nep-reg New Economics Papers
on Regulation
Issue of 2015‒05‒09
eight papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Information v. Energy Efficiency Incentives: Evidence from Residential Electricity Consumption in Maryland By Anna Alberini; Charles Towe
  2. Pharmaceutical regulation, mandatory substitution, and generic competition By Birg, Laura
  3. Crossing the River by Feeling the Stones: The Case of Carbon Trading in China By ZhongXiang Zhang
  4. Time Scale Externalities and the Management of Renewable Resources By Giannis Vardas; Anastasios Xepapadeas
  5. Modelling "race to the bottom" effect on the self-regulated markets By Kolesnik, Georgiy
  6. An equilibrium model estimated on pharmaceutical data By Dalen, Dag Morten; Locatelli, Marilena; Strom, Steinar
  7. Fiscal Policy and CO2 Emissions of New Passenger Cars in the EU By Reyer Gerlagh; Inge van den Bijgaart; Hans Nijland; Thomas Michielsen
  8. Energy Efficiency Policy with Price-quality Discrimination By Marie-Laure Nauleau; Louis-Gaëtan Giraudet; Philippe Quirion

  1. By: Anna Alberini (University of Maryland); Charles Towe (University of Connecticut)
    Abstract: We focus on two utility programs intended to reduce energy usage and the associated CO2 emissions—a home energy audit and rebates on the purchase of high-efficiency air-source heat pumps. We use a unique panel dataset from participating and non-participating households to estimate the average treatment effect of participating in either program on electricity usage. We fit models with household-by-season, season-by-year, and household-by-year fixed effects to account for all possible confounders that might be influence energy usage. Since the programs are voluntary, we seek to restore near-exogeneity of the program “treatment” by matching participating households with control households. We deploy coarsened exact matching (CEM; Iacus et al., 2011) as our main matching method. We ask whether it is sufficient to match households based on past electricity usage, or if we gain by adding structural characteristics of the home, including heating system type. We find that the two programs reduce electricity usage by 5% on average. The effects are strong in both winter and summer for the energy audit group but appear to be stronger in the winter for the heat pump rebate group. Adding house characteristics to the matching variables does seem to affect results, suggesting that using past usage alone may not be sufficient to identify the effects of program participation.
    Keywords: Energy Efficiency, Household Behavior, Energy Efficiency Incentives, Electricity Usage, Home Energy Audit
    JEL: Q41 D12 H3
    Date: 2015–03
  2. By: Birg, Laura
    Abstract: This paper studies the effect of two regulatory instruments - a price cap and a reference price system - a mandatory substitution rule, and the combination of both on generic competition in a Salop-type model with an off-patent brand-name drug and n differentiated generic versions. The price cap reduces only the brand-name price, the reference price system reduces the brand-name price and generic prices. Both regulatory instruments reduce the generic market share and the number of generic competitors. The mandatory substitution rule decreases the brand-name price, but increases generic prices. It increases the generic market share and the number of generic competitors. Under mandatory substitution, price decreases under both regulatory instruments are lower. Mandatory substitution weakens the negative effect of the price cap on the generic market share and the number of generic competitors, but it amplifies the negative effect of the reference price system on the generic market share and the number of generic competitors.
    Keywords: pharmaceutical regulation,generic competition,mandatory substitution,reference price,price cap
    JEL: I18 I11 L50
    Date: 2015
  3. By: ZhongXiang Zhang (College of Management and Economics, Tianjin University, Tianjin and School of Economics, Fudan University, Shanghai (China))
    Abstract: Putting a price on carbon is considered a crucial step for China’s endeavor of harnessing the market forces to reduce its energy consumption and carbon emissions. Indeed, aligned with China’s grand experiment with low-carbon provinces and low-carbon cities in six provinces and thirty-six cities, the Chinese central government has approved the seven pilot carbon trading schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China turns to market forces and opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the five pilot trading schemes that have to comply with their emissions obligations by June 2014, and examines a wide range of design, implementation, enforcement and compliance issues related to China’s carbon trading pilots and their first-year performance. The article ends with drawing some lessons learned and discussing the options to evolve regional pilot carbon trading schemes into a nationwide carbon trading scheme.
    Keywords: Pilot Carbon Trading Schemes, Low-carbon Development, Environmental Taxes, Market Stabilization Mechanism, Carbon Offsets, Enforcement and Compliance, China
    JEL: H23 O13 P28 Q43 Q48 Q52 Q54 Q58
    Date: 2015–03
  4. By: Giannis Vardas; Anastasios Xepapadeas (Athens University of Economics and Business)
    Abstract: The evolution of renewable resources is characterized in many cases by different time scales where some state variables such as biomass, may evolve relatively faster than other state variables such as carrying capacity. Ignoring this time scale separation means that a slowly changing variable is treated as constant over time. Management rules designed without accounting for time scale separation will result in inefficiencies in resource management. We call this inefficiency time scale externality and we analyze renewable resource harvesting when carrying capacity evolves slowly, either in response to exogenous forcing or in response to emissions generated by the industrial sector of the economy. We study cooperative and non-cooperative solutions under time scale separation. Using singular perturbation reduction methods (Fenichel 1979), we examine the role of different time scales in environmental management and the potential errors in optimal regulation when time scale separation is ignored.
    Keywords: Optimal Resource Harvesting, Fast Slow Dynamics, Singular Perturbation, Regulation, Open Loop, Closed Loop
    JEL: D81 Q20
    Date: 2015–03
  5. By: Kolesnik, Georgiy
    Abstract: The effect of the competition among self-regulatory organizations (SROs) on the efficiency of the corresponding goods and services markets is studied. It is shown that under certain conditions the competition among SROs worsens the quality of the goods and services and leads to decreasing consumers’ welfare. Moreover, the distinctive feature of the competition among SROs in comparison with other types of regulatory competition is that even introduction of the alternative state control does not improve the situation. The proposals are formulated for self-regulatory markets’ structure and conditions change in order to reduce the negative effects of the SROs’ competition.
    Keywords: self-regulation; race to the bottom; regulatory competition; state control; hierarchical system; non-cooperative game
    JEL: C72 L22 L51
    Date: 2015–05–03
  6. By: Dalen, Dag Morten; Locatelli, Marilena; Strom, Steinar (University of Turin)
    Abstract: The purpose of this paper is to estimate to what extent patients/doctors respond to prices when making a choice between a brand name product and its generics, and also how pharmacies respond to government regulation and to prices set by brand name producers. Data is unique in the sense that we observe prices set by pharmacies as well as by producers. We have estimated the demand side, but also jointly the demand side and the price setting by retailers/wholesalers and producers. Results confirm that estimating only the demand side yields biased estimates. Taking the whole data generating process into account we find much stronger price responses.
    Date: 2015–04
  7. By: Reyer Gerlagh (Tilburg University, Netherlands); Inge van den Bijgaart (Tilburg University, Netherlands); Hans Nijland (PBL Netherlands Environmental Assessment Agency, Netherlands); Thomas Michielsen (CPB Netherlands Bureau for Economic Policy Analysis, Netherlands)
    Abstract: T o what extent have national fiscal policies contributed to the decarbonisation of newly sold passenger cars? We construct a simple model that generates predictions regarding the effect of fiscal policies on average CO2 emissions of new cars, and then test the model empirically. Our empirical strategy combines a diverse series of data. First, we use a large database of vehicle-specific taxes in 15 EU countries over 2001-2010 to construct a measure for the vehicle registration and annual road tax levels, and separately, for the CO2 sensitivity of these taxes. We find that for many countries the fiscal policies have become more sensitive to CO2 emissions of new cars. We then use these constructed measures to estimate the effect of fiscal policies on the CO2 emissions of the new car fleet. The increased CO2-sensitivity of registration taxes have reduced the CO2 emission intensity of the average new car by 1,3 percent, partly through an induced increase of the share of diesel-fuelled cars by 6,5 percentage points. Higher fuel taxes lead to the purchase of more fuel efficient cars, but higher annual road taxes have no or an adverse effect.
    Keywords: Vehicle Registration Taxes, Fuel Taxes, CO2 Emissions
    JEL: H30 L62 Q48 Q54 Q58 R48
    Date: 2015–04
  8. By: Marie-Laure Nauleau (CIRED); Louis-Gaëtan Giraudet (CIRED, Ecole des Ponts ParisTech); Philippe Quirion (CIRED, CNRS)
    Abstract: We compare a range of energy efficiency policies in a durable good market subject to both energy-use externalities and price-quality discrimination by a monopolist. We find that the social optimum can be achieved with differentiated subsidies. With ad valorem subsidies, the subsidization of the high-end good leads the monopolist to cut the quality of the low-end good. The rates should always be decreasing in energy efficiency. With per-quality subsidies, there is no such interference and the rates can be increasing if the externality is large enough relative to the market share of low-type consumers. Stand-alone instruments only achieve second-best outcomes. A minimum quality standard may be set at the high-end of the product line if consumers are not too dissimilar, otherwise it should only target the low-end good. An energy tax should be set above the marginal external cost. Likewise, a uniform ad valorem subsidy should be set above the subsidy that would be needed to specifically internalize energy-use externalities. Lastly, if, as is often observed in practice, only the high-end good is to be incentivized, a per-quality schedule should be preferred over an ad valorem one. An ad valorem tax on the high-end good may even be preferred over an ad valorem subsidy if the externality is small enough and low-end consumers dominate the market.
    Keywords: Energy Efficiency, Price-Quality Discrimination
    JEL: Q4 Q41 Q48
    Date: 2015–04

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