nep-reg New Economics Papers
on Regulation
Issue of 2015‒12‒20
five papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. The Optimal Regulation of a Risky Monopoly By Yolande Hiriart; Lionel Thomas
  2. Environmental Policies, Innovation and Productivity in the EU By Roberta De Santis; Cecilia Jona Lasinio
  3. Prices vs. quantities in presence of a second, unpriced, externality By Guy Meunier
  4. Crowding in Public Transport: Who Cares and Why? By Luke Haywood; Martin Koning; Guillaume Monchambert
  5. Leaving Coal Unburned: Options for Demand-Side and Supply-Side Policies By Kim Collins; Roman Mendelevitch

  1. By: Yolande Hiriart (Université de Bourgogne Franche-Comté, CRESE, IUF); Lionel Thomas (Université de Bourgogne Franche-Comté, CRESE)
    Abstract: We study the potential conflict between cost minimization and investment in prevention for a risky venture. A natural monopoly is regulated i) for economic purposes; ii) because it can cause losses of substantial size to third parties (the environment or people). The regulator observes the production cost without being able to distinguish the initial type (an adverse selection parameter) from the effort (a moral hazard variable). In addition, the investment in prevention is non observable (another moral hazard variable) and the monopoly is protected by limited liability. We fully characterize the optimal regulation in this context of asymmetric information plus limited liability. We show that incentives to reduce cost and to invest in safety are always compatible. But, in some cases, higher rents have to be given up by the regulator.
    Keywords: Risk Regulation, Incentives, Moral Hazard, Adverse Selection, Insolvency
    JEL: L51 D82 Q58
    Date: 2015–12
  2. By: Roberta De Santis; Cecilia Jona Lasinio
    Abstract: In this paper we test the weak Porter hypothesis on a sample of European economies in the period 1995-2008. We focus on the channels through which tighter environmental regulation affects productivity and innovation. Our findings suggest that the “weak” Porter hypothesis cannot be rejected and that the choice of policy instruments is not neutral. In particular, market based environmental stringency measures seem to be the most suitable to stimulate innovation and productivity growth. Consistently with the strategic reorientation of environmental policies in the European Union since the end of the eighties, our results indicate that the EU might privilege market based instruments in order to meet more effectively the 2030 targets, especially through the channels of innovation and productivity enhancement.
    Keywords: environmental regulation, productivity, innovation, Porter hypothesis
    JEL: D24 Q50 Q55 O47 O31
    Date: 2015–11
  3. By: Guy Meunier (Ecole Polytechnique [Palaiseau] - Ecole Polytechnique, INRA- UR1303 ALISS)
    Abstract: We study a situation in which two goods jointly generate an externality but only one of them is regulated. Unilateral regulation of greenhouse gas emissions and related carbon leakage is a well known example. We compare tax and quantity instruments under uncertainty à la Weitzman (1974). Because of the uncertainty surrounding the unregulated good, the external cost is stochastic with both instruments. Whether the unregulated good quantity is more or less variable under a tax or under a quota depends on the degree of substitutability and the correlation between uncertainties on private valuations. In case of a positive correlation and imperfect substitution, a tax better stabilize the unregulated good quantity and can therefore dominate a quota when the slope of the external cost associated to the unregulated good is large. In a specification, relevant for leakage, it is shown that if uncertainty about the unregulated good (imports) is large, a tax might be preferable to a quota, regardless of the convexity of the external cost.
    Keywords: Environmental regulation, Tax , Quotas, Multi-pollutant, Carbon leakage
    Date: 2015–12–11
  4. By: Luke Haywood; Martin Koning; Guillaume Monchambert
    Abstract: Crowding on public transport (PT) is a major issue for commuters around the world. Nevertheless, economists have rarely investigated the causes of crowding discomfort. Furthermore, most evidence on the costs of PT crowding is based on contingent valuation studies. First, this paper assesses discomfort with PT crowding over different density levels, trip durations and across different individuals using a different methodology. Based on a survey of 1,000 Paris PT users, the negative, linear relationship of in-vehicle density on reported travel satisfaction is remarkably similar to previous studies investigating PT crowding costs and stable across most individual characteristics. Contrary to the identifying assumption of most contingent valuation studies, we find little increase in crowding costs over travel time, in line with an additive specification of the generalized PT cost function. Second, we investigate the causes of this discomfort effect. We identify three key drivers: (a) dissatisfaction with standing and not being seated; (b) less opportunities to make use of the time during the journey; (c) the physical closeness of other travellers per se.
    Keywords: Public transport, crowding, stated satisfaction, travel cost, survey data
    Date: 2015
  5. By: Kim Collins; Roman Mendelevitch
    Abstract: Climate policy consistent with the 2°C target needs to install mechanisms that leave most current coal reserves unburned. Demand-side policies have been argued to be prone to adverse carbon leakage and “green paradox” effects. A growing strain of literature argues in favor of supply-side policies in order to curb future coal consumption. Various concepts with analogies in other sectors are currently discussed. Future empirical research on both demand- and supply-side policy is vital to be able to design efficient and effective policy instruments for climate change mitigation.
    Date: 2015

This nep-reg issue is ©2015 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.