nep-reg New Economics Papers
on Regulation
Issue of 2012‒10‒27
seven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Mortgage companies and regulatory arbitrage By Yuliya Demyanyk; Elena Loutskina
  2. Certifying in Contested Spaces: Private Regulation in Indonesian Forestry and Palm Oil By John F. McCarthy
  3. “Regulation of Port Charges in Spain: Global versus Local Competition” By Xavier Fageda; Marta Gonzalez-Aregall
  4. Mandatory Versus Discretionary Spending: The Status Quo Effect By T. Renee Bowen; Ying Chen; Hulya Eraslan
  5. Competitiveness and Leakage Concerns and Border Carbon Adjustments By ZhongXiang Zhang
  6. Price Discrimination of Congestible Network Goods By Maxime Agbo; Marc Santugini; Jonathan W. Williams
  7. Emissions Trading - A Transatlantic Journey for an Idea? By Katja Biedenkopf

  1. By: Yuliya Demyanyk; Elena Loutskina
    Abstract: Mortgage companies (MCs) originated about 60% of all mortgages before the 2007 crisis and continue to hold a 30% market share postcrisis. While financial regulations are strictly enforced for depository institutions (banks), they are weakly enforced for MCs even if they are subsidiaries of a bank holding company (BHC). This study documents that the resulting regulatory arbitrage creates incentives for BHCs to engage in risk shifting through their MC affiliates. We show that MCs are established to circumvent the capital requirements and to shield the parent BHCs from loan-related losses. BHCs run the risky mortgage business through their MC affiliates. As compared to bank affiliates of BHCs, the MC affiliates lent more to individuals with lower credit scores, lower incomes, and higher loan-to-income ratios. MC borrowers experienced higher rates of foreclosure and delinquency during the crisis. Our results imply that the regulation in place had the capacity to prevent the deterioration of lending standards widely blamed for the crisis. The inconsistent enforcement of regulation, though, eroded its effectiveness. Higher involvement of mortgage companies in subprime lending and securitization activity do not explain our results.
    Keywords: Banks and banking ; Mortgages ; Foreclosure ; Regulation ; Regulation
    Date: 2012
  2. By: John F. McCarthy
    Abstract: Over recent years, systems of civil or private regulation have emerged across several commodity sectors in developing countries. This paper compares two regulatory systems applied to parallel food and forestry problems: the Forest Stewardship Council (FSC) and the Roundtable on Sustainable Palm Oil (RSPO). Analysing these regulations as attempts to extend procedural and distributional justice into contested forested and agricultural spaces, the paper examines the paradox that, despite successful advocacy campaigns using these regulatory standards, oil palm and timber estates and associated land conflicts continue to proliferate in Indonesia. These regulatory processes provide leverage within bounded spaces, yet they are limited by an incommensurability of values and interests that reflect underlying structural problems. At best these certification schemes provide limited learning tools. Addressing the underlying problems will require legal reforms, effective State engagement and supporting forms of accountability.
    Keywords: Regulatory, forestry, land conflicts, Palm oil, Indonesia, certifying working papers series
    Date: 2012–09
  3. By: Xavier Fageda (Faculty of Economics, University of Barcelona); Marta Gonzalez-Aregall (Faculty of Economics, University of Barcelona)
    Abstract: This article examines the determinants of traffic volumes and the revenues per tonne generated by Spain’s port authorities. The interest of the study lies on the strong differences between port authorities in a context of strict regulation but that provides some scope for price competition. We find that port charges influence the amount of traffic that a port is able to generate. Furthermore, we find clear evidence of local price competition and report mixed results for global competition. Revenues per tonne are higher in ports operating more international regular lines and with multinational terminal operators, while they are lower in ports with nearby competing facilities and where the market share of the dominant shipping firm is high.
    Keywords: ports, revenues, traffic, prices JEL classification: -
    Date: 2012–10
  4. By: T. Renee Bowen (Stanford University); Ying Chen (Arizona State University); Hulya Eraslan (Johns Hopkins University)
    Abstract: Do mandatory spending programs such as Medicare improve efficiency? We analyze a model with two parties allocating a fixed budget to a public good and private transfers each period over an infinite horizon. We compare two institutions that differ in whether public good spending is discretionary or mandatory. We model mandatory spending as an endogenous status quo since it is enacted by law and remains in effect until changed. Mandatory programs result in higher public good spending; furthermore, they ex ante Pareto dominate discretionary programs when parties are patient, persistence of power is low, and polarization is low.
    Keywords: budget negotiations, mandatory programs, dynamic bargaining, endogenous status quo, public goods
    JEL: C73 D61 D78
    Date: 2012–10
  5. By: ZhongXiang Zhang
    Abstract: This paper provides a review of the literature on competitiveness and leakage concerns associated with differentiated climate abatement commitments among countries. The literature reviewed is not exhausted, but it is sufficient to provide a balanced view of both academics and policy circles. Section 2 discusses how to indentify the sectors at a risk of carbon leakage. Section 3 examines exante estimates of potential carbon leakage rates, and explains why they differ from ex post results of environmental tax reforms and greenhouse gas emissions trading schemes that have been implemented in the European Union. Section 4 discusses broad policy options to address competitiveness and leakage concerns, and compares which anti-leakage policy, border adjustments or output-based allocation, is more effective to limiting carbon leakages or mitigating production loss in the sectors affected. Given that border carbon adjustment measures are incorporated in the U.S. proposed congressional climate bills to level the carbon playing field and could have potential conflicts with World Trade Organization (WTO) provisions and practical difficulties associated with their implementation, Section 5 discuses in great detail the WTO consistency, the effectiveness and methodological challenges of border carbon adjustment measures. The paper ends with some concluding remarks.
    Keywords: Emission trading. Competitiveness. Carbon leakage. Emissions allowance requirements. Carbon tariffs. Border carbon adjustments. Grandfathering. Output-based allocation. World Trade Organization
    JEL: F18 F47 O13 O24 O31 O44 Q42 Q43 Q48 Q54 Q55 Q56 Q58 R13 R15
    Date: 2012–10
  6. By: Maxime Agbo; Marc Santugini; Jonathan W. Williams
    Abstract: We study second-degree price discrimination for a congestible network good. We show that the seller does not always provide distinct contracts (i.e., it is not always optimal to price discriminate) and that it is more likely for the low-valuation buyer to be excluded. Because of the network externality through congestion, no buyer receives an efficient allocation. In particular, the high-valuation buyer might be offered a higher or a lower quality (relative to the first-degree price discrimination offer). Moreover, with congestion and for values of the parameters for which all types are serviced, consumer surplus under second-degree price discrimination may be greater than consumer surplus under no price discrimination.
    Keywords: Congestion, Network, Price Discrimination
    JEL: D40 D62 D86 L14
    Date: 2012
  7. By: Katja Biedenkopf
    Abstract: This paper examines the ways in which the EU greenhouse gas (GHG) emissions trading system (ETS) affected the design of similar programs in North America. It investigates the conditions under which EU pioneering policy can play a role in extra-EU jurisdictions’ policy-making. The empirical investigation finds that the EU’s promotion of emissions trading was successful to some extent. The EU did not influence or trigger the inception of GHG emissions trading programs in North America. The EU ETS, however, played a role in the design process of the North American programs. Actors learned from elements of the EU system. Domestic North American factors were the triggers and drivers of the agenda-setting stage and dominated the policy adoption stage while the EU ETS significantly contributed to the policy formulation processes. The EU ETS played a role at the technical level rather than at the level of political deliberations and decision-making. The EU’s policy promotion efforts depended on the demand in North America. The resonance and receptiveness in North America were decisive factors. The EU was not an importunate persuader. Learning from the ETS was to a significant part demand-driven.
    Keywords: new technologies; regulations; environmental policy
    Date: 2012–09–17

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