nep-reg New Economics Papers
on Regulation
Issue of 2011‒08‒09
sixteen papers chosen by
Oleg Eismont
Russian Academy of Sciences

  1. The Regulation of Interdependent Markets By Raffaele Fiocco; Carlo Scarpa
  2. Mobile banking and financial inclusion: The regulatory lessons By Klein, Michael; Mayer, Colin
  3. Investment and capital structure of partially private regulated firms By Cambini, Carlo; Spiegel, Yossi
  4. Taxation and Regulation of Bonus Pay By Timothy Besley; Maitreesh Ghatak
  5. Bargaining and Collusion in a Regulatory Model By Raffaele Fiocco; Mario Gilli
  6. When Does Regulation Bite? Co-Determination and the Nature of Employment Relations By Uschi Backes-Gellner; Jens Mohrenweiser; Kerstin Pull
  7. Why should support schemes for renewable electricity complement the EU emissions trading scheme? By Lehmann, Paul; Gawel, Erik
  8. Regulating international finance and the evolving imbalance of capitalisms since the 1970s By Kalinowski, Thomas
  9. Imports and the structure of retail markets By Raff, Horst; Schmitt, Nicolas
  10. Governance in state-owned enterprises revisited : the cases of water and electricity in Latin America and the Caribbean By Andres, Luis Alberto; Guasch, Jose Luis; Azumendi, Sebastian Lopez
  11. Wettbewerb im Internet: Was ist online anders als offline? By Haucap, Justus; Wenzel, Tobias
  12. A comparison of screening mechanisms for identifying potentially anticompetitive accountable care organizations By Pelnar, Gregory
  13. Pulling the Plug on Monopoly Power: Reform for the Canadian Wheat Board By Richard Pedde; Al Loyns
  14. L'économie du bien-être est morte. Vive l' économie du bien-être ! By Antoinette Baujard - Université of Caen Basse-Normandie - CREM-CNRS
  15. What happened to efficiency in electricity industries after reforms? By Erdogdu, Erkan
  16. Warum und wozu Regulierung im europäischen Mehr-Ebenen-System? Gründe für bzw. Ziele von Regulierung By Knieps, Günter

  1. By: Raffaele Fiocco; Carlo Scarpa
    Abstract: We examine the issue of whether two monopolists which produce substitutable goods should be regulated by one (centralization) or two (decentralization) regulatory authorities, when the regulator(s) can be partially captured by industry. Under full information, two decentral- ized agencies - each regulating a single market - charge lower prices than a unique regulator, making consumers better off. However, this leads to excessive costs for the taxpayers who subsidize the …rms, so that centralized regulation is preferable. Under asymmetric informa- tion about the firms' costs, lobbying induces a unique regulator to be more concerned with the industry's interests, and this decreases social welfare. When the substitutability between the goods is high enough, the firms'lobbying activity may be so strong that decentralizing the regulatory structure may be social welfare enhancing.
    Keywords: regulation, lobbying, asymmetric information, energy markets
    JEL: D82 L51
    Date: 2011–07
  2. By: Klein, Michael; Mayer, Colin
    Abstract: Mobile banking is growing at a remarkable speed around the world. In the process it is creating considerable uncertainty about the appropriate regulatory response to this newly emerging service. This paper sets out a framework for considering the design of regulation of mobile banking. Since it lies at the interface between financial services and telecoms, mobile banking also raises competition policy and interoperability issues that are discussed in the paper. Finally, by unbundling payments services into its component parts, mobile banking provides important lessons for the design of financial regulation more generally in developed as well as developing economies. --
    Keywords: Banking,Regulation,Microfinance,Payments System,Mobile Money
    JEL: G21 G28
    Date: 2011
  3. By: Cambini, Carlo; Spiegel, Yossi
    Abstract: We develop a model that examines the capital structure and investment decisions of regulated firms in a setting that incorporates two key institutional features of the public utilities sector in many countries: firms are partially owned by the state and regulators are not necessarily independent. Among other things, we show that firms invest more, issue more debt, and are allowed to charge higher prices when they are more privatized and when the regulator is more independent and more pro-firm.
    Keywords: debt; government ownership; investment; regulation; regulatory climate; regulatory independence
    JEL: G32 L33 L51
    Date: 2011–08
  4. By: Timothy Besley; Maitreesh Ghatak
    Abstract: We explore the consequence for taxation and regulation of bonus pay when investors are protected by taxpayers from downside risk. The paper develops a model where workers in financial sector firms make decisions about effort and risktaking which are influenced by the structure of bonus pay. Bailouts lead to too little effort, too much risk-taking and increase inequality. We show that the optimal structure of bonuses can be implemented by a combination of a regulation on the structure of bonuses and a tax on their level.
    Date: 2011–07
  5. By: Raffaele Fiocco; Mario Gilli
    Abstract: Within a standard three-tier regulatory model, a benevolent prin- cipal delegates to a regulatory agency two tasks: the supervision of the …rms (two-type) costs and the arrangement of a pricing mecha- nism. The agency may have an incentive to manipulate information to the principal to share the gains of collusion with the …rm. The novelty of this paper is that both the regulatory mechanism and the side contracting between the agency and the …rm are modelled as a bargaining process. While as usual the ine¢ cient …rm does not have any interest in cost manipulation, we …nd that the e¢ cient …rm has an incentive to collude only if the agencys bargaining power is high enough, and the total gains of collusion are now lower than those the two partners would appropriate if the agency could make a take-it-or- leave-it o¤er. Then, we focus on the optimal institutional responses to the possibility of collusion. In our setting, where the incomplete- ness of contracts prevents the principal from designing of a screening mechanism and thus Tiroles equivalence principle does not apply, we show how the playersbargaining powers crucially drive the optimal response to collusion.
    Keywords: bargaining, collusion, regulation
    JEL: D73 D82 L51
    Date: 2011–07
  6. By: Uschi Backes-Gellner (Department of Business Administration, University of Zurich); Jens Mohrenweiser (Centre for European Economic Research); Kerstin Pull (Department of Human Resource Management and Organization, Eberhard Karls Universitaet Tuebingen)
    Abstract: The German Codetermination Law grants workers of establishments with 200 or more employees the right to have a works councillor fully exempted from his regular job while still being paid his regular salary. We analyze theoretically and empirically how this de jure right to paid leave of absence translates into practice and explicitly take into account the nature of the industrial relations participation regime. We find the right of exemption to make no difference in cooperative employment relations, but to develop its bite in adversarial rela-tions, i.e. when – without legal enforcement – the legislator’s intent would not be realized.
    Keywords: Works councils, employment relations, de facto and de jure consequences of legal regulations
    JEL: J53 M54 K31
    Date: 2011–07
  7. By: Lehmann, Paul; Gawel, Erik
    Abstract: In virtually all EU Member States, the EU Emissions Trading Scheme (EU ETS) is complemented by support schemes for electricity generation from renewable energy sources (RES-E). This policy mix has been subject to strong criticism. It is mainly argued that RES-E schemes contribute nothing to emissions reduction and undermine the cost-effectiveness of the EU ETS. Consequently, many scholars suggest the abolition of RES-E schemes. However, this conclusion rests on quite narrow and unrealistic assumptions about the design and performance of markets and policies. This article provides a systematic and comprehensive review and discussion of possible rationales for combining the EU ETS with RES-E support schemes. The first and most important reason may be restrictions to technology development and adoption. These may be attributed to the failure of markets as well as policies, and more generally to the path dependency in socio-technical systems. Under these conditions, RES-E schemes are required to reach sufficient levels of technology development. In addition, it is highlighted that in contrast to the EU ETS RES-E support schemes may provide benefits beyond mitigating climate change. --
    Keywords: EU Emissions Trading System,market failure,path dependency,policy failure,policy mix,renewable energies,subsidies
    Date: 2011
  8. By: Kalinowski, Thomas
    Abstract: In this paper, I put the ongoing G20 process of improving the regulation of international finance into a historically informed perspective. To understand the driving forces behind and obstacles to international cooperation in governing finance I combine concepts from international political economy and comparative political economy (IPE and CPE) that have previously been only loosely connected. Building on the IPE literature that highlights the historical and political embeddedness of financial regulation I depart from the IPE focus on the globalization of US-UK financial market capitalism. CPE studies show that, since the 1970s, different variations of capitalism have reacted in distinct ways to the collapse of the Bretton Woods system, lower growth rates and saturated domestic markets. Most notably, there has been a divergence between the approaches of financializing countries (US, UK) and export-oriented countries (Germany, East Asian nations). The interdependence between financialized and export-oriented variations of capitalism has contributed to the dynamics and crises of international finance for the past four decades. This 'imbalance of capitalisms' also became an obstacle to international cooperation in regulating finance. Faced with the 'trilemma of economic policies,' the financialized and export-oriented variants of capitalism have chosen different combinations of macroeconomic policies, currency policies, and the regulation of financial flows and financial firms. This divergence has led to conflicting preferences with regard to international cooperation to regulate finance. -- Dieses Papier betrachtet die historischen Hintergründe der Schwierigkeiten und Konflikte bei der (Re-)regulierung der internationalen Finanzbeziehungen in der G20. Diese Konflikte lassen sich besonders gut bei dem Versuch der Koordinierung von Fiskal- und Geldpolitik, der Regulierung von Banken und Finanzströmen sowie der Reduzierung globaler wirtschaftlicher Ungleichgewichte beobachten. Hierzu werden bisher nur unzureichend verbundene Ansätze aus der Internationalen und der Vergleichenden Politischen Ökonomie (IPÖ/VPÖ) kombiniert. Die IPÖ-inspirierte Betrachtung internationaler Kooperation verbunden mit dem VPÖ-inspirierten Fokus auf die pfadabhängig unterschiedlichen Spielarten des Kapitalismus ermöglicht ein besseres Verständnis der Hintergründe von Konflikten bei der Regulierung internationaler Finanzbeziehungen. Besonders berücksichtigt werden hierbei die unterschiedlichen Entwicklungen verschiedener Spielarten des Kapitalismus seit dem Zusammenbruch des Bretton-Woods-Systems Anfang der 1970er-Jahre. Die Interdependenz von finanzmarktorientiertem Kapitalismus in den Vereinigten Staaten und Großbritannien sowie exportorientierter Kapitalismusvarianten in Europa und Ostasien haben die internationalen Finanzbeziehungen in den letzten vier Jahrzehnten entscheidend geprägt. Beide Modelle unterscheiden sich ganz erheblich bezüglich der institutionellen Arrangements bei der Regulierung von Finanzbeziehungen und der Fiskal-, Geld- und Währungspolitik. Diese Unterschiede wiederum führen zu divergierenden Präferenzen und Konflikten bei der internationalen Koordinierung der Regulierung von Finanzbeziehungen.
    Date: 2011
  9. By: Raff, Horst; Schmitt, Nicolas
    Abstract: We construct a model of trade with heterogeneous retailers to examine the effects of trade liberalization on retail market structure, imports and social welfare. We are especially interested in investigating the transmission of lower import prices into consumer prices and the effects of retail market regulation. The paper shows that changes in import prices may have large effects on consumer prices and import volumes when changes in retail market structure are taken into account, and that restrictions on retailing, as they occur in several countries, may significantly alter this transmission mechanism by reducing imports and raising consumer prices. --
    Keywords: International trade,retailing,firm heterogeneity
    JEL: F12 L11
    Date: 2011
  10. By: Andres, Luis Alberto; Guasch, Jose Luis; Azumendi, Sebastian Lopez
    Abstract: This paper studies the governance structure of state-owned enterprises in the water and electricity sectors of Latin America and the Caribbean. Through a unique dataset, the paper compares 44 leading state companies of the region based on an aggregate measure of corporate governance and six salient aspects of their design: board, chief executive officer, performance orientation, management, legal framework, and transparency/disclosure. The results indicate the need for improvement in areas such as the selection and appointment of directors to the board and the performance-orientation of the enterprises. The paper also highlights the importance of discussing the management of state-owned enterprises in the wider context of public sector governance, with particular focus on accountability. Moreover, it recognizes the role of accountability as central in the management of state-owned enterprises, recommending a better understanding of regulation and performance management. The paper finds a positive correlation between corporate governance and the utilities'performance. Among the different aspects of corporate governance, performance orientation and professional management seem to be the highest contributors to well-performing state-owned enterprises. State-owned enterprises in the electricity sector show higher governance levels than those in the water sector.
    Keywords: National Governance,Corporate Law,Private Participation in Infrastructure,Governance Indicators,Banks&Banking Reform
    Date: 2011–08–01
  11. By: Haucap, Justus; Wenzel, Tobias
    Abstract: Das Internet ist stark durch Wettbewerb zwischen Plattformen geprägt, welche potenzielle Tauschpartner zusammenbringen. Die Konkurrenz zwischen solchen mehrseitigen Plattformen und die Marktkonzentration wird maßgeblich bestimmt durch (1) die Stärke der indirekten Netzeffekte, (2) das Ausmaß steigender Skaleneffekte, (3) Überlastungsgefahren, (4) Differenzierung der Plattformen und (5) die Möglichkeit des sogenannten Multihoming. Je nach Ausprägung dieser Faktoren ergeben sich unterschiedliche Konzentrationstendenzen und Markteintrittsbarrieren. Pauschal lässt sich zwar nicht feststellen, dass im Internet besonders viele dauerhaft resistente Monopole anzutreffen wären und ein besonderer Regulierungsbedarf besteht. Gleichwohl zeigt sich, dass einzelne Plattformen wie z.B. ebay auf manchen Märkten durchaus beträchtliche Marktmacht besitzen, die aufgrund erheblicher Markteintrittsbarrieren auch nicht schnell erodieren wird. -- The Internet is characterized by competition between platforms which bring together potential partners of exchange. The degree of competition between these multi-sided platforms und market concentration are determined through (1) the strength of the direct and indirect network effects, (2) the extent of economies of scale, (3) the risk of congestition, (4) platform differentiation, and (5) the possibility of multi-homing. Depending on these factors different market concentrations and barriers to entry result. While there is no general tendency for concentration in the Internet and no general need for special market regulation of online content providers and intermediaries, single platforms may still have long lasting and significant market power which is unlikely to erode fastly, as the example of ebay illustrate.
    Date: 2011
  12. By: Pelnar, Gregory
    Abstract: The FTC and DOJ’s Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program explains how the antitrust agencies will screen accountable care organizations (ACOs) to identify ones that are potentially anticompetitive and therefore require further review. In contrast to the antitrust screens the agencies have set forth in earlier Statements or Guidelines which are based on market shares in relevant markets, the Proposed Statement introduces a screen based on market shares in Primary Service Areas (PSAs). By examining several numerical examples, the proposed ACO screen is compared to some alternatives, including the review thresholds set forth in the 2010 Horizontal Merger Guidelines. The results indicate that the proposed ACO screen produces results qualitatively similar to other screens in some instances, but can be more stringent or more lax in others. It is therefore at best premature to conclude that PSAs are a useful tool for screening out potentially anticompetitive ACOs.
    Keywords: accountable care organizations; antitrust; primary service area
    JEL: I18 K21 L40
    Date: 2011–07–29
  13. By: Richard Pedde (Farmer); Al Loyns (University of Manitoba)
    Abstract: Change is in store for the Canadian Wheat Board (CWB), which has the legal authority to purchase all Western Canadian wheat and barley produced for export and for domestic human consumption. The CWB defends the continuation of this legal authority on the premise that by selling together, Western Canadian farmers exert more market power in wheat markets and receive higher returns than they could if competing against each other. However, the declining global market share of Canadian wheat makes it increasingly unlikely that the CWB is able to exert market power: the CWB is a price taker in many markets. In the absence of strong evidence that the CWB is able to achieve its policy goal of higher returns to farmers because of the compulsory purchase of grains, its monopoly over Western Canadian wheat and most barley sales should be reconsidered with an eye to ending it.
    Keywords: Governance & Public Institutions, Canadian Wheat Board (CWB), monopoly
    JEL: Q13 Q17 F13
    Date: 2011–06
  14. By: Antoinette Baujard - Université of Caen Basse-Normandie - CREM-CNRS
    Abstract: L'économie du bien-être a beaucoup évolué au cours du XXième siècle, jusqu'à entrer, disent certains, dans une impasse qui lui est fatale. Les controverses sur la possibilité et la pertinence des comparaisons interpersonnelles de bien-être sont réputées permettre d'expliquer cette évolution. Nous opposons à cette lecture standard une autre explication, essentiellement épistémologique et liée aux interprétations plus ou moins opérationnalles de l'utilité. Des conséquences importantes découlent de cette option, notamment quant au rôle de l'économie du bien-être dans l'action publique.
    Keywords: Economie du bien-être ; Comparaisons interpersonnelles d'utilité ; histoire de l'économie normative / Welfare economics ; Interpersonal comparisons of utilities ; History of normative economics
    JEL: A13 B2 D6
    Date: 2011–06
  15. By: Erdogdu, Erkan
    Abstract: The last two decades have witnessed widespread power market reforms in both developed and developing countries that have cost billions of dollars. Among the key aims (and assumptions) of these reforms, there has always been realization of improvements in power sector efficiency. This paper questions the validity of this hypothesis. Using panel data from 92 countries covering the period 1982–2008, empirical models are developed and analyzed. The research findings suggest that the impact of the reforms on electricity industry performance is statistically significant but also limited. The results imply that, after controlling for country-specific variables, application of liberal market models in electricity industries slightly increases efficiency in power sector. Besides, we detect a positive relationship between reform process and the percentage share of network (transmission and distribution) losses in total electricity supplied; meaning that as countries take more reform steps the network losses as a fraction of power generated tend to increase. Moreover, the study puts forward that income level and other country specific features are more important determinants of industry efficiency than the reform process. Overall, contrary to expectations of substantial increases in sector efficiency, the paper concludes that introducing a decentralized market model with competition in the electricity sector has a limited increasing effect on power industry performance.
    Keywords: Models with panel data (C33); model construction and estimation (C51); electric utilities (L94); power market reform; electricity industry efficiency
    JEL: C51 L11 O13 L94
    Date: 2011–07
  16. By: Knieps, Günter
    Abstract: In diesem Aufsatz werden die drei grundlegenden Fragen behandelt, die sich bei der Ausgestaltung der Regulierung in den Netzsektoren Europas stellen. Warum soll reguliert werden, was und wie soll reguliert werden, welche institutionelle Lösung soll für die Regulierung gewählt werden? Die Potenziale für grenzüberschreitende Interoperabilität von Netzinfrastrukturen, für die marktkonforme Ausschreibung von Universaldienstleistungen sowie für die disaggregierte Re-gulierung verbleibender netzspezifischer Marktmacht werden aufgezeigt. Es gilt die Kompetenzen von Regulierungsbehörden mit Hilfe eines disaggregierten Regulierungsmandats zu beschränken, ohne den für eine ex ante Regulierung erforderlichen diskretionären regulatorischen Handlungsspielraum zu beseitigen. --
    Date: 2011

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