nep-reg New Economics Papers
on Regulation
Issue of 2011‒08‒29
eleven papers chosen by
Oleg Eismont
Russian Academy of Sciences

  1. Regulation and corporate corruption: new evidence from the telecom sector By Berg, Sanford V; Jiang, Liangliang; Lin, Chen
  2. Prohibition of parallel Imports as a hard core Restriction of Article 4 of Block Exception Regulation for vertical Agreements: European Law and Economics By Zevgolis, Nikolaos; Fotis , Panagiotis
  3. Indian Labour Regulation and Its Impact on Unemployment: A Leximetric Study, 1970-2006 By Sarkar, Prabirjit
  4. Three New Empirical Tests of the Pollution Haven Hypothesis When Environmental Regulation is Endogenous By Millimet, Daniel L.; Roy, Jayjit
  5. Ownership Unbundling of Gas Transmission Networks - Empirical Evidence By Growitsch, Christian; Stronzik, Marcus
  6. How to Move Product Market Regulation in New Zealand Back Towards the Frontier By Paul Conway
  7. Bank risk taking and liquidity creation following regulatory interventions and capital support By Berger, A.N.; Bouwman, C.H.S.; Kick, T.; Schaeck, K.
  8. Why didn’t Canada have a banking crisis in 2008 (or in 1930, or 1907, or ...)? By Michael D. Bordo; Angela Redish; Hugh Rockoff
  9. Financial Regulation and Transparency of Information: first steps on new land By Helder Ferreira de Mendonça; Délio José Cordeiro Galvão; Renato Falci Villela Loures
  10. Impact of Labour Regulation on Unemployment: A Case Study of France, Germany, UK and USA By Sarkar, Prabirjit
  11. Deregulation, Consolidation, and Efficiency: Evidence from U.S. Nuclear Power By Lucas W. Davis; Catherine Wolfram

  1. By: Berg, Sanford V; Jiang, Liangliang; Lin, Chen
    Abstract: This paper examines how government regulation in developing countries affects the form of corruption between business customers and service providers in the telecom sector. We match the World Bank enterprise-level data on bribes with a unique cross-country telecom regulation dataset collected by Wallsten et al. (2004), finding that 1) strong regulatory substance (the content of regulation) and regulatory governance reduce corruption; 2) competition and privatization reduces corruption; 3) the effects of regulatory substance on corruption control are stronger in countries with state-owned or partially state-owned telecoms, greater competition, and higher telecommunication fees; and 4) bureaucratic quality exert substitution effects to regulatory substance in deterring corruption. Overall, our results suggest that regulatory strategies that reduce information asymmetry and increase accountability tend to reduce illegal side-payments for connections.
    Keywords: Telecommunications; Regulation; Corruption
    JEL: L5 L9 K4
    Date: 2011–08–18
  2. By: Zevgolis, Nikolaos; Fotis , Panagiotis
    Abstract: This paper attempts, on the one hand, to reveal the main principles of Competition Law (regulatory and case law framework) covering the prevention of parallel trade, mainly the prohibition of parallel imports or exports, and on the other hand to cast light on the main effects of parallel imports prohibition imposed by an upstream supplier on the competitive structure of the downstream market. Especially, the regulatory framework relates Block Exception Regulation 330/2010, (ex Block Exception Regulation 2790/99), with Block Exception Regulation 461/2010 (ex Block Exception Regulation 1400/2002) in order to determine whether prohibition of parallel trade constitutes a hardcore restriction or not, while the economic analysis evaluates it in a geographical vertical market which constitutes an upstream and a downstream market with few suppliers & buyers respectively which sell goods to the final (domestic) consumers. The results indicate that prohibition of parallel imports by the upstream sellers causes vertical restraints to the domestic customers of the buyers.
    Keywords: Antitrust Law; Vertical Restraints; Block Exception Regulation; Market Imperfection; Consumer Nondurables; Repeated Games of Oligopoly Theory;
    JEL: K21 D43 C73
    Date: 2011–08–16
  3. By: Sarkar, Prabirjit
    Abstract: This paper analyses a new leximetric dataset on Indian labour law over a long period 1970-2006. There are five broad aspects of labour law such as Alternative employment contracts, Regulation of working time, Regulation of dismissal, Employee representation and Industrial action. Indian labour regulation is more concerned with the regulation of dismissal. It is more pro-labour than any of the four major OECD countries such as France, Germany, UK and USA. There is no evidence that more labour friendly regulation leads to more unemployment and industrial stagnation. Rather the direction of causality is from unemployment and output to labour regulation.
    Keywords: labour law; employment; India
    JEL: J80 J60 J83 K31
    Date: 2011
  4. By: Millimet, Daniel L. (Southern Methodist University); Roy, Jayjit (Appalachian State University)
    Abstract: The validity of existing empirical tests of the Pollution Haven Hypothesis (PHH) is constantly under scrutiny due to two shortcomings. First, the issues of unobserved heterogeneity and measurement error in environmental regulation are typically ignored due to the lack of a credible, traditional instrumental variable. Second, while the recent literature has emphasized the importance of geographic spillovers in determining the location choice of foreign investment, such spatial effects have yet to be adequately incorporated into empirical tests of the PHH. As a result, the impact of environmental regulations on trade patterns and the location decisions of multinational enterprises remains unclear. In this paper, we circumvent the lack of a traditional instrument within a model incorporating geographic spillovers utilizing three novel identification strategies. Using state-level panel data on inbound U.S. FDI, relative abatement costs, and other determinants of FDI, we consistently find (i) evidence of environmental regulation being endogenous, (ii) a negative impact of own environmental regulation on inbound FDI in pollution-intensive sectors, particularly when measured by employment, and (iii) larger effects of environmental regulation once endogeneity is addressed. Neighboring environmental regulation is not found to be an important determinant of FDI.
    Keywords: foreign direct investment, environmental regulation, spillovers, instrumental variables, control function, heteroskedasticity
    JEL: C31 F21 Q52
    Date: 2011–08
  5. By: Growitsch, Christian (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Stronzik, Marcus (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: The European Commission has intensively discussed the mandatory separation of natural gas transmission from production and services. However, economic theory is ambiguous on the price effects of vertical separation. In this paper, we empirically analyse the effect of ownership unbundling of gas transmission networks as the strongest form of vertical separation on the level of end-user prices. <p> Therefore, we apply different dynamic estimators as system GMM and the bias-corrected least-squares dummy variable or LSDVC estimator on an unbalanced panel out of 18 EU countries over 19 years, allowing us to avoid the endogeneity problem and to estimate the long-run effects of regulation. <p> We introduce a set of regulatory indicators as market entry regulation, ownership structure, vertical separation and market structure and account for structural and economic country specifics. Among these different estimators, we consistently find that ownership unbundling has no impact on natural gas end-user prices, while the more modest legal unbundling reduces them significantly. Furthermore, third-party access, market structure and privatisation show significant influence with the latter leading to higher price levels.
    Keywords: Natural gas; Networks; Regulation; Ownership unbundling; Panel data
    JEL: C23 L43 L94
    Date: 2011–07–20
  6. By: Paul Conway
    Abstract: From the mid-1980s, New Zealand was widely considered to be a leader in liberalising product market regulation (PMR). However, the reform of PMR has lost momentum over recent years. Many areas of PMR are still consistent with best practice, but New Zealand is no longer assessed to be at the forefront of regulatory policy making. Although economic geography clearly offers a partial explanation for the relative underperformance of the NZ economy, restrictive policies in some areas are also likely to be constraining growth in GDP per capita. Indeed, it is likely that being small and distant exacerbates the negative impact of restrictive product market policies on New Zealand’s economic performance. This implies a genuine need to shift the regulatory framework back towards the OECD frontier. Ongoing improvements in regulatory governance, minimising the government’s influence in competitive markets and lowering barriers to trade and FDI, including ongoing policy harmonisation and mutual recognition with trading partners where appropriate, would all help in this regard. This Working Paper relates to the 2011 Economic Survey of New Zealand (<P>Replacer la réglementation des marchés de produits en Nouvelle-Zélande à la pointe des pays de l'OCDE<BR>Depuis le milieu des années 80, la Nouvelle-Zélande a été considérée comme le leader dans la libéralisation de la réglementation des marchés de produits (RMP). Cependant, la réforme des RMP s’est essoufflée au cours de ces dernières années. Dans nombre de domaines, les PMR sont encore en phase avec les meilleures pratiques mais la Nouvelle-Zélande n’est plus considérée comme étant à l’avant-garde de la politique de réglementation. Certes, la géographie économique explique en partie la relative sous-performance de l’économie néo-zélandaise, mais des politiques restrictives dans certains domaines sont susceptibles de brider la croissance du PIB par habitant. Le fait d’être un petit pays excentré aggrave probablement l’impact négatif d’une réglementation restrictive des marchés de produits sur la performance économique néo-zélandaise. La Nouvelle-Zélande a donc le plus grand besoin de ramener son cadre réglementaire vers la frontière des pays de l’OCDE. Continuer d’améliorer la gouvernance de la réglementation, réduire autant que possible l’influence de l’État sur les marchés concurrentiels et abaisser les obstacles aux échanges et à l’IDE, notamment par une plus grande harmonisation des politiques et, le cas échéant, par des accords de reconnaissance mutuelle avec les partenaires commerciaux sont autant d’actions qui seraient utiles à cet égard. Ce document se rapporte à l’Étude économique de l’OCDE de la Nouvelle-Zélande 2011 (éland e).
    Keywords: product market regulation, productivity, institutions, New Zealand, indicators, productivité, institutions, indicateurs, réglementation des marchés de produits, réformes, Nouvelle-Zélande
    JEL: D D24 K23 L11 L12 L25 L43 L5
    Date: 2011–07–13
  7. By: Berger, A.N.; Bouwman, C.H.S.; Kick, T.; Schaeck, K. (Tilburg University, Center for Economic Research)
    Abstract: During times of bank distress, authorities often engage in regulatory interventions and provide capital support to reduce bank risk taking. An unintended effect of such actions may be a reduction in bank liquidity creation, with possible adverse consequences for the economy as a whole. This paper tests hypotheses regarding the effects of regulatory interventions and capital support on bank risk taking and liquidity creation using a unique dataset over the period 1999-2009. We find that both types of actions are generally associated with statistically significant reductions in risk taking and liquidity creation in the short run and long run. While the effects of regulatory interventions are also economically significant, the effects of capital support are only economically significant in the long run. Thus, both types of actions have important intended and unintended consequences with implications for policymakers.
    Keywords: risk taking;liquidity creation;bank distress;regulatory interventions;capital support.
    JEL: G21 G28
    Date: 2011
  8. By: Michael D. Bordo; Angela Redish; Hugh Rockoff
    Abstract: The financial crisis of 2008 engulfed the banking system of the United States and many large European countries. Canada was a notable exception. In this paper we argue that the structure of financial systems is path dependent. The relative stability of the Canadian banks in the recent crisis compared to the United States in our view reflected the original institutional foundations laid in place in the early 19th century in the two countries. The Canadian concentrated banking system that had evolved by the end of the twentieth century had absorbed the key sources of systemic risk—the mortgage market and investment banking—and was tightly regulated by one overarching regulator. In contrast the relatively weak, fragmented, and crisis prone U.S. banking system that had evolved since the early nineteenth century, led to the rise of securities markets, investment banks and money market mutual funds (the shadow banking system) combined with multiple competing regulatory authorities. The consequence was that the systemic risk that led to the crisis of 2008 was not contained.
    JEL: N20
    Date: 2011–08
  9. By: Helder Ferreira de Mendonça; Délio José Cordeiro Galvão; Renato Falci Villela Loures
    Abstract: This article examines the relationship between the level of regulation and transparency of financial institutions from 37 countries and the impacts of the subprime crisis on the stock market, through a regulation and transparency index. Furthermore, with the objective of detecting reasons for the success of some emerging economies in avoiding the crisis, empirical evidence for the presence of market discipline in the Brazilian banking industry is shown. The results are that a higher degree of regulation and transparency is related to higher returns and lower volatility in the stock market during the subprime crisis. Moreover, one of the main reasons for the apparent success of the Brazilian case in facing the crisis is the combination of a strong regulation of the financial system and the presence of market discipline.
    Date: 2011–08
  10. By: Sarkar, Prabirjit
    Abstract: This paper examines the state of labour protection in four countries (UK, USA, France and Germany) during 1970-2006. It supports the contention of the legal-origin theory that UK and USA (common law countries) intervene less in the labour market and grant less protection to labourers. It also supports the proposition that the problem of unemployment is more acute in the civil law countries (France and Germany). But it finds no direct relationship between various aspects of labour regulation and unemployment rate. Hence, we conclude that the explanation of more acute unemployment problem in France and Germany should be sought elsewhere.
    Keywords: law and economics; labour law; legal origin theory; unemployment rate; long-term unemployment; youth unemployment
    JEL: J80 J60 K31 J50
    Date: 2011
  11. By: Lucas W. Davis; Catherine Wolfram
    Abstract: For the first four decades of its existence the U.S. nuclear power industry was run by regulated utilities, with most companies owning only one or two reactors. Beginning in the late 1990s electricity markets in many states were deregulated and almost half of the nation’s 103 reactors were sold to independent power producers selling power in competitive wholesale markets. Deregulation has been accompanied by substantial market consolidation and today the three largest companies control more than one-third of all U.S. nuclear capacity. We find that deregulation and consolidation are associated with a 10 percent increase in operating efficiency, achieved primarily by reducing the frequency and duration of reactor outages. At average wholesale prices the value of this increased efficiency is approximately $2.5 billion annually and implies an annual decrease of almost 40 million metric tons of carbon dioxide emissions.
    JEL: D21 D40 L51 L94 Q48
    Date: 2011–08

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