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on Regulation |
| By: | Viral Acharya; Hamid Mehran; Til Schuermann; Anjan Thakor |
| Abstract: | Banks’ leverage choices represent a delicate balancing act. Credit discipline argues for more leverage, while balance-sheet opacity and ease of asset substitution argue for less. Meanwhile, regulatory safety nets promote ex post financial stability, but also create perverse incentives for banks to engage in correlated asset choices and to hold little equity capital. As a way to cope with these distorted incentives, we outline a two-tier capital framework for banks. The first tier is a regular core capital requirement that helps deter excessive risk-taking incentives. The second tier, a novel aspect of our framework, is a special capital account that limits risk taking but preserves creditors’ monitoring incentives. |
| Keywords: | Bank assets ; Credit ; Bank capital ; Banks and banking - Regulations ; Systemic risk |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:490&r=reg |
| By: | Ivan Ledezma (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, LEDa - DIAL - Laboratoire d'Economie de Dauphine - Economie de la mondialisation et du développement - Université Paris Dauphine - Paris IX : EA4404, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | This paper analyses the potentially defensive behaviour of successful innovators and its effect on aggregate R&D effort. It proposes a quality-ladders model that endogenously determines leader's technology advantages and who innovate (the leader firm or its competitors). Regulation can have either a positive or a negative effect on R&D intensity. It can be negatively associated to aggregate innovative effort in higly deregulated economies. In more regulated ones, where deterring strategies are constrained, it yields incentives to innovate. These predictions are consistent with data on manufacturing industries of 14 OECD countries between 1987-2003. |
| Keywords: | innovative leaders ; quality ladders ; R&D, regulation ; industry-level data |
| Date: | 2011–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00586709&r=reg |
| By: | Haucap, Justus; Coenen, Michael |
| Abstract: | The Europeanization of energy policies is desirable because the three main objectives of energy policy (climate protection, security of supply and competitiveness) have cross-border impacts. Hence, it is good that the European Union has been granted a competence for energy policy in the article 194 of the Lisbon treaty. In addition, it is good that the European Commission has published its long-term strategy to stabilize expectations which is important for infrastructure investment. It is regrettable though that price signals, competition and market principles only play a minor role for the Commission while rather doubtful objectives such as fostering energy efficiency and promoting renewable dominate the agenda. The Commission's strategy is mainly characterized by bureaucratic dirigisme, intense regulation, state planning and public subsidies. The road to a centrally planned energy industry is being walked down fast. -- |
| JEL: | L94 Q48 Q58 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:diceop:11&r=reg |
| By: | Maria Abascal; Luis Carranza; Mayte Ledo; Arnoldo Lopez Marmolejo |
| Abstract: | This article analyzes the potential impact of a higher level of capital and liquidity of banks on the credit penetration and the economic development in emerging countries. To do so, it employs an econometric exercise in two stages. In the first stage it is estimated the impact of capital and liquidity on the quantity and the price of credit. In the second stage it is quantified the impact of credit and its price on the GDP per capita. Thus, the impact of regulation on output is estimated using a chain rule. The article shows that in general the effects of capital and liquidity are higher in emerging countries in terms of banking penetration and GDP per capita. |
| Keywords: | Basel III, capital, liquidity, banking penetration. |
| JEL: | G21 G28 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:1108&r=reg |
| By: | Hintermaier, Thomas (University of Bonn); Koeniger, Winfried (Queen Mary, University of London) |
| Abstract: | We provide a model with endogenous portfolios of secured and unsecured household debt. Secured debt is collateralized by owner-occupied housing whereas unsecured debt can be discharged according to bankruptcy regulations. We show that the calibrated model matches important quantitative characteristics of observed wealth and debt portfolios for prime-age consumers in the U.S. We then establish the quantitative result that home equity does not serve as informal collateral for unsecured debt since, as in the data, unsecured debtors hold small amounts of home equity in equilibrium. Thus, observed variations in homestead exemptions, which are an important part of U.S. bankruptcy regulation, have a small effect on the quantity and price of unsecured debt. |
| Keywords: | household debt portfolios, housing, collateral, bankruptcy, commitment, income risk |
| JEL: | E21 D91 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5653&r=reg |
| By: | Rogge, Karoline S.; Schleich, Joachim; Haussmann, Philipp; Roser, Annette; Reitze, Felix |
| Abstract: | Based on a research framework which combines environmental economics and innovation studies, we explore the relevance of the regulatory framework for innovation activities in the German paper industry, with a focus on climate poli-cies. Innovation activities considered include research and development, adop-tion and organizational change. Empirically, we mainly rely on the survey data of paper producers and technology providers. Findings suggest that innovation activities are mainly governed by market factors and (as yet) are hardly affected by the European Emission Trading System and other climate policies. Also, the impact of these policies on innovation activities is lower for technology providers than for paper producers. However, the majority of companies expect the ef-fects of the regulatory climate policy framework on innovation to increase by 2020. -- |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisisi:s12011&r=reg |
| By: | Wolfgang Maennig (Chair for Economic Policy, University of Hamburg) |
| Abstract: | Restrictions on new constructions and modernisations occur in almost all countries and numerous regulations apply in Germany. This article outlines regulations regarding the protection of historical buildings, restoration law and preservation statutes and describes compensatory subsidies available in the form of tax benefits and/or grants. The article evaluates German regulations and public supports available for monument protection and modernisation from an international perspective. |
| Keywords: | Monument Protection, Zoning, Modernisation, Real Estates, Regulations, Germany, Historical Building |
| JEL: | L85 R31 R33 R52 |
| Date: | 2011–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:hce:wpaper:040&r=reg |
| By: | Mougeot, Michel; Naegelen, Florence |
| Abstract: | Public service motivation is often considered as an argument for low- powered incentive schemes in the public sector. In this paper, we characterize the optimal contract between a public regulator and an altruistic agent according to the degree of public service motivation, when the type of the public service consumer is privately observed. We show that the requested effort is non decreasing with and can be higher than the first best level. Moreover we show that the agent is put on a high powered contract when some customers are served but that this contract is associated with different types of consumers according to : In contrast, the agent is never put on a cost-plus contract. Finally, we show that the first best allocation can be achieved under budget balance for a degree of altruism higher than a threshold that we characterize. |
| Keywords: | altruism; power of incentive schemes; regulation; countervailing incentives; public organization; |
| JEL: | D2 D8 L3 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/5991&r=reg |
| By: | Jan Hanousek; Evzen Kocenda |
| Abstract: | In this paper we analyze the dynamics of public investment and public finance in new members of the European Union, and also how these sectors were affected by changes in economic freedom and corruption. When we assess the role of regulation and corruption on public investment, we find that improvements in economic freedom tend to be associated with decreases in public investment, while reductions in corruption produce effects going in both directions. Similarly, we show that increases in public investment are often linked with decreases as well as increases in corruption. In terms of public finance we detect mostly improvement in debt when there is less economic regulation, while results for a deficit are less conclusive. On the other hand, improvements in the corruption environment are mostly associated with decreases in the deficit as well as debt. As a general rule that follows from our results, steps aimed at reducing corruption and the degree of economic regulation should lead towards improvements in the fiscal position in most of the new EU countries. |
| Keywords: | public finance, public investment, economic freedom, corruption, EU convergence and integration, macroeconomic policy, fiscal reforms, new EU members |
| JEL: | E61 E62 F42 H50 H60 O11 |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2010-1006&r=reg |
| By: | S. Nuray Akin (Department of Economics, University of Miami); Val E. Lambson (Department of Economics, Brigham Young University); Grant R. McQueen (Marriott School, Brigham Young University); Brennan Platt (Department of Economics, Brigham Young University); Barrett A. Slade (Marriott School, Brigham Young University); Justin Wood (Marriott School, Brigham Young University) |
| Abstract: | We explore the questions of whether and why Real Estate Investment Trusts (REITs) pay more for real estate than non-REIT buyers, consequently breaking the law of one price. We develop a model where REITs optimally pay more for property because (1) they are able, due to capital access advantages and, (2) are occasionally compelled, due to regulatory time constraints on the deployment of capital. We show that the typically large (20 to 60 percent) and statistically significant (p-values less than 0.01) REIT-buyer premiums found in standard empirical hedonic pricing models are biased due to unobserved explanatory variables. Using a repeat-transaction methodology that controls for unobserved independent variables, we find the REIT-buyer premium to be about 5 percent. Furthermore, we show that REITs¿ ability (as measured by access to capital markets) and regulator compulsion (as measured by capital deployment deadlines) are related to the price premium. |
| Keywords: | Real Estate Investment Trusts (REITs), commercial properties, hedonic price analysis, repeat transactions, market efficiency, law of one price, price premium |
| JEL: | D83 G14 R33 R3 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:mia:wpaper:2011-1&r=reg |
| By: | Sébastien MARCHAND (Centre d'Etudes et de Recherches sur le Développement International); Gaoussou DIARRA (Centre d'Etudes et de Recherches sur le Développement International) |
| Abstract: | This paper investigates empirically the relationships between the corruption climate and the demand for good governance by focusing on firms' behaviors in developing countries. The concept of demand for good governance is conceived in terms of a firm's willingness to comply with regulatory norms measured through the firm's perception of the level of public accountability as well as the firm's behavior in terms of corruption practices. While there is a growing theoretical literature on the importance of externality mechanisms of corruption phenomena, little empirical evidences has been highlighted. This paper contributes to fill this gap by using firm-level data from the World Bank Enterprise Survey. We show that when corruption is found to be a very important constraint for a firm's business, its willingness to comply decreases and the probability of the firm's corrupting officials increases. These results support arguments according to which the demand for good governance is likely to be influenced by the perception of the existence of pervasive corruption. Moreover, the results are conditioned on countries' institutional features and the type of regulation. Some evidence is also found for firms' environmental overcompliance. |
| Keywords: | Corruption; Compliance; Regulation; Firms |
| JEL: | A13 A12 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1258&r=reg |
| By: | Bieber, Tonia |
| Abstract: | Far-reaching transformations in Swiss education were pushed in the last decade by two prominent international initiatives, namely the 1999 Bologna process and the OECD's PISA study starting in 2000. To what extent and in which way were these soft governance initiatives able to trigger Swiss policy convergence towards their policy models? Drawing on convergence approaches, it is assumed that mechanisms of transnational communication and regulatory competition acted as driving forces of the Swiss reform wave in the last decade. Results show that Swiss secondary education policy exhibits a considerable level of convergence towards the OECD recommendations based on the PISA results, and that reforms in Swiss higher education highly conformed to the Bologna aims. While different communicative mechanisms furthered policy convergence in Swiss secondary and higher education towards the international models of the PISA study and the Bologna process, in both cases regulatory competition was highly effective in promoting domestic reforms. Applying qualitative methods of expert interviews and document analysis, this paper contributes to research on policy convergence. It fills the research gap concerning the role of the newly emerged, but ever more influential education-political actors of the OECD and the EU as promoters and of domestic actors as both supporters and antagonists of convergence. -- |
| Keywords: | Bologna process,EU,OECD,PISA study,policy convergence,Switzerland |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:sfb597:147&r=reg |
| By: | FURUSAWA Taiji; KONISHI Hideo |
| Abstract: | We study international free-riding-proof coalitions to solve trans-boundary environmental problems such as global warming. We show that the free-riding problem is rather serious so that a free-riding-proof coalition can consist of only a small number of countries. In the optimal coalitional structure, therefore, the world would be divided into many small groups. For each group, if countries are symmetric, their individual incentives to join a group are identical across the two regimes of environmental coalitions: the non-transferable utility (NTU) regime and transferable utility (TU) regime. If member countries are asymmetric, however, groups are more stable under the TU regime than under the NTU regime since the former regime enables the member countries to pool their incentives. International cooperation (within each group) on carbon taxes is shown to be equivalent to the NTU regime, while emission permit trading is shown to be equivalent to the TU regime. Therefore, the emission permit trading system can be considered to be superior in the world of asymmetric countries. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:11043&r=reg |
| By: | Brouwer, E.; Ozbugday, F.C. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper tests whether the transition from the old Economic Competition Act, which was based on the so-called “abuse systemâ€, to the new Competition Act, which was based on “prohibition systemâ€, in the Netherlands had an impact on the price-cost margins in manufacturing industries during the period 1993-2007. The paper further investigates if the price-cost margins were higher in industries where temporary antitrust immunity was granted for subset of firms that engaged in concerted practices. The results indicate that the change in the competition law in the Netherlands had a very small and negative, yet statistically insignificant deterrent effect on the price-cost margins. Elsewhere, markups were higher in industries in which temporary antitrust immunity was granted for some class of coordinated actions. |
| Keywords: | Price-cost margins;Competition law;Antitrust immunity;Antitrust enforcement;Dynamic panel data model;the Netherlands. |
| JEL: | K21 L4 L6 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011038&r=reg |
| By: | Seker, Murat |
| Abstract: | There have been significant improvements in traditional trade policies in the past few decades. However, these improvements can only be fully effective when they are complemented with a favorable investment climate. This study focuses on a particular aspect of investment climate, namely labor regulations, and shows how these regulations can be discouraging from exporting. Using firm level data from 26 countries in Eastern Europe and Central Asia region, the paper empirically shows that firms that cannot create new jobs due to stringent labor regulations are less likely to export. Firms that plan to export expand their sizes before they start to export. However the rigidities in labor markets make this adjustment process costly. Higher costs of employment decrease operating profits and lead to a higher productivity threshold level required for entering export markets. As a result, a smaller fraction of firms can afford to export. |
| Keywords: | Exporting; firm heterogeneity; labor regulations; developing countries; Eastern Europe and Central Asia region |
| JEL: | F16 F12 F14 J23 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29907&r=reg |
| By: | Talat S. Genc (Department of Economics,University of Guelph); Henry Thille (Department of Economics, University of Guelph) |
| Abstract: | We study competition between hydro and thermal electricity generators that face uncertainty over demand and water flows where the hydro generator is constrained by water flows and the thermal generator by capacity. We compute the Feedback equilibrium for the in?nite horizon game and show that there can be strategic withholding of water by the hydro generator. When water inflow is relatively low, however, the hydro generator may use more water than efficient as it faces an inefficiently low shadow price of water in this case. The inefficiency of the market outcome is tempered by the capacity constraints: for a large range of possible thermal production capacities and water flow levels, welfare loss under the duopoly market structure is much less than would occur in the absence of water and capacity constraints. |
| Keywords: | Electricity markets; Electricity markets; Hydroelectricity; Imperfect Competition |
| JEL: | L13 L94 C63 C73 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2011-04.&r=reg |
| By: | Duso, Tomaso; Gugler, Klaus; Yurtoglu, Burcin B. |
| Abstract: | This paper applies an intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990-2002 to assess the effectiveness of European merger control. The basic idea is to relate announcement and decision abnormal returns. Under a set of four maintained assumptions, merger control might be interpreted to be effective if rents accruing due to the increased market power observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. To clearly identify the events' competitive effects, we explicitly control for the market expectation about the outcome of the merger control procedure and run several robustness checks to assess the role of our maintained assumptions. We find that only outright prohibitions completely reverse the rents measured around a merger's announcement. On average, remedies seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be more effective when applied during the first rather than the second investigation phase and in subsamples where our assumptions are more likely to hold. Moreover, the European Commission appears to learn over time. -- |
| Keywords: | Merger Control,Remedies,European Commission,Event Studies |
| JEL: | L4 K21 G34 C2 L2 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:15&r=reg |