of targeting (alternatively Sandmo’s (1975) additivity property and Kopczuk’s (2003) decomposition involving the Pigovian rule) has relevance for environmental taxation in a second best world consisting of an exogenous revenue requirement and pre-existing distortionary taxes. In the context of differentiated commodity taxes, we find that Sandmo’s additivity property breaks down once one solves explicitly for the marginal cost of public funds (MCPF). Further, in the more realistic setting of a uniform commodity tax and a dedicated emissions tax, we find that the additivity property no longer holds even in the form Sandmo studied it, i.e. without solving explicitly for the MCPF. Finally, we argue that Koczuk’s decomposition is not persuasive, as it requires that a second government agency must apply a corrective tax or subsidy to adjust the choice of the Pigovian rule by the environmental agency. In a same-numbers exercise (i.e. the number of tax instruments is not increased), we show that there is no presumption in favour of a direct emissions tax over a uniform commodity tax; rather, the choice depends upon the size of the environmental damages. We conclude that there does not exist a principle of targeting in environmental taxation. |
| Keywords: | environmental taxation; second best; principle of targeting |
| JEL: | H23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:1102e&r=reg |
| By: | Jaime Vázquez-Caro; Richard M. Bird (Rotman School of Management, University of Toronto) |
| Abstract: | Benchmarking as a way of establishing standards for evaluating the performance of tax administrations has become increasingly popular in recent years. Two common approaches to benchmarking are ‘benchmarking by numbers’ – the quantitative approach and ‘benchmarking by (presumed) good institutional practice’ – the qualitative approach. Both these approaches consider each component or aspect of the tax administration separately. This paper suggests a contrasting approach to benchmarking, the purpose of which is less to allow others to assess the performance of a tax administration than it is to permit an administration to understand and improve its own performance. This systemic approach is more conceptually and operationally difficult because it requires considering how all aspects of the administrative system function as a whole in the context of the environment within which that system is embedded and operates. On the other hand, it is also more directly aimed at understanding and improving the key operational strategies that define good, better and best tax administrations. |
| Keywords: | tax administration, benchmarking, developing countries |
| Date: | 2011–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1104&r=reg |
| By: | Weigt, H.; Willems, Bert (Tilburg University, Center for Economic Research) |
| Abstract: | In the most liberalized electricity markets, abuse of market power is a concern related to oligopolistic market structures, flaws in market architecture, and the specific characteristics of electricity generation and demand. Several methods have been suggested to improve the competitiveness of the liberalized electricity markets and to reallocate rents from generators to consumers. In this paper we study to what extend divestitures can improve the competitiveness of the electricity market. We quantify the expected developments under different divestiture scenarios for the German market, using Cournot and Supply Function Equilibrium simulations. We find an overall welfare gain in both models and show that those gains are highest if the divested assets are sold to independent and small firms, preventing the formation of additional firms that set prices strategically. |
| Keywords: | Supply Function Equilibrium;Cournot competition;electricity markets;divestitures. |
| JEL: | L L13 C72 D43 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011034&r=reg |
| By: | Godal, Odd (Göteborg University and University of Bergen); Meland, Frode (University of Bergen, Department of Economics) |
| Abstract: | This paper discusses coalition formation with side payments in markets for transferable property rights where strategic agents prevail on both sides of the market. Our concern is emissions permit trading under the Kyoto Protocol. While a seller cartel is not profitable, our analysis indicates that coalitions between sellers and buyers pay off. Three stable cartels are found. None involve all agents, yet they all induce overall e¢ ciency. To support a stable coalition, the EU, Japan and Canada may pay together between 0 and 13 billion US dollars per year to Russia. The permit price and society-wide emission reductions are nil. |
| Keywords: | Emissions trading; Kyoto Protocol; cartel formation; merger profitability. |
| JEL: | C71 C72 Q58 |
| Date: | 2011–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bergec:2006_004&r=reg |
| By: | Jun Zhou (University of Bonn) |
| Abstract: | The objective of this paper is to investigate the efficacy of the European Commission’s leniency in destabilizing and deterring cartels. I discuss a dynamic model of cartel formation and dissolution to illustrate how changes in antitrust policies and market and macroeconomic conditions might affect cartel duration. Comparative statics results are then corroborated with empirical estimates of a hazard function adjusted to account for both the heterogeneity of cartels and the non proportional time dependence suggested by theory. Statistical tests are consistent with the theoretic predictions that following a more efficacious leniency program, the average duration of discovered cartels rises in the short run and falls in the long-run. |
| Keywords: | Taxation, evaluation of antitrust policies, leniency, time-varying policy effcts, sample selection bias, appropriateness of proportional hazard assumption |
| JEL: | D43 K21 K42 L13 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:353&r=reg |