nep-reg New Economics Papers
on Regulation
Issue of 2011‒07‒02
fourteen papers chosen by
Oleg Eismont
Russian Academy of Sciences

  1. Tópicos de Economía de la Regulación de los Servicios Públicos By Chisari, Omar; Ferro, Gustavo
  2. Land use planning: the impact on retail productivity By Paul Cheshire; Christian Hilber; Ioannis Kaplanis
  3. The European commission's discretion as to the adoption of Article 9 commitment decisions: Lessons from Alrosa By Cavicchi, Piero
  4. The Impact of Dark and Visible Fragmentation on Market Quality (Replaces CentER Discussion Paper 2011-051) By Degryse, H.A.; Jong, F.C.J.M. de; Kervel, V.L. van
  5. High quality exports and consumers’ trust: a development perspective By Nadia Cuffaro; Marina Di Giacinto
  6. Barriers to Entry, Deregulation and Workplace Training By Andrea Bassanini; Giorgio Brunello
  7. Successfully implementing major financial stability regulatory reforms: the risk weighting based controversy (Basel v Dodd Frank) and the role of national supervisors By Ojo, Marianne
  8. LA REGULATION MONETAIRE EN ALGERIE (1990 - 2007) By Samir Bellal
  9. Risky Bank Lending and Optimal Capital Adequacy Regulation By Michael Kumhof; Jaromir Benes
  10. Bank Behavior in Response to Basel III: A Cross-Country Analysis By Dalia Hakura; Thomas F. Cosimano
  11. In brief: Competition in the public sector: good for the goose, good for the gander? By Zack Cooper
  12. A Theoretical Model of Optimal Compliance Decisions under Different Penalty Designs in Emissions Trading Markets By Restiani, Phillia; Betz, Regina
  13. Liberalization-Privatization Paths: Policies and Politics By Filippo Belloc; Antonio Nicita
  14. Forecasting Italian Electricity Zonal Prices with Exogenous Variables By Angelica Gianfreda; Luigi Grossi

  1. By: Chisari, Omar (Universidad Argntina de la Empresa); Ferro, Gustavo (Universidad Argntina de la Empresa)
    Abstract: Competitive markets could yield socially optimum results, but although market fail in many cases. If the regulation is successful in generating competition or in replicating its incentives, the next problem to solve is to face the inherent tendency of the competition dynamic toward concentration, cartelization or monopolization of the markets. Mechanisms to ensure or to preserve competition gain importance. Regulation could be conceived as an evolutionary process starting in natural monopoly regulation and ending in competition policy. In many cases, competition is infeasible with the current state of the technology (such as in water and sanitation), whether in other infrastructure sectors it can be possible (such as in segments of telephony or power generation. Regulation is compatible with state provision, and there can be separated the provision, control and supervision of the providers, even when the former are in public hands. Normally tariffs are regulated in infrastructure sectors, also quality and safety standards. Regulation nevertheless is a second best device, since it is costly. We develop a list of topics on market failures, natural monopoly, information problems, different kind of regulatory mechanisms, access prices, the basic Ramsey model of prices, applied to regulation, universal service obligation, the quality of product and service regulation, cost of capital in regulated industries, efficiency and benchmarking, and we conclude discussing the link between infrastructure and growth.
    Keywords: regulation; Competitive markets; natural monopoly; Regulación de los Servicios Públicos
    JEL: G18 G28 G38 H00 H44 L44
    Date: 2011–02–01
  2. By: Paul Cheshire; Christian Hilber; Ioannis Kaplanis
    Abstract: The restrictions that planning policies impose on retail development have significantly reduced the productivity of supermarkets, according to Paul Cheshire and colleagues.
    Keywords: Land use regulation, regulatory costs, firm productivity, retail
    JEL: D2 L51 L81 R32
    Date: 2011–06
  3. By: Cavicchi, Piero
    Abstract: Introduced by Article 9 of Regulation 1/2003, commitment decisions represent a tool - alternative to Article 7 infringement decisions - available to the European Commission in order to ensure an effective implementation of the EU antitrust rules. Over the last few years there has been an increased recourse to commitment decisions in antitrust cases. This paper explores the reasons for the apparent success of this new instrument and anticipates the consequences of the recent Alrosa judgment rendered by the European Court of Justice, which limits the judicial review of commitment decisions to the manifest incorrectness of the Commission's assessment. The paper concludes that, in light of the extent of the Commission's discretion as to the adoption of commitment decisions defined by the Court in Alrosa, the observed trend seems likely to continue. In particular, given the generous boundaries set by the Court to the Commission's discretionary power, hopes of avoiding system failures in commitment decisions seem actually to be pinned on the Commission's self-restraint more than on the potential for control by the Luxembourg Courts. --
    Keywords: Article 9 of Regulation 1/2003,Article 7 of Regulation 1/2003,commitment decisions,infringement decisions,Commission's discretionary power,principle of proportionality,ECJ Alrosa judgment
    Date: 2011
  4. By: Degryse, H.A.; Jong, F.C.J.M. de; Kervel, V.L. van (Tilburg University, Center for Economic Research)
    Abstract: Two important characteristics of current European equity markets are rooted in changes in financial regulation (the Markets in Financial Instruments Directive). The regulation (i) allows new trading venues to emerge, generating a fragmented market place and (ii) allows for a substantial fraction of trading to take place in the dark, outside publicly displayed order books. This paper evaluates the impact on liquidity of fragmentation in visible order books and dark trading for a sample of 52 Dutch stocks. We consider global liquidity by consolidating the entire limit order books of all visible European trading venues, and local liquidity by considering the traditional market only. We find that fragmentation in visible order books improves global liquidity, but dark trading has a detrimental effect. In addition, local liquidity is lowered by fragmentation in visible order books.
    Keywords: Market microstructure;Market fragmentation;Liquidity;MiFID
    JEL: G10 G14 G15
    Date: 2011
  5. By: Nadia Cuffaro (University of Cassino); Marina Di Giacinto (University of Cassino)
    Abstract: We analyze the impact of the effectiveness of internal regulation for the development of internal and export markets for credence goods, particularly for a developing country which is an exporter (or a potential exporter). In the model, since goods of actual different quality can be sold as high quality goods, expected quality is a function of consumers’ beliefs about the effectiveness of regulation. Foreign consumers, who cannot observe foreign regulation as closely as domestic ones, may partly base their expectations on the level of development of the exporting country. Low effectiveness, negative stereotype and low consumers’ trust may cause a failure in the market for high quality, and there may be a trap of underdevelopment and no high quality exports. The main policy implications are that increasing the effectiveness of regulation improves export prospects; standard setting and enforcement by external actors, such as supermarkets, or NGOs in the case of certain niche markets, is likely to be beneficial
    JEL: L15 F13 O12
    Date: 2011–06–21
  6. By: Andrea Bassanini (OECD); Giorgio Brunello (University of Padova)
    Abstract: We study the impact of regulatory barriers to entry on workplace training. We develop a model of training in imperfectly competitive product and labour markets. The model indicates that there are two contrasting effects of deregulation on training. As stressed in the literature, with a given number of firms, deregulation reduces the size of rents per unit of output that firms can reap by training their employees. Yet, the number of firms increases following deregulation, thereby raising output and profit gains from training and improving investment incentives. The latter effect prevails. In line with the predictions of the theoretical model, we find that the substantial deregulation in the 1990s of heavily regulated European industries (energy, transport and communication) increased training incidence.
    Keywords: training, product market competition, regulatory reform, Europe.
    JEL: J24 L11 O43
    Date: 2011–06
  7. By: Ojo, Marianne
    Abstract: As well as a consideration of the role contributed by national supervisors in the successful implementation and enforcement of standards, recommendations and regulations, the significance of clear and unambiguous mandates in enhancing communication between micro prudential supervisors (usually national financial supervisors and central banks) and macro prudential bodies which are responsible for writing the laws that are enforced by micro prudential supervisors, will be highlighted in this paper. This will incorporate a discussion on the advantages and disadvantages inherent in clear, explicit mandates – such a discussion necessitating a distinction between financial stability and monetary policy objectives. Furthermore, the role of credit ratings and their significance in influencing investor choices and judgments, will be considered as a means of highlighting how they contribute to the neglect of risks, exposures attributed to certain financial instruments, and ultimately, systemic risks which de stabilize the financial system.
    Keywords: European Systemic Risk Board; financial stability; credit ratings; Dodd Frank Act; Basel III; micro prudential supervision; risk weights; European Central Bank; counterparty risks; macro prudential arrangements; central banks; European Supervisory Authorities; monetary policy; risks
    JEL: D0 K2 E5 D8 E3
    Date: 2011–06–22
  8. By: Samir Bellal (Faculté des Sciences Economiques, Université de GUELMA, ALGERIE - Université de Guelma)
    Abstract: On se propose de décrire les changements notables qui se sont produits dans la régulation monétaire en Algérie depuis le début des années 90. Le détour par l'héritage volontariste qui a résulté de la trajectoire économique des années 70 et 80 permet de mettre en évidence les continuités et les ruptures survenues dans la configuration de la forme institutionnelle qu'est la " monnaie ", notamment dans ses composantes relatives à l'offre de monnaie et du crédit.
    Keywords: Monnaie, régulation, crédit, structuralisme, monétarisme.
    Date: 2010–12–10
  9. By: Michael Kumhof; Jaromir Benes
    Abstract: We study the welfare properties of a New Keynesian monetary economy with an essential role for risky bank lending. Banks lend funds deposited by households to a financial accelerator sector, and face penalties for maintaining insufficient net worth. The loan contract specifies an unconditional lending rate, which implies that banks can make loan losses. Their main response is to raise lending rates to rebuild net worth. Prudential rules that adjust minimum capital adequacy requirements in response to loan losses significantly increase welfare. But the gains from eliminating limited liability and moral hazard would be an order of magnitude larger.
    Date: 2011–06–06
  10. By: Dalia Hakura; Thomas F. Cosimano
    Abstract: This paper investigates the impact of the new capital requirements introduced under the Basel III framework on bank lending rates and loan growth. Higher capital requirements, by raising banks’ marginal cost of funding, lead to higher lending rates. The data presented in the paper suggest that large banks would on average need to increase their equity-to-asset ratio by 1.3 percentage points under the Basel III framework. GMM estimations indicate that this would lead large banks to increase their lending rates by 16 basis points, causing loan growth to decline by 1.3 percent in the long run. The results also suggest that banks’ responses to the new regulations will vary considerably from one advanced economy to another (e.g. a relatively large impact on loan growth in Japan and Denmark and a relatively lower impact in the U.S.) depending on cross-country variations in banks’ net cost of raising equity and the elasticity of loan demand with respect to changes in loan rates.
    Keywords: Bank regulations , Bank supervision , Banking sector , Basel Core Principles , Capital , Commercial banks , Cross country analysis , Developed countries , Economic models , Loans ,
    Date: 2011–05–24
  11. By: Zack Cooper
    Abstract: Zack Cooper outlines evidence on the benefits of competition in healthcare - and the implications for the coalition government's NHS reform plans.
    Keywords: hospital competition, market structure, prospective payment, incentive structure
    JEL: C21 I18 L1 R0
    Date: 2011–06
  12. By: Restiani, Phillia; Betz, Regina
    Abstract: This paper employs a theoretical model to examine compliance incentives and market efficiency under three penalty types: the fixed penalty rate, which uses a constant marginal financial penalty; the make-good provision (quantity penalty), where each missing permit in the current period is to be offset with a ratio (restoration rate) in the following period; and a mixed penalty, which combines the two penalty types. Using a simple two-period model of firmâs profit maximisation, we analyse compliance decisions and the efficient penalty level under each penalty type. Firmsâ compliance strategies are modelled as an irreversible investment in abatement measures and permit buying in the market. Our findings indicate that the penalty type does not affect compliance decisions provided that the efficient penalty level is applied. Market efficiency is retained regardless of penalty types. Nevertheless, the mixed penalty design provides the strongest compliance incentives. Hence this finding supports the practice in which this penalty design is widely used in the existing and the proposed trading schemes. Furthermore, we discuss the policy implications of the findings with regard to permit price discovery process and the Australian proposal of tying the penalty level to the permit price
    Keywords: emissions trading, penalty design, compliance, Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2010–12
  13. By: Filippo Belloc; Antonio Nicita
    Abstract: We empirically investigate the political determinants of deregulation policies in six network industries of 30 OECD countries over 1975-2007. We unbundle privatization and liberalization and propose an econometric study in which we allow for the joint adoption of the two policies by governments. We find, contrary to conventional wisdom, that right-wing executives tend to privatize more and to liberalize less, relative to left-wing governments. Thus, we show that ideological cleavages affect the ‘structure’ of deregulation, i.e. the way in which liberalization and privatization are combined. This result may shed new lights on the analysis of the political determinants of market-oriented policy, and suggest new issues for further theoretical and empirical research
    Keywords: Liberalization; Privatization; Network Industries; Partisanship.
    JEL: D72 L50 P16 C23
    Date: 2011–03
  14. By: Angelica Gianfreda (Department of Economics (University of Verona)); Luigi Grossi (Department of Economics (University of Verona))
    Abstract: In the last few years we have observed deregulation in electricity markets and an increasing interest of price dynamics has been developed especially to consider all stylized facts shown by spot prices. Only few papers have considered the Italian Electricity Spot market since it has been deregulated recently. Therefore, this contribution is an investigation with emphasis on price dynamics accounting for technologies, market concentration and congestions. We aim to understand how technologies, concentration and congestions affect the zonal prices since these ones combine to bring about the single national price (prezzo unico d’acquisto, PUN). Hence, understanding its features is important for drawing policy indications referred to production planning and selection of generation sources, pricing and risk–hedging problems, monitoring of market power positions and finally to motivate investment strategies in new power plants and grid interconnections. Implementing Reg–ARFIMA–GARCH models, we assess the forecasting performance of selected models showing that they perform better when these factors are considered.
    Keywords: Electricity prices, Production technologies, Market power (HHI, RSI), Congestions, Fractional Integration, Forecasting
    JEL: C1 Q4
    Date: 2011–01

This nep-reg issue is ©2011 by Oleg Eismont. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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