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on Regulation |
| By: | Peter Sinclair |
| Abstract: | This paper scrutinizes the economic case for adopting a system of macroprudential regulation, the instruments that may be available to conduct it, and the practical implications for policy |
| Keywords: | macroprudential regulation |
| JEL: | D53 G28 L74 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:11-21&r=reg |
| By: | Donato Masciandaro, Francesco Passarelli |
| Abstract: | In this paper we describe systemic financial risk as a pollution issue. Free riding leads to excess risk production. This problem may be solved, at least partially, either with financial regulation or taxation. From a normative viewpoint taxation is superior in many respects. However, reality shows that financial regulation is more frequently adopted. In this paper we make a positive, politico-economic argument. If the majority chooses a tax, then it is likely to be too low. If it chooses regulation it will possibly be too harsh. Moreover, a majority of low polluting portfolio owners may strategically use regulation in order to charge the minority a larger share of the externality reduction. |
| Keywords: | financial crises, banking regulation, financial transaction taxes |
| JEL: | D62 D72 G21 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:slp:islawp:islawp41&r=reg |
| By: | Ronelle Burger (Department of Economics, University of Stellenbosch); Indraneel Dasgupta (Centre for Studies in Social Sciences,Calcutta); Trudy Owens (School of Economics, University of Nottingham) |
| Abstract: | We develop a model of regulation of service-delivery NGOs, where future grants are conditional on prior spending of some minimal proportion of current revenue on direct project-related expenses. Such regulation induces some NGOs to increase current project spending, but imposes wasteful costs of compliance verification on all NGOs. Under a large class of parametric configurations, we find that regulation increases total discounted project expenditure over a regime of no regulation, when verification costs constitute no more than 15% of initial revenue. We characterize the optimal regulatory policy under these configurations. We apply our analysis to a large sample of NGOs from Uganda, and find regulation to be beneficial in that context. |
| Keywords: | Regulation of non-governmental organizations, developing countries, Uganda |
| JEL: | I38 L31 L38 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers150&r=reg |
| By: | Jeroen Klomp; Jakob de Haan |
| Abstract: | Using data for more than 200 banks from 21 OECD countries for the period 2002 to 2008, we examine the impact of bank regulation and supervision on banking risk using quantile regressions. In contrast to most previous research, we find that banking regulation and supervision has an effect on the risks of high-risk banks. However, most measures for bank regulation and supervision do not have a significant effect on low-risk banks. As banking risk and bank regulation and supervision are multifaceted concepts, our measures for both concepts are constructed using factor analysis. |
| Keywords: | Financial soundness; Bank regulation and supervision; Banking risk; Quantile regression |
| JEL: | E44 G2 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:323&r=reg |
| By: | Blackman, Allen (Resources for the Future) |
| Abstract: | Private sector initiatives certifying that producers of goods and services adhere to defined environmental process standards are increasingly popular worldwide. According to proponents, they can circumvent chronic barriers to effective public sector environmental regulation in developing countries. But eco-certification programs will have limited effects on producers’ environmental performance if, as one would expect, they select for those already meeting certification standards. Rigorous evaluations of the environmental effects of eco-certification in developing countries that control for selection bias are rare. We use plant-level data on more than 80,000 Mexican facilities to determine whether ISO 14001 series certification of environmental management systems boosts regulatory compliance. We use propensity score matching to control for nonrandom selection into the program. We find that plants recently fined by environmental regulators were more likely to be certified, all other things equal, but that certified plants were subsequently fined just as often as similar uncertified plants. These results suggest that in Mexico, the ISO 14001 program attracts dirty plants under pressure from regulators—not just relatively clean ones—but does not have a large, lasting impact on their regulatory compliance. |
| Keywords: | voluntary environmental regulation, duration analysis, propensity score matching, Mexico |
| JEL: | Q56 Q58 O13 O54 C41 |
| Date: | 2011–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-39&r=reg |
| By: | Muehlenbachs, Lucija (Resources for the Future); Newcomb Sinha, Elisabeth; Ranjan Sinha, Nitish |
| Abstract: | Using advances in text analysis, we examine the content and timing of 21,493 press releases issued by the U.S. Environmental Protection Agency (EPA) between 1994 and 2009. Press releases announcing enforcement actions or regulatory changes were issued more often on Fridays and before holidays, a time when news has the least impact on media coverage and financial markets. Changing the timing of press releases may increase deterrence through awareness of regulation and market reaction to environmental news. We find no evidence of regulatory capture. We compare text analysis techniques that allow data collection from sources previously too expensive to access. |
| Keywords: | text analysis, computational linguistics, regulation, environment, politics, Environmental Protection Agency |
| JEL: | Q58 |
| Date: | 2011–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-45&r=reg |
| By: | Fraas, Art (Resources for the Future); Lutter, Randall (Resources for the Future) |
| Abstract: | In their recent paper , Efficient Pollution Regulation: Getting the Prices Right (henceforth, EPR), Muller and Mendelsohn describe a broader, more appealing concept of efficiency that incorporates information on damages caused by emissions from specific sources: “The science and economics related to pollution control”, they write, “have advanced to the point where regulations can now move from cost-effectiveness to efficiency.” We argue that despite the appeal of the EPR solution, its conclusion that source-specific marginal damage estimates are ready for use in regulations is simply incompatible with the empirical evidence presented in EPR. In particular, we explore the implications of the EPR finding of negative marginal damages from NOx emissions for many heavily populated counties. The associated nonconvexities, we show, imply that the source-specific trading ratios that EPR advocates lead to unattractive outcomes not likely to be efficient. We also discuss how the EPR assumption that the regulators know damages with certainty oversimplifies key aspects of efficient air pollution regulation. |
| Date: | 2011–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-36&r=reg |
| By: | Ian Christensen; Césaire Meh; Kevin Moran |
| Abstract: | This paper assesses the merits of countercyclical bank balance sheet regulation for the stabilization of financial and economic cycles and examines its interaction with monetary policy. The framework used is a dynamic stochastic general equilibrium modelwith banks and bank capital, in which bank capital solves an asymmetric information problem between banks and their creditors. In this economy, the lending decisions of individual banks affect the riskiness of the whole banking sector, though banks do not internalize this impact. Regulation, in the form of a constraint on bank leverage, can mitigate the impact of this externality by inducing banks to alter the intensity of their monitoring efforts. We find that countercyclical bank leverage regulation can have desirable stabilization properties, particularly when financial shocks are an important source of economic fluctuations. However, the appropriate contribution of countercyclical capital requirements to stabilization after a technology shock depends on the size of the externality and on the conduct of the monetary authority. <P> |
| Keywords: | Moral hazard, bank capital, countercyclical capital requirements, leverage, monetary policy, |
| JEL: | E44 E52 G21 |
| Date: | 2011–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2011s-76&r=reg |
| By: | Brennan, Timothy J. (Resources for the Future) |
| Abstract: | Promoting energy efficiency (EE) has become a leading policy response to greenhouse gas emissions, energy dependence, and the cost of new generators and transmission lines. Such policies present numerous puzzles. Electricity prices below marginal production costs could warrant EE policies if EE and energy are substitutes, but they will not be substitutes if the energy price is sufficiently high. Using EE savings to meet renewable energy requirements can dramatically increase the marginal cost of electricity. Rejecting “rationality” of consumer energy choices raises doubts regarding cost–benefit analysis when demand curves may not reveal willingness to pay. Decoupling to guarantee constant profit regardless of use contradicts findings that incentive-based mechanisms outperform cost-of-service regulation. Regulators may implement EE policies to exercise buyer-side market power against generators, increasing consumer welfare but reducing overall economic performance. Encouraging utilities to take over potentially competitive EE contradicts policies to separate competitive from monopoly enterprises. |
| Keywords: | energy efficiency, energy policy, decoupling, monopsony, vertical integration |
| JEL: | Q48 L94 L51 |
| Date: | 2011–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-27&r=reg |
| By: | Viscusi, W. Kip (Vanderbilt University); Zeckhauser, Richard J. (Harvard University) |
| Abstract: | Catastrophic risks differ in terms of their natural or human origins, their possible amplification by human behaviors, and the relationships between those who create the risks and those who suffer the losses. Given their disparate anatomies, catastrophic risks generally require tailored therapies, with each prescribed therapy employing a specific portfolio of policy strategies. Given that catastrophic risks occur rarely, and impose extreme losses, traditional mechanisms for controlling risks--bargaining, regulation, liability--often function poorly. Commons catastrophes arise when a group of actors collectively impose such risks on themselves. When the commons is balanced, that is, when the parties are roughly symmetrically situated, a range of regulatory mechanisms can perform well. However, unbalanced commons--such as exist with climate change--will challenge any control mechanism with the disparate parties putting forth proposals to limit their own burdens. When humans impose catastrophic risks predominantly on others--as with deepwater oil spills--the risks are external. For those risks, the analysis shows, a single responsible party should be identified. Primary emphasis should then be placed on a two-tier liability system. Parties engaged in activities posing such catastrophic risks would be subject to substantial minimum financial requirements, strict liability for all damages, and a risk-based tax for expected losses that would exceed the responsible party's ability to pay. Utilizing the financial incentives of this two-tier liability system would decrease the current reliance on regulatory policy, and would alter the role of regulators with a tilt toward financial oversight efforts and away from direct control. Catastrophic risks will always be with us. But as rare, extreme events, society has little experience with them, and current mechanisms are poorly designed to control them. Only a tailored therapy approach offers promise of significant improvement. |
| JEL: | G22 H00 K32 Q30 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-045&r=reg |
| By: | Burtraw, Dallas (Resources for the Future); Paul, Anthony (Resources for the Future); Woerman, Matt (Resources for the Future) |
| Abstract: | The EPA will issue rules regulating greenhouse gas (GHG) emissions from existing steam boilers and refineries in 2012. A crucial issue affecting the scope and cost of emissions reductions will be the potential introduction of flexibility in compliance, including averaging across groups of facilities. This research investigates the role of compliance flexibility for the most important of these source categories—existing coal-fired power plants—that currently account for one-third of national emissions of carbon dioxide, the most important greenhouse gas. We find a flexible standard, calibrated to achieve the same emissions reductions as an inflexible approach, reduces the increase in electricity price by 60 percent and overall costs by two-thirds in 2020. The flexible standard also leads to substantially more investment to improve the operating efficiency of existing facilities, whereas the inflexible standard leads to substantially greater retirement of existing facilities. |
| Keywords: | climate policy, efficiency, EPA, Clean Air Act, coal, compliance flexibility, regulation |
| JEL: | K32 Q54 Q58 |
| Date: | 2011–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-30&r=reg |
| By: | Bernardo Batiz-Lazo (School of Social Sciences, University of Manchester, UK); Masayoshi Noguchi (Research Institute for Economics and Business Administration, Kobe University) |
| Abstract: | This paper examines how accounting-based regulation modified the operation of one type of participant in British retail finance. Specifically, the House Purchase and Housing Act, 1959 and Building Societies Act, 1960 gave the Registrar of Friendly Societies new powers of intervention and these were used to discipline building societies revealing inadequate use of their funds. Although only a tiny fraction of existing societies were ultimately sanctioned, they all observed important deviations from specified accounting-based criteria that were generally recognized as financially sound within the industry. Intervention, however, was also motivated by two other factors: the successful lobbying by the Building Society Association to discipline non-members; and attempts by the Registrar to stop property developers from abusing moribund London-based societies. Results provide enough evidence to suggest that other studies' assessment that managers of British retail financial intermediaries disregarded accounting information in executive decisions need to be revised in light of the fact that the accounting control of building societies was supplemented by the disciplinary power granted to state regulators (as represented by the Treasury and the Registrar of Friendly Societies). |
| Keywords: | accounting-based regulation; House Purchase and Housing Act, 1959; Building Societies Act, 1960; Chief Registrar of Friendly Societies; HM Treasury; the Building Societies Association; disciplinary power; reserve ratio; property developers. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2011-34&r=reg |
| By: | Richardson, Nathan (Resources for the Future) |
| Abstract: | The U.S. Environmental Protection Agency (EPA) continues to move ahead with regulation of greenhouse gas emissions under the Clean Air Act (CAA). Previous work has indicated that basic forms of compliance flexibility—trading—appear to be legally permissible under the relevant part (Section 111) of the CAA. This paper takes a close look at more expansive and ambitious types of flexibility: trading between different kinds of sources, biomass co-firing, and, above all, offsets. It concludes that most types of such extended flexibility are either legally incompatible with the CAA, or so legally problematic that EPA is unlikely to adopt them. This has important implications for both the costs of CAA climate policy and the level of environmental benefits that are achievable. It also creates tension between CAA climate policy and state-level policies, such as California’s, that aim to include various forms of extended flexibility. |
| Keywords: | Clean Air Act, offsets, carbon, GHGs, greenhouse gases, flexibility, §111, §111(d), CAA, biomass co-firing, AB32 |
| Date: | 2011–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-49&r=reg |
| By: | Julia Langbein |
| Abstract: | Why is regulatory convergence towards EU rules more successful in some policy fields than in others within one EU neighboring country? By comparing Ukraine’s convergence towards EU rules in the field of shareholders’ rights and technical standards, I challenge prominent explanations for policy change outside the EU that emphasize misfit and adaptational costs, the institutionalization of EU rules or policy-specific conditionality. In order to deal with the shortcomings of these explanations, it is necessary to disaggregate incentives and capacities of various domestic actors within the particular policy fields. I argue that regulatory convergence in EU neighboring countries is more likely if external actors combine the application of policy-specific conditionality, such as access to the European market, with multiplex capacity-building measures that diversify demand among domestic state regulators and firms and empower them to make their claims. |
| Keywords: | regulatory politics; neighbourhood policy |
| Date: | 2011–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:erp:kfgxxx:p0033&r=reg |
| By: | Sean Dougherty; Verónica Frisancho Robles; Kala Krishna |
| Abstract: | Using plant-level data from the Annual Survey of Industries (ASI) for the fiscal years from 1998-99 through 2007-08, this study provides plant-level cross-state/time-series evidence of the impact of employment protection legislation (EPL) on total factor productivity (TFP) and labour productivity in India. Identification of the effect of EPL follows from a difference-in-differences estimator inspired by Rajan and Zingales (1998) that takes advantage of the state-level variation in labour regulation and heterogeneous industry characteristics. The fundamental identification assumption is that EPL is more likely to restrict firms operating in industries with higher labour intensity and/or higher sales volatility. Our results show that firms in labour intensive or more volatile industries benefited the most from labour reforms in their states. Our point estimates indicate that, on average, firms in labour intensive industries and in flexible labour markets have TFP residuals 14% higher than those registered for their counterparts in states with more stringent labour laws. However, no important differences are identified among plants in industries with low labour intensity when comparing states with high and low levels of EPL reform. Similarly, the TFP of plants in volatile industries and in states that experienced more pro-employer reforms is 11% higher than that of firms in volatile industries and in more restrictive states; however, the TFP residuals of plants in industries with low labour intensity are 11% lower in high EPL reform states than in states with lower levels of EPL reform. In sum, the evidence presented here suggests that the high labour costs and rigidities imposed through Indian federal labour laws are lessened by labour market reforms at the state level.<P>La législation sur la protection de l'emploi et la productivité des entreprises en Inde<BR>À l’aide de données au niveau des entreprises, tirées de l’enquête annuelle sur les industries (ASI) pour l’ensemble des exercices comptables entre 1998-99 et 2007-08, cette étude présente des séries chronologiques pour des États indiens mettant en lumière l’incidence de la législation sur la protection de l’emploi (LPE) sur la productivité totale des facteurs (PTF) et la productivité du travail dans les entreprises indiennes. L’incidence de la LPE est déterminée à partir d’un estimateur de la différence des différences inspiré de Rajan et Zingales (1998), qui tire parti des différences de réglementation au niveau des États et des caractéristiques hétérogènes des secteurs d’activité. L’hypothèse de base retenue pour la détermination de l’incidence est que la LPE est plus susceptible de peser sur les entreprises exerçant leurs activités dans un secteur à forte intensité de main-d’oeuvre et/ou dont la volatilité des ventes est élevée. Nos résultats montrent que les entreprises relevant de secteurs à forte intensité de main-d’oeuvre ou plus volatils sont celles qui ont le plus tiré profit des réformes du marché du travail mises en place dans leurs États. Nos évaluations de point indiquent qu’en moyenne, les entreprises de secteurs à forte intensité de main-d’oeuvre et évoluant dans un marché du travail flexible affichent, pour la PTF, des chiffres résiduels supérieurs de 14 % à ceux de leurs homologues implantées dans des États dont la législation sur le travail est plus stricte. Toutefois, aucun écart important n’a été décelé entre les entreprises de secteurs à faible intensité de main-d’oeuvre lorsque l’on compare les États qui ont peu et beaucoup réformé leur LPE. De même, la PTF des entreprises de secteurs volatils implantées dans des États ayant imposé des réformes plus favorables aux employeurs est supérieure de 11 % à celle des entreprises de secteurs volatils implantées dans des États plus restrictifs. Cependant, les chiffres résiduels de la PTF des entreprises exerçant leurs activités dans des secteurs à faible intensité de main-d’oeuvre sont inférieurs de 11 % dans les États ayant beaucoup réformé leur LPE par rapport à ceux qui ont peu réformé leur législation dans ce domaine. En conclusion, les éléments présentés ici donnent à penser que les effets des coûts élevés du travail et des rigidités imposées par la législation fédérale indienne sur l’emploi sont atténués par les réformes du marché du travail mises en oeuvre au niveau des États. |
| Keywords: | total factor productivity, labour regulation, state-level reforms, difference-in-differences, firm heterogeneity, productivité totale des facteurs, réglementation du travail, réformes au niveau des États, différence des différences, hétérogénéité des entreprises |
| JEL: | D24 F16 J5 J8 K31 |
| Date: | 2011–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:917-en&r=reg |
| By: | Sophie Bernard |
| Abstract: | In a stylized model of international trade, firms in the North indirectly export second-hand products to a representative firm in the South to be reused as intermediate goods, with potential trade gains. The level of reusability of waste products is a crucial choice variable in the North. This is because, in the presence of imperfect international monitoring, non-reusable waste can be illegally mixed with reusable waste. I explore the driving forces for illegal waste movement, with a particular focus on local waste regulations such as the EU’s Directive on Waste Electrical and Electronic Equipment. <p> Under mild conditions, it is shown that increasingly stringent regulations in the North induce Northern firms to reduce product reusability. Consequently, the flow of non-reusable waste to the South increases, magnifying the pollution haven effect. <P> |
| Keywords: | waste, second-hand products, environmental regulations, trade, green design, illegal market, |
| JEL: | F18 L10 O13 Q53 Q56 |
| Date: | 2011–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2011s-77&r=reg |