nep-reg New Economics Papers
on Regulation
Issue of 2011‒10‒15
25 papers chosen by
Oleg Eismont
Russian Academy of Sciences

  1. Network Interconnectivity with Regulation and Competition By Jolian McHardy; Michael Reynolds; Stephen Trotter
  2. Environmental Regulations, Air and Water Pollution, and Infant Mortality in India By Michael Greenstone; Rema Hanna
  3. Can National Innovation Substitute The Role of Environmental Regulation to Improve Corporate Environmental Performance? By Natalia Ortiz-de-Mandojana; Javier Aguilera-Caracuel; José Manuel de la Torre-Ruíz; Vera Ferrón-Vílchez
  4. Provisioning Requirements in Latin America: Where Does the Region Stand? By Arturo Galindo; Liliana Rojas-Suárez
  5. Price volatility, market regulation and risk management: challenges for the future of the CAP By Vincent Chatellier
  6. Do States Free Ride in Antitrust Enforcement? By Robert M. Feinberg; Thomas A. Husted
  7. Macro-prudential regulation of credit booms and busts -- the case of Poland By Kruszka, Michal; Kowalczyk, Michal
  8. Home high above and home deep down below -- lending in Hungary By Banai, Adam; Kiraly, Julia; Nagy, Marton
  9. Regulation of ATM fees in a model of spatial competition By Karen Kaiser; Carlos Lever Guzmán
  10. What Fuels the Boom Drives the Bust: Regulation and the Mortgage Crisis By Jihad Dagher; Ning Fu
  11. Reforms for competitive markets in Pakistan By Haque, Nadeem; Ahmed, Vaqar; Shahid, Sana
  12. How do GM / non GM coexistence regulations affect markets and welfare? By Desquilbet, Marion; Poret, Sylvaine
  13. Socio-Spatial Implications of Street Market Regulation Policy: The Case of Ferias Libres in Santiago de Chile By Lissette Aliaga Linares
  14. Evaluating Policies to Increase the Generation of Electricity from Renewable Energy By Richard Schmalensee
  15. Basel 3, Pillar 2: the role of banks’ internal governance and control function By Elisabetta Gualandri
  16. Reducing Rents from Energy Technology Adoption Programs by Exploiting Observable Information By Aalbers, R.F.T.; Vollebergh, H.R.J.; Groot, H.L.F. de
  17. Regulatory Design for RES-E Support Mechanisms: Learning Curves, Market Structure, and Burden-Sharing By C. Batlle; I.J. Pérez-Arriaga; P. Zambrano-Barragán
  18. Mandatory Disclosure of Blockholders and Related Party Transactions: Stringent Versus Flexible Rules By McCahery, J.A.; Vermeulen, E.P.M.
  19. Regulatory Policies and Consumers Perception of Wines with Protected Designation of Origin: A Conjoint Experiment By Chiodo, Emilio; Casolani, Nicola; Fantini, Andrea
  20. Regulated Medical Fee Schedule of the Japanese Health Care System By Makoto Kakinaka; Ryuta Ray Kato
  21. Auction Experiments and Simulations of Milk Quota Exchanges By Brummer, Bernhard; Loy, Jens-Peter; Requate, Till
  22. Firing Regulations and Firm Size in the Developing World: Evidence from Differential Enforcement By Almeida, Rita K.; Susanli, Z. Bilgen
  23. The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool By Orley C. Ashenfelter; Daniel S. Hosken; Matthew C. Weinberg
  24. The Political Economy of State Government Subsidy Adoption: The Case of Ethanol By Mark, Skidmore; Chad, Cotti; James, Alm
  25. Evaluating the Effects of Entry Regulations and Firing Costs on International Income Differences By Hernan J. Moscos Boedo; Toshihiko Mukoyama

  1. By: Jolian McHardy (Department of Economics, The University of Sheffield); Michael Reynolds; Stephen Trotter
    Abstract: A simple theoretical network model is introduced to investigate the problem of network interconnection. Prices, profits and welfare are compared under welfare maximisation, network monopoly and network monopoly with competition over one part of the network. Given that inducing actual competition may bring disbenefits such as cost duplication and co-ordination costs, we also explore the possibility of a regulator using the threat of entry on a section of the monopoly network in order to bring about the socially preferred level of interconnectivity. We show that there are feasible parameter values for which such a threat is plausible.
    Keywords: Network interconnectivity, monopoly, competition, regulation
    JEL: L14 L33 L50
    Date: 2011–10
  2. By: Michael Greenstone; Rema Hanna
    Abstract: Using the most comprehensive data file ever compiled on air pollution, water pollution, environmental regulations, and infant mortality from a developing country, the paper examines the effectiveness of India’s environmental regulations. The air pollution regulations were effective at reducing ambient concentrations of particulate matter, sulfur dioxide, and nitrogen dioxide. The most successful air pollution regulation is associated with a modest and statistically insignificant decline in infant mortality. However, the water pollution regulations had no observable effect. Overall, these results contradict the conventional wisdom that environmental quality is a deterministic function of income and underscore the role of institutions and politics.
    Date: 2011–07
  3. By: Natalia Ortiz-de-Mandojana (Universidad de Granada. Department of Business); Javier Aguilera-Caracuel (Universidad de Granada. Department of Business); José Manuel de la Torre-Ruíz (Universidad de Granada. Department of Business); Vera Ferrón-Vílchez (Universidad de Granada. Department of Business)
    Abstract: Environmental regulatory uncertainty has attracted extraordinary attention among scholars, managers, policy-makers and other members of society. Despite this increasing attention, the impact of environmental regulatory uncertainty on the environmental approaches of firms is difficult to estimate in the business context. Considering that environmental regulations are not the only mechanism enabling firms to develop proactive environmental management practices, we show that the national institutional profile delineates a firm’s environmental progress. Specifically, we argue that the national level of innovation is an essential institutional condition that can encourage firms to develop advanced environmental approaches and even overcoming the effect of environmental regulatory uncertainty on corporate environmental performance. Using a sample of 1,912 firms from 19 countries, we developed different scenarios that combine the effects of environmental regulatory uncertainty and the national level of innovation. Knowledge of these different situations illustrates how managers cope with environmental regulatory uncertainty.
    Keywords: Environmental Regulatory Uncertainty; National Level of Innovation; Corporate Environmental Performance
    JEL: M1
    Date: 2011–10–01
  4. By: Arturo Galindo; Liliana Rojas-Suárez
    Abstract: This policy note focuses on provisioning practices in Latin America, a supervisory tool that if well designed can contribute to strengthen both micro and macro prudential regulation. For that purpose this note briefly explains the importance of an adequate regulatory regime for provisioning requirements and identifies key features of an adequate provisioning regime, describes the most salient characteristics of provisioning regimes in Latin America, and constructs an index to assess the quality of the provisioning regimes in the selected countries.
    Keywords: Financial Sector :: Financial Policy, Economics :: Financial Crises & Economic Stabilization, IDB-PB-119, financial crisis, financial regulatory framework, provisioning
    Date: 2011–01
  5. By: Vincent Chatellier
    Abstract: This article provides an analysis of the European Commission’s proposals (18 Novembre 2010) regarding the next CAP reform. It proposes a reflection centered on the volatility of agricultural prices, the market regulation mechanisms and the risk management tools (the important question of direct payment to farmers is not included here). The first section deals with the factors underlying the volatility of agricultural prices, the effects of these factors on an international scale and ways of better managing volatility through enhanced international coordination of policies associated with agriculture. The second concerns the European tools that could be mobilised to accompany and support the envisaged strategies on a more global scale. Arguments are then developed around the following topics: customs duties, export refunds, safety nets, futures markets, fiscal policies and income stabilisation tools.
    Keywords: CAP, agricultural market, price volatility, risk, regulation instruments
    JEL: Q10 Q13 Q18
    Date: 2011
  6. By: Robert M. Feinberg; Thomas A. Husted
    Abstract: Recent research has documented a substantial role in antitrust enforcement by U.S. states. While many of the cases litigated involve small local firms, a non-trivial portion encompass multiplestate issues. Some previous literature has investigated whether states engage in free-riding behavior in environmental regulation, and whether governments free ride on private decisions in provision of public goods. In this paper, we analyze a sample of antitrust cases involving crossstate impacts (from the Multi-State Antitrust Database, provided by the National Association of Attorneys General) and explain the determinants of free-riding (which we define as participatingin a case, but not as a lead plaintiff). JEL classification:
    Date: 2011–10
  7. By: Kruszka, Michal; Kowalczyk, Michal
    Abstract: The last several years before the global downturn of 2008-2009 saw rapid credit growth in Poland. The credit-to-gross domestic product ratio rose from about 25 percent in 2004 to close to 50 percent in 2009. Such an expansion itself might potentially be a source of risks to financial stability, but it was also coupled with relatively new phenomena, such as massive foreign currency lending. Thanks to the pro-active attitude of the Polish authorities and sound economic fundamentals, the risks largely have not materialized. Since 2006 the financial supervisor has addressed in its recommendations for banks the problem of foreign exchange lending, which contributed to the high quality of the portfolio. Before the economy slowed down, the Polish Financial Supervisory Authority persuaded banks to accumulate an additional capital buffer that helped protect them from the negative consequences of the downturn. Some regulatory concepts that had been put into place in Poland in the previous years, including quantitative liquidity requirements, are now being implemented globally. The Polish Financial Supervisory Authority participates in international debates on a new regulatory regime for the financial system. The major message the authority intends to convey is that all new regulations must be tailored carefully. Regulators should make an effort to ensure that the benefits of enhanced quality of the capital base or the countercyclical buffer are not compromised by international overregulation that could undermine national authorities'ability to pursue effective country-specific policies.
    Keywords: Banks&Banking Reform,Debt Markets,Access to Finance,Bankruptcy and Resolution of Financial Distress,Emerging Markets
    Date: 2011–10–01
  8. By: Banai, Adam; Kiraly, Julia; Nagy, Marton
    Abstract: In Hungary in the pre-crisis period, the bank sector-initiated private credit boom significantly contributed to the accumulation of economic imbalances. Nevertheless, before the 2008 crisis no special regulatory measure was taken to mitigate the foreign exchange lending to unhedged borrowers, which was a main moving force of the credit boom. Depreciation of forint-denominated subsidized housing loans and the increased risk premium significantly deteriorated customers'positions and resulted in rocketing nonperforming loans. A recession, deteriorating portfolios, and lack of efficient workout. The introduction of strict regulation froze banking activity and the danger of recovery without lending emerged. This paper compares the pre- and post-crisis lending activity and analyzes the lack of regulation in the pre-crisis period and the inefficient regulation in the post-crisis period.
    Keywords: Debt Markets,Banks&Banking Reform,Currencies and Exchange Rates,Bankruptcy and Resolution of Financial Distress,Emerging Markets
    Date: 2011–10–01
  9. By: Karen Kaiser; Carlos Lever Guzmán
    Abstract: Following the Hotelling model of spatial competition used by Massoud and Bernhardt (2002) to analyze competition in ATM fees, in this paper we analyze the effects of banning fees on the usage of ATMs by account holders. We find that the prohibition also reduces the fees charged to non-account holders but increases fixed fees. This latter increase is on average smaller than the decrease of the former two, which leads total consumer welfare to increase. We also find that the prohibition decreases total surplus but that this decrease is absorbed by the banks' profits. The model does not consider the decision of banks to open or close down ATMs, which we leave for future research.
    Keywords: Banking competition, ATM fees, bank regulation, retail banking.
    JEL: G21 L51 D40
    Date: 2011–09
  10. By: Jihad Dagher; Ning Fu
    Abstract: We show that the lightly regulated non-bank mortgage originators contributed disproportionately to the recent boom-bust housing cycle. Using comprehensive data on mortgage originations, which we aggregate at the county level, we first establish that the market share of these independent non-bank lenders increased in virtually all US counties during the boom. We then exploit the heterogeneity in the market share of independent lenders across counties as of 2005 and show that higher market participation by these lenders is associated with increased foreclosure filing rates at the onset of the housing downturn. We carefully control for counties’ economic, demographic, and housing market characteristics using both parametric and semi-nonparametric methods. We show that this relation between the pre-crisis market share of independents and the rise in foreclosure is more pronounced in less regulated states. The macroeconomic consequences of our findings are significant: we show that the market share of these lenders as of 2005 is also a strong predictor of the severity of the housing downturn and subsequent rise in unemployment. Overall our findings lend support to the view that more stringent regulation could have averted some of the volatility on the housing market during the recent boom-bust episode.
    Keywords: Bank regulations , Banks , Business cycles , Credit demand , Housing prices , Nonbank financial sector , United States ,
    Date: 2011–09–14
  11. By: Haque, Nadeem; Ahmed, Vaqar; Shahid, Sana
    Abstract: While Pakistan has taken several steps to promote competition in its markets, further reforms are required in improving domestic commerce, agricultural markets and industries. With increasing risks and cost of doing business due to deteriorating law and order situation as well as massive energy shortages, Pakistan needs to compensate its entrepreneurs and investors by enhancing its investment and business climate. By adopting certain administrative and legal reforms, Pakistan can considerably lessen the burden on its businessmen and help lower the costs of exogenous factors. The main reforms needed to promote competitive and vibrant markets need to be initiated at the domestic commerce level. For promoting domestic commerce, city zoning laws and building regulations should be reformed to allow land to respond to market demand. The legal framework must also be strengthened to support the complex needs of diverse markets. Moreover, there is a need to push for openness and competition to bring international quality goods to the market and promote innovation. For agricultural markets, the Agricultural Produce Markets Act 1939 must be reformed to introduce competition such that private sector involvement is encouraged. Government involvement in storage and transport facilities, especially for agricultural produce, needs to be reconsidered so space can open up for private sector involvement. For reforms in the industries, consistency in policy is required along with reduction in government involvement in certain areas. It is only through minimising the heavy government footprint from markets that the private sector can be allowed to function competitively and efficiently, emphasising the role of markets as a major driving force behind economic growth.
    Keywords: Competition; Market Regulation; Economic Growth
    JEL: G28 D4 F43
    Date: 2011
  12. By: Desquilbet, Marion; Poret, Sylvaine
    Abstract: This paper presents a theoretical economic model assessing the effect of the level of mandatory genetically modified (GM) / non-GM coexistence regulations on market and welfare outcome. We assume vertical differentiation of GM and non-GM goods on the consumer side. Producers are heterogeneous in their cost savings from GMO adoption. Producers of non-GM crops face a probability of having their harvest downgraded if gene flow from GM fields makes its GMO content above the labeling threshold. The government may impose to GMO producers mandatory ex ante isolation distances from non-GM fields in order to decrease the probability of non-GM harvest downgrading. It may also introduce an ex post compensation to non-GMO farmers for profit losses due to harvest downgrading, imposing GMO farmersâ participation to a compensation fund via a tax on GM seeds. Assuming endogenous crop choices and prices, we study the effects of ex ante regulation and ex post liability of GMO producers on market equilibrium as well as on global and interest group welfare.
    Keywords: genetically modified organisms, coexistence, identity preservation, regulation, liability, vertical differentiation, law and economics, Marketing, Research and Development/Tech Change/Emerging Technologies,
    Date: 2011
  13. By: Lissette Aliaga Linares
    Abstract: Unlike in most Latin American cities, street vendors organized in farmers’ markets popularly known as ferias libres in Santiago de Chile, gained legal recognition early in the twentieth century. Since then, comunas, or local municipalities, have provided vendors with individual licenses that stipulate the place and time of operations, and have defined a clear set of rules regarding customer service. However, this early legal recognition has not necessarily overcome the embedded conflict over the economic use of public space. As supermarkets become spatially positioned along the main streets within easy access of the city’s transportation system, feriantes, or licensed street vendors, are being relocated in less profitable areas. Moreover, coleros, or unlicensed vendors, are still flourishing despite efforts to restrict their numbers.
    Keywords: informal sector, regulation, farmers’ markets, competition
    Date: 2011
  14. By: Richard Schmalensee
    Abstract: Focusing on the U.S. and the E.U., this essay seeks to advance four main propositions. First, the incidence of the short-run costs of programs to subsidize the generation of electricity from renewable sources varies with the organization of the electric power industry, and this variation is may be a significant contributor to their political attractiveness in U.S. states. Second, despite the greater popularity of feed-in-tariff schemes worldwide, renewable portfolio standard (RPS) programs may involve less long-run social risk under plausible conditions. Third, in contrast to the E.U.’s approach to reducing carbon dioxide emissions, its renewables program is almost certain not to minimize the cost of achieving its goals. Fourth, the array of state RPS programs in the U.S. are also almost certain to cost more than necessary, even though most employ market mechanisms. To support this last point I provide a fairly detailed description of actual markets for renewable energy credits (RECs) and their shortcomings.
    Date: 2011–05
  15. By: Elisabetta Gualandri
    Abstract: The analysis of the financial crisis has revealed not only major market and regulatory failures, but also shortcomings in supervisory approaches and in banks’ systems of internal and external controls. These failures and shortcomings played a significant role in the origin and evolution of the crisis. In some important cases, the crisis revealed that banks’ internal governance, and their internal control functions in particular, were ineffective or even unsuitable when faced with the demands of overseeing the growing levels of risk undertaken by intermediaries, and especially the interrelations between these exposures. So what are the implications of the crisis, the regulatory innovations now being implemented, and the changes in supervisory policies and practices, for banks’ internal control systems? Given the role of internal control functions in risk-based supervision, what is the exact relationship between supervisor and supervised as defined by Basel 3, Pillar 2, with regard to ICAAP and SREP? One important lesson to emerge from recent experience is the need to encourage a new culture amongst banks, ensuring that they appreciate the key role of internal controls as a tool for managing and monitoring risk.
    JEL: G21 G28 G32
    Date: 2011–10
  16. By: Aalbers, R.F.T.; Vollebergh, H.R.J.; Groot, H.L.F. de (Tilburg University, Center for Economic Research)
    Abstract: In this paper, we study how regulators may improve upon the efficiency of their energy technology adoption programs by exploiting readily observable information to limit rent extraction by firms. Using panel data on 862 investment decisions in the Netherlands, we find that rent extraction is closely linked not only to technology characteristics, but also to the firm's capital budgetting technique. In particular, we find that firms are more likely to extract rent when either the technology's pay-back period or its required investment is lower, but less likely if they do not use a formal capital budgeting technique. Standard firm characteristics, such as size and sector, correlate with firms' use of capital budgeting techniques, thereby partly resolving the regulator's asymmetric information problem.
    Keywords: rent extraction;tagging;tax expenditure programs;technology adoption subsidies;investment decisions;bivariate probit model.
    JEL: H25 H32 O33 Q48
    Date: 2011
  17. By: C. Batlle; I.J. Pérez-Arriaga; P. Zambrano-Barragán
    Abstract: Drawing from relevant experiences in power systems around the world, this paper offers a critical review of existing policy support mechanisms for RES-E (renewable energy sources for electricity), with a detailed analysis of their regulatory implications. While recent studies provide an account of current RES-E support systems, in this paper we focus on the impacts these mechanisms have on the overall energy market structure and its performance in the short and long term. Given the rising importance of RES-E in systems everywhere, these impacts can no longer be overlooked.
    Date: 2011–05
  18. By: McCahery, J.A.; Vermeulen, E.P.M. (Tilburg University, Center for Economic Research)
    Abstract: Investor confidence in financial markets depends in large part on the existence of an accurate disclosure and reporting regime that provides transparency in the beneficial ownership and control structures of publicly listed companies. Today, a common post-financial crisis regulatory reform theme is to tighten the disclosure and reporting rules that apply to large blockholders. We examine the implications of this trend, analyzing whether detailed, stringent and mandatory reporting rules could have a counterproductive effect on the financial markets. A central idea of this paper is the evolution of a well-balanced regime that is flexible and proportional and allows for a case-by-case determination of a beneficial owner. In the current era of information-based technology, the most obvious challenge for regulators is to design a legal framework that is adaptable to technological change and its impact on financial instruments.
    Keywords: beneficial ownership;control enhancing mechanisms;corporate.
    JEL: G30 G32 K22 K42
    Date: 2011
  19. By: Chiodo, Emilio; Casolani, Nicola; Fantini, Andrea
    Keywords: Consumer/Household Economics,
    Date: 2011
  20. By: Makoto Kakinaka (International University of Japan); Ryuta Ray Kato (International University of Japan)
    Abstract: We present a theoretical framework for investigating the effect of the Japanese government-regulated medical fee schedule, 'Shinryo-Houshu-Seido,' on the behavior of medical providers. We also discuss the optimal rule of this fee schedule for the regulator, taking into account information asymmetry between the regulator and providers. Our simple model predicts that under the current fee schedule heterogeneous providers either under-provide or over-provide medical inputs, depending on the price. Furthermore, our analytical results show that when the allocated budget is reduced to a certain level, even the second-best outcome becomes unachievable, no matter how the fee schedule is regulated. While we demonstrate that the global budget caps or the limited budget size is shown to have a clear negative effect on social welfare, we suggest that the prospect of obtaining the second-best outcome without complete information on heterogeneous providers is left to negotiation between the regulator and the budget allocator.
    Keywords: asymmetric information, budget caps, regulated medical fee schedule, Japanese health care system
    Date: 2011–05
  21. By: Brummer, Bernhard; Loy, Jens-Peter; Requate, Till
    Abstract: Since 2000 Germany has introduced a fairly unique market mechanism to trade milk quotas between dairy farms. The two major features are: (1) a quasi auctioning system that produces excess demands which are covered by state reserves free of charge and (2) a price band that is used to exclude highest bids. For both features an experimental design is developed to study the impact in reference to a regular sellerâs sealed bid double auction. Results show that both treatments lead to significant misallocations. These are due to the direct impact of regulations and due to an imperfect adjustment of bidding functions. The major goal of the market design to reduce quota prices is reached, however, at significant trade losses.
    Keywords: Livestock Production/Industries,
    Date: 2011
  22. By: Almeida, Rita K. (World Bank); Susanli, Z. Bilgen (Isik University)
    Abstract: This paper examines how stringent de facto firing regulations affect firm size throughout the developing world. We exploit a large firm level dataset across 63 countries and within country variation in the enforcement of the labor codes in countries with very different de jure firing regulations. Our findings strongly suggest that firms facing a stricter enforcement of firing regulations are on average smaller. We interpret this finding as supportive of the fact that more stringent de facto firing regulations tend to reduce average employment. We also find robust evidence that this effect is stronger for more labor intensive manufacturing firms, especially those operating in low-technology sectors. Evidence also shows that this negative correlation does not hold in countries with a very weak rule of law.
    Keywords: firing regulations, developing countries, labor markets, enforcement, micro data
    JEL: J21 J24 K20
    Date: 2011–10
  23. By: Orley C. Ashenfelter; Daniel S. Hosken; Matthew C. Weinberg
    Abstract: Many experts speculate that U.S. antitrust policy towards horizontal mergers has been too lenient. We estimate the price effects of Whirlpool’s acquisition of Maytag to provide new evidence on this debate. We compare price changes in appliance markets most affected by the merger to markets where concentration changed much less or not at all. We estimate price increases for dishwashers and relatively large price increases for clothes dryers, but no price effects for refrigerators or clothes washers. The combined firm’s market share fell across all four affected categories and the number of distinct appliance products fell.
    JEL: K2 K21 L11 L4
    Date: 2011–10
  24. By: Mark, Skidmore; Chad, Cotti; James, Alm
    Abstract: In this paper we examine the factors that determine the adoption of state economic development incentives in the ethanol industry. We compile data on the implementation dates for subsidies/tax credits for all states for years 1984-2007, a period that covers the complete emergence of the biofuel industry in the United States and that was characterized by the passage of a numerous of state-level subsidies and tax breaks aimed at increasing ethanol production. Using Cox proportional hazard regression analysis, we find that states are more likely to adopt ethanol subsidies when corn production is high, when corn prices are low and gasoline prices are high, when a state is affiliated with the National Corn Growers Association, when a check-off is present, and when state government is under the control of Democrats.
    Keywords: ethanol; subsidies; political economy; rent seeking; proportional hazard estimation
    JEL: H25 H71
    Date: 2011–06
  25. By: Hernan J. Moscos Boedo; Toshihiko Mukoyama
    Abstract: This paper analyzes the effects of entry regulations and firing costs on cross-country differences in income and productivity. We construct a general equilibrium industry- dynamics model and quantitatively evaluate it using the cross-country data on entry costs and firing costs. Entry costs lower overall productivity in an economy by keeping low- productivity establishments in operation and making the establishment size inefficiently large. Firing costs lower productivity by reducing the reallocation of labor from low- productivity establishments to high-productivity establishments. The linear regression of the data on the model prediction accounts for 27% of the cross-sectional variation in total factor productivity. Moving the level of entry costs and firing costs from the U.S. level to that of the average of low income countries (countries with a Gross National Income below 2% of the U.S. level) reduces TFP by 27% in the model without capital, and by 34% in the model with capital and capital adjustment costs.
    Keywords: Entry cost, firing cost,international income differences,industry dynamics
    JEL: D24 E23 J65 L11 O11
    Date: 2011–10

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