nep-reg New Economics Papers
on Regulation
Issue of 2014‒04‒11
nine papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Transmission and generation investment in electricity markets: The effects of market splitting and network fee regimes By Grimm, Veronika; Martin, Alexander; Weibenzahl, Martin; Zoettl, Gregor
  2. Regulation of Network Sectors in the EU: A Federalist Perspective By Wolfgang Kerber; Julia Wendel
  3. Cap and Trade under Transactions Costs By Singh, Rajesh; Weninger, Quinn
  4. Energy market liberalisation and renewable energy policies in OECD countries By Francesco Vona; Francesco Nicolli
  5. Does benefit/cost-efficiency influence transport investment decisions? By Eliasson, Jonas; Börjesson, Maria; Odeck, James; Welde, Morten
  6. Strategic Withholding through Production Failures By Fogelberg, Sara; Lazarczyk, Ewa
  7. Regulatory environment and firm performance in EU telecommunications services By Daniel Montolio; Francesc Trillas; Elisa Trujillo-Baute
  8. Freight transport, policy instruments and climate By Mandell, Svante; Nilsson , Jan-Eric; Vierth , Inge
  9. Product market regulation, innovation and productivity. By Bruno Amable; Ivan Ledezma; Stéphane Robin

  1. By: Grimm, Veronika; Martin, Alexander; Weibenzahl, Martin; Zoettl, Gregor
    Abstract: In this paper we propose a three-level computational equilibrium model that allows to analyze the impact of the regulatory environment on transmission line expansion (by the regulator) and investment in generation capacity (by private firms) in liberalized electricity markets. The basic model analyzes investment decisions of the transmission operator (TO) and private firms in expectation of an energy only market and cost-based redispatch. In different specifications we consider the cases of one versus two price zones (market splitting) and analyze different approaches to recover network cost, in particular lump sum, capacity based, and energy based fees. In order to compare the outcomes of our multi-stage market model with the first best benchmark, we also solve the corresponding integrated planer problem. In two simple test networks we illustrate that energy only markets can lead to suboptimal locational decisions for generation capacity and thus, imply excessive network expansion. Market splitting heals those problems only partially. Those results obtain for both, capacity and energy based network tariffs, although investment slightly differs across those regimes. --
    Keywords: Electricity markets,Network Expansion,Generation Expansion,Investment Incentives,Computational Equilibrium Models,Transmission Management
    Date: 2014
  2. By: Wolfgang Kerber (University of Marburg); Julia Wendel (University of Marburg)
    Abstract: The vertical allocation of regulatory powers within the European two-level system of network sector regulation is analysed from the perspective of the economic theory of legal federalism. The analysis shows that sophisticated combinations of harmonised European rules along with sufficient scope for decentralised decisions of national regulators seem to be optimal. Especially interesting is that networks of regulatory authorities (as BEREC in telecommunications) can play an important role in regard to balancing the advantages and disadvantages of (de)centralisation. Whereas in regard to telecommunication a further shifting of regulatory powers to the EU level cannot be recommended, both in energy and railway markets it might still be necessary to strengthen the regulatory power of the EU.
    Keywords: EU sector regulation, legal federalism, regulatory networks, telecommunication
    JEL: K23 H77 F15
    Date: 2014
  3. By: Singh, Rajesh; Weninger, Quinn
    Abstract: We study equilibrium production and emission in a model where firms jointly produce a valued good and an environmental bad, pollution. Firms are ex ante identical but receive random productivity shocks. A regulator imposes a cap-and-trade policy to control pollution emissions. Trade in emission permits entails transactions costs which follow two specifications: constant per unit trading costs or fixed trading costs. Under proportional costs, the equilibrium outcome is independent of buyers' and sellers' costs and depends only on the total, buyers' plus sellers, per unit trading cost. Under fixed costs, both buyers' and sellers' costs matter. Under proportional costs trade always occurs, either fully or partially, as long as the total trading costs are below the market surplus obtained from the traded permit. With fixed costs, trade is either partial or non-existent. The implication is that production is efficient for a range of proportional trading costs, but always inefficient under fixed costs. In either case, trade is impeded most, even with small costs, when the emission permit market is thin, i.e., when the mass of buyers and sellers is small. We derive a non-monotonic relationship between the aggregate emissions cap and an upper bound for trading costs that obstruct or preclude trade. Further, we find that output loss due to emissions-permit-constrained unutilized capacity increases with productivity variance under ad valorem costs, the result is the opposite under fixed costs.
    Keywords: Cap-and-trade regulation; emissions permit trading; ad valorum and fixed transactions costs; capacity utilization.
    JEL: L5 Q5
    Date: 2014–03–29
  4. By: Francesco Vona (OFCE); Francesco Nicolli (Facoltà di Economia (Faculty of Economics))
    Abstract: We analyse the impact of market liberalisation on renewable energy policies in OECD countries. To this end, we first develop an aggregated indicator of renewable energy policies using principal components analysis and then examine its determinants through panel datatechniques. Our resultsare consistent with the predictions of political-economy models of environmental policies, as brown lobbying, proxied by entry barriers in the energy sector, and citizens’ preferenceshave the expected effectson policy. Brown lobbying has a negative effect on the policy indicator, evenwhen accounting for endogeneity in its effects in a dynamic panel specification and using different policy indicators. Reducing income inequality, the ratification of the Kyoto protocol and stronger green parties all positively affect the approval of more ambitious policies but with less robust results.
    Keywords: Renewable Energy Policy; Energy Market Liberalisation; Political Economy
    JEL: Q42 Q48 O38 D72
    Date: 2013–07
  5. By: Eliasson, Jonas (KTH); Börjesson, Maria (KTH); Odeck, James (NTNU, Trondheim); Welde, Morten (NTNU, Trondheim)
    Abstract: We explore how benefit-cost efficiency and electoral support affect road investment decisions in Sweden and Norway. In Norway, neither benefits nor costs seem to affect project selection. In Sweden, civil servants’ decisions are strongly affected by projects’ benefit-cost ratios, with a stronger effect for more expensive projects, while politicians’ decisions are only weakly affected, and only for small projects. In both countries, governments tend to favour investments in regions where they enjoy strong local electoral support. Using cost efficiency as a final selection criterion seems to filter out many inefficient projects already at an early stage of the planning process. We argue that even if political decisionmakers are apparently mostly governed by other concerns than cost efficiency, civil servants at the administrations should not shy away from preparing efficient project suggestions for decisionmakers to choose from.
    Keywords: Cost benefit analysis; Project appraisal; Public decision making; Transport investments
    JEL: H43 R42 R48
    Date: 2014–04–01
  6. By: Fogelberg, Sara (Research Institute of Industrial Economics (IFN)); Lazarczyk, Ewa (Research Institute of Industrial Economics (IFN))
    Abstract: Anecdotal evidence indicates that electricity producers use production failures to disguise strategic reductions of capacity in order to influence prices, but systematic evidence is lacking. We use a quasi-experimental set up and data from the Swedish energy market to examine such behavior. In a market without strategic withholding, the decision of reporting a failure should be independent of the market price. We show that marginal producers in fact base their decision to report a failure in part on prices, which indicates that failures are a result of economic incentives as well as of technical problems.
    Keywords: Electricity markets; Urgent Market Messages (UMMs); Unplanned failures
    JEL: L49 L94
    Date: 2014–03–31
  7. By: Daniel Montolio (Universitat de Barcelona & IEB); Francesc Trillas (Autonomous University of Barcelona, PPSRC-Iese & IEB); Elisa Trujillo-Baute (Universitat de Barcelona & IEB)
    Abstract: We empirically estimate the effects of regulated access prices and firms’ multinational status on firm performance by using firm, corporate group, and country level information for the European broadband market between 2002 and 2010. Three measures of firm performance are used, namely: market share, turnover and productivity. Special attention is paid to differences in the impact on the performance measures depending on a firm’s position as either a market incumbent or entrant. We find that while access prices have a negative effect on entrants’ market share and turnover, the effect on incumbents’ market share, turnover and productivity is positive. Further, we find that multinational entrants perform better than national entrants in terms of their market share but worse in terms of their turnover and productivity. The opposite is true of incumbent multinationals which perform better than nationals in terms of their turnover and productivity but worse in terms of their market share. This confirms that a firm’s multinational status has a significant impact on its performance, and that this impact differs for incumbents and entrants. Finally, when evaluating the impact of access prices on firm performance at the mean performance of national and multinational firms, we find that the impact of access prices is lower for multinational than for national firms.
    Keywords: Regulation, firm performance, telecommunications, multinational firms
    JEL: L51 L25 L96 F23
    Date: 2014
  8. By: Mandell, Svante (KTH and VTI); Nilsson , Jan-Eric (VTI); Vierth , Inge (VTI)
    Abstract: The impact of policy instruments supposed to reduce greenhouse gas emissions from road freight transports may seem smaller than expected. Using insights from economics and contract theory, the paper sorts out the (possible) instances of market failure in the freight transport market; operator market power, asymmetric information split incentives, and public goods. The primary limitations of standard policy instruments are demonstrated to be linked to unobservable information. Some of these may be reduced but not eliminated as information technologies develop, making it possible to observe, verify and provide contract-relevant information to the uninformed parties. There is little reason to believe that possible market failures present major limitations to the efficiency of economic instruments geared toward protecting the climate, other than possibly in the short run
    Keywords: Freight transport; Climate; Greenhouse gas; Policy instruments; Asymmetric information; Split incentives
    JEL: R40
    Date: 2014–03–25
  9. By: Bruno Amable (Centre d'Economie de la Sorbonne & Institut Universitaire de France); Ivan Ledezma (Université Paris-Dauphine, LEDa & IRD); Stéphane Robin (PRISM Sorbonne - Université Paris 1)
    Abstract: Several recent policy and academic contributions consider that liberalising product markets would foster innovation and growth. This paper analyses the innovation-productivity relationship at the industry-level for a sample of OECD manufacturing industries. We pay particular attention to the vertically-induced influence of product market regulation (PMR) of key input sectors of the economy on the innovative process of manufacturing and its consequences on productivity. We test for a differentiated effect of this type of PMR depending on whether countries are technological leaders or laggards in a given industry and for a given time period. Contrary to the most widespread policy claims, the innovation-boosting effects of liberalisation policies at the leading edge are systematically not supported by the data. These findings question the relevance of a research and innovation policy based on liberalisation.
    Keywords: Product market regulation, innovation, productivity, growth.
    JEL: D24 O43
    Date: 2014–03

This nep-reg issue is ©2014 by Natalia Fabra. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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