nep-reg New Economics Papers
on Regulation
Issue of 2013‒03‒09
six papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Do State Campaign Finance Reforms Reduce Public Corruption? By Jeffrey Milyo; Adriana Cordis
  2. Prices vs. Quantities: Incentives for Renewable Power Generation - Numerical Analysis for the European Power Market By Nagl, Stephan
  3. Policy Deviations, Uncertainty, and the European Court of Justice By Carsten Hefeker; Michael Neugart
  4. Environmental Regulation Induced Foreign Direct Investment By Robert J R Elliott; Ying Zhou
  5. The Value of Information in Explicit Cross-Border Capacity Auction Regimes in Electricity Markets By Richter, Jan; Viehmann, Johannes
  6. Market failures and the additionality effects of public support to private R&D: Theory and empirical implications By Takalo, Tuomas; Tanayama , Tanja; Toivanen , Otto

  1. By: Jeffrey Milyo (Department of Economics, University of Missouri-Columbia); Adriana Cordis
    Abstract: The Supreme Court has long held that campaign finance regulations are permissible for the purpose of preventing corruption or the appearance of corruption. Yet the implied hypothesis that campaign finance reforms are effective tools for combating public corruption has gone essentially untested. We conduct the first systematic evaluation of the effects of campaign finance laws on actual corruption rates in the states. We examine the effects of state reforms on both convictions and filings in public corruption cases over the last 25 years; overall, we find no strong or convincing evidence that state campaign finance reforms reduce public corruption. Earlier research that employs similar methods also finds little support for the contention that state campaign finance regulations increase public trust and confidence in government. Together, these results call into question the legal rationale for campaign finance regulations.
    Keywords: public corruption, campaign finance, regulation
    JEL: D72 D78 H70 K40
    Date: 2013–01–17
  2. By: Nagl, Stephan (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: This paper outlines the effects of weather uncertainty on investment and operation decisions of electricity producers under a feed-in tariff and renewable quota obligation. Furthermore, this paper tries to quantify the sectoral welfare and investments risks under the different policies. For this purpose, a spatial stochastic equilibrium model is introduced for the European electricity market. The numerical analysis suggests that including the electricity market price in renewable policies (wholesale price + x) reduces the loss of sectoral welfare due to a renewable policy by 11-20 %. Moreover, investors face an only slightly higher risk than under fixed price compensations. However, electricity producers face a substantially larger investment risk when introducing a renewable quota obligation without the option of banking and borrowing of green certi cates. Given the scenario results, an integration of the hourly market price in renewable support mechanisms is mandatory to keep the financial burden to electricity consumers at a minimum. Additionally, following the discussion of a European renewable quota after 2020, the analysis indicates the importance of an appropriate banking and borrowing mechanism in light of stochastic wind and solar generation.
    Keywords: RES-E policy; price and quantity controls; mixed complementarity problem
    JEL: C61 L50 Q40
    Date: 2013–02–18
  3. By: Carsten Hefeker (University of Siegen); Michael Neugart (University of Darmstadt)
    Abstract: The implementation of European Union directives into national law is at the discretion of member states. We analyze incentives for member states to deviate from these directives when the European Commission may sue a defecting member state and rulings at the European Court of Justice (ECJ) are uncertain. We find that higher uncertainty about the preferences of the ECJ increases policy deviation, irrespective of whether a case is taken to court or not. If decisions of member states to deviate are independent, the incidence of filed cases decreases while for thos policies reaching the ECJ deviations increase.
    Keywords: European Union law, directives, compliance, European Court of Justice, court behavior, uncertainty, legal process, European Commission
    JEL: D72 D78 K41
    Date: 2013
  4. By: Robert J R Elliott; Ying Zhou
    Abstract: The last decade has witnessed a renewed interest in the relationship between environmental regulations and international capital flows. However, empirical studies have so far failed to find conclusive evidence for this so-called pollution haven or race to the bottom effect where foreign direct investment (FDI) is assumed to be attracted to low regulation countries, regions or states. In this paper we present a simple theoretical framework to demonstrate that greater stringency in environmental standards can lead to a strategic increase in capital inflows which we refer to as environmental regulation induced FDI. Our result reveals a possible explanation for the mixed results in the empirical literature and provides an illustration of the conditions under which environmental regulations in the host country can affect the location decision of foreign firms.
    Keywords: FDI, environmental regulations, pollution halo
    JEL: F2 Q5
    Date: 2013–02
  5. By: Richter, Jan (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Viehmann, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: We study two electricity markets connected by a fixed amount of crossborder capacity. The total amount of capacity is known to all electricity traders and allocated via an auction. The capacity allocated to each bidder in the auction remains private information. We assume that traders are faced with a demand function reflecting the relationship between electricity transmitted between the markets and the spot price difference. Therefore, traders act like Bayesian-Cournot oligopolists in exercising their transmission rights when presented with incomplete information about the competitors’ capacities. Our analysis breaks down the welfare effect into three different components: Cournot behavior, capacity constraints, and incomplete information. We find that social welfare increases with the level of information with which traders are endowed.
    Keywords: Cournot Oligopoly; incomplete information; capacity constraints; electricity markets; interconnector; cross-border trade
    JEL: C72 D43 L13 L94
    Date: 2013–02–18
  6. By: Takalo, Tuomas (Bank of Finland and KU Leuven); Tanayama , Tanja (National Audit Office of Finland); Toivanen , Otto (KU Leuven & CEPR)
    Abstract: We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D costs and a cost of external finance. We derive the optimal support rule. At the intensive (extensive) margin the costs of external funding reduce (increase) the optimal subsidy rate. We also establish necessary and sufficient conditions for the existence of additionality. It turns out that additionality at the intensive margin is less likely with large spillovers. Our results suggest that the relationship between additionality and welfare may not be straightforward.
    Keywords: R&D; entrepreneurial finance; R&D subsidies; innovation policy
    JEL: G28 H25 L32 O38
    Date: 2013–02–13

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