nep-reg New Economics Papers
on Regulation
Issue of 2018‒03‒05
twelve papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Incentive regulation: Evidence from German electricity networks By Hellwig, Michael; Schober, Dominik; Cabral, Luís M. B.
  2. Fuel Subsidy Pass-Through and Market Structure: Evidence from the Renewable Fuel Standard By Gabriel E. Lade; James Bushnell
  3. An evaluation of policy options for reducing greenhouse gas emissions in the transport sector: The cost-effectiveness of regulations versus emissions pricing By Nicholas Rivers, Randall Wigle
  4. Opening Hours Decision and Competition in the Motor Vehicle Inspection Market By Habte, Osmis
  5. Energy Tax Reform and Poverty Alleviation in Mexico By José M. Labeaga; Xavier Labandeira; Xiral López-Otero
  6. Designing Dynamic Subsidies to Spur Adoption of New Technologies By Ashley Langer; Derek Lemoine
  7. Path creation, global production networks and regional development: a comparative international analysis of the offshore wind sector By Danny MacKinnon; Stuart Dawley; Markus Steen; Max-Peter Menzel; Asbjørn Karlsen; Pascal Sommer; Gard Hopsdal Hansen; Håkon Endresen Normann
  8. Assigning an unpleasant task without payment By Goldlücke, Susanne; Tröger, Thomas
  9. Leveraging the Smart Grid: The Effect of Real-Time Information on Consumer Decisions By Nicholas Rivers
  10. Renewable Energy, Oil Prices, and Economic Activity: A Granger-causality in Quantiles Analysis By Troster, Victor; Shahbaz, Muhammad; Uddin, Gazi Salah
  11. Natural Gas Price Elasticities and Optimal Cost Recovery Under Consumer Heterogeneity: Evidence from 300 million natural gas bills By Maximilian Auffhammer; Edward Rubin
  12. The Evolution of U.S. Spectrum Values Over Time By Michelle Connolly; Nelson Sa; Azeem Zaman; Chris Roark; Akshaya Trivedi

  1. By: Hellwig, Michael; Schober, Dominik; Cabral, Luís M. B.
    Abstract: We propose a difference-in-differences (DiD) approach to estimate the impact of incentives on cost reduction. We show theoretically, and estimate empirically, that German electricity distribution system operators (DSOs) incur higher costs when subject to a lower-powered regulation mechanism. The difference is particularly significant (about 7%) for firms in the upper quartile of the efficiency distribution, a pattern which is consistent with the pooling of types under the threat of ratcheting.
    Keywords: regulation,ratchet effect,electricity utilities,difference-in-differences,efficiency analysis
    JEL: K23 L51 L94 L98 D24 D82
    Date: 2018
  2. By: Gabriel E. Lade (Center for Agricultural and Rural Development (CARD)); James Bushnell
    Abstract: The Renewable Fuel Standard (RFS) is among the largest renewable energy mandates in the world. The policy is enforced using tradeable credits that implicitly subsidize biofuels and tax fossil fuels. The RFS relies on these taxes and subsidies to be passed through to consumers to stimulate demand for biofuels and decrease demand for gasoline and diesel. Using station-level prices for E85 (a high-ethanol blend fuel) from over 450 retail fuel stations, we show that pass-through of the ethanol subsidy is, on average, complete. However, we find that full pass-through takes four to six weeks and that local market structure of gasoline stations influences both the speed and overall level of pass-through. JEL Codes: Q42, Q58, H23
    Keywords: retail fuel markets, E85, renewable fuel standard, subsidy pass-through
    Date: 2016–12
  3. By: Nicholas Rivers, Randall Wigle (Wilfrid Laurier University)
    Abstract: The reduction of greenhouse gas emissions from road transport is a key policy goal that is being pursued by both federal and provincial governments using a range of policies. This paper considers the cost of alternative approaches to reducing emissions from road passenger travel in Canada. Our findings reinforce the widely-held belief that a revenue-neutral carbon tax is the most cost-effective tool to reduce greenhouse gas emissions. Regulatory instruments on their own, such as a low carbon fuel standard, vehicle greenhouse gas intensity regulation, or zero emission vehicle mandate, achieve a given reduction at much higher cost. We show, however, that a combination of regulatory instruments can better approach the cost-effectiveness of a carbon tax than individual regulations. We provide insight about the optimal combination of regulatory instruments in the Canadian context, and find that both a low carbon fuel standard and an zero emission vehicle mandate can be jointly used to reduce GHG emissions from the transport sector. Our analysis is timely, given the rapidly evolving policies in this sector.
    Keywords: Greenhouse gas emissions, low carbon fuel standard, electric vehicles, carbon tax, road transport
    Date: 2018–01–01
  4. By: Habte, Osmis (Department of Economics, Lund University)
    Abstract: This paper examines the effect of competition on a firm's choice of opening hours in the motor vehicle inspection market. Competition affects the incentive inspection firms face when choosing opening hours, which influences the probability that consumers find service time that best matches their preferred time. We use 2SLS analyses to resolve the potential endogeneity of market entry decisions. Using a detailed monthly firm-level panel data for all inspection firms in Sweden, we find that increased competition, measured using both the number of firms in a geographic market and average distance to nearby competitors, leads to expanded opening hours. The probability that inspection firms offer services on weekends also increases with local competition.
    Keywords: opening hours; competition; non-price competition; entry; motor vehicle inspection market
    JEL: D22 L11 L84
    Date: 2017–12–22
  5. By: José M. Labeaga; Xavier Labandeira; Xiral López-Otero
    Abstract: Equity and efficiency are crucial issues behind any tax reform, but they are particularly relevant in countries with high inequality and large shares of poverty. This paper provides a comprehensive socio-economic empirical assessment of Mexico’s recently implemented tax reforms in the energy domain, and of a hypothetical (partial) removal of existing electricity subsidies. Using the rich National Household Income and Expenditure Survey within the context of a demand system adjustment of non-durable goods, this article provides the publicrevenue, environmental and distributional impacts from the simulation of different combinations of energy taxation, subsidyremoval and distributive offsets.
    Keywords: Distribution; equity; emissions; subsidy
    JEL: D12 D31 H23 Q48
    Date: 2018–01
  6. By: Ashley Langer; Derek Lemoine
    Abstract: We analyze the efficient subsidy for durable good technologies. We theoretically demonstrate that a policymaker faces a tension between intertemporally price discriminating by designing a subsidy that increases over time and taking advantage of future technological progress by designing a subsidy that decreases over time. Using new empirical estimates of household preferences for residential solar in California, we show that the efficient subsidy increases strongly over time if households are myopic and is much flatter if households have rational expectations. The regulator's spending increases by 70% when households anticipate future technological progress and future subsidies.
    JEL: H21 H23 H71 Q48
    Date: 2018–02
  7. By: Danny MacKinnon; Stuart Dawley; Markus Steen; Max-Peter Menzel; Asbjørn Karlsen; Pascal Sommer; Gard Hopsdal Hansen; Håkon Endresen Normann
    Abstract: The question of how regions and nations develop new sources of industrial growth is of recurring interest in economic geography and planning studies. From an evolutionary economic geography (EEG) perspective, new growth paths emerge out of existing economic activities and their associated assets and conditions. In response to the micro-economic and endogenous focus of much EEG research, this paper utilises a broader evolutionary perspective on path creation which stresses the dynamic interplay between four sets of factors: regional assets; key economic and organisational actors; mechanisms of path creation; and multi-scalar institutional environments and policy initiatives. Reflecting the importance of extra-regional networks and institutions, this framework is also informed by the Global Production Networks (GPN) approach, which highlights the process of strategic coupling between firms and regions and its political and institutional mediation by state institutions at different spatial scales. We deploy this framework to investigate regional path creation in the context of renewable energy technologies, focusing specifically on the offshore wind industry. We adopt a comparative cross-national approach, examining the evolution of offshore wind in Germany, the UK and Norway. Of the three cases, Germany has developed the most deep-rooted and holistic path to date, characterised by leading roles in both deployment and manufacturing. By contrast, path creation in the UK and Norway has evolved in more partial and selective ways. The UK's growth path is developing in a relatively shallow manner, based largely upon deployment and 'outside in' investment, whilst Norway?s path is emerging in an exogenous, ?inside-out? fashion around a fairly confined set of actors and deployment and supply functions. In conclusion, the paper emphasises the important role of national states in orchestrating the strategic coupling of regional and national assets to particular mechanisms of path creation.
    Keywords: Evolutionary economic geography, path creation, national states, global production networks, offshore wind, international comparative analysis
    JEL: L1 L5 O1 O25 O43 O44 R5
    Date: 2018–02
  8. By: Goldlücke, Susanne; Tröger, Thomas
    Abstract: How should a group of people decide to allocate a task that has to be done but is not adequately rewarded? This paper finds an optimal mechanism for the private provision of a public service in an environment without monetary transfers. All members of the group have the same cost of providing the service, but some individuals are better suited for the task than others. The optimal mechanism is a threshold rule that assigns the task randomly among volunteers if enough volunteers come forward, and otherwise assigns the task among the non-volunteers.
    Keywords: Volunteering , public good provision , mechanism design
    JEL: D82 D71 D62 H41
    Date: 2018
  9. By: Nicholas Rivers (University of Ottawa)
    Abstract: This report reviews the literature on the impact of real-time information provision on consumer decision-making. In addition, it describes the results of a study in which about 7000 households in Ontario, Canada were provided with in-home displays linked to smart meters that provided real-time feedback on electricity consumption. The results show that electricity consumption declines by about 3% as a result of information feedback, that the reduction in demand is sustained for at least five months, and that it is highly correlated with outdoor temperature.
    Keywords: Electricity demand, energy conservation, information provision, time-of-use pricing
    JEL: D12 L94 Q41 Q48
    Date: 2018–03–01
  10. By: Troster, Victor; Shahbaz, Muhammad; Uddin, Gazi Salah
    Abstract: This paper analyzes the causal relationship between renewable energy consumption, oil prices, and economic activity in the United States from July 1989 to July 2016, considering all quantiles of the distribution. Although the concept of Granger-causality is defined for the conditional distribution, the majority of papers have tested Granger-causality using conditional mean regression models in which the causal relations are linear. We apply a Granger-causality in quantiles analysis that evaluates causal relations in each quantile of the distribution. Under this approach, we can discriminate between causality affecting the median and the tails of the conditional distribution. We find evidence of bi-directional causality between changes in renewable energy consumption and economic growth at the lowest tail of the distribution; besides, changes in renewable energy consumption lead economic growth at the highest tail of the distribution. Our results also support the unidirectional causality from fluctuations in oil prices to economic growth at the extreme quantiles of the distribution. Finally, we find evidence of lower-tail dependence from changes in oil prices to changes in renewable energy consumption. Our findings call for government policies aimed at developing renewable energy markets, to increase energy efficiency in the U.S.
    Keywords: Granger-causality; Quantile Regression; Oil Prices; Renewable Energy Consumption; Economic Growth
    JEL: A1
    Date: 2018–01–04
  11. By: Maximilian Auffhammer; Edward Rubin
    Abstract: Half of American households heat their homes with natural gas furnaces and 43% use it to heat their water. Hence, understanding residential natural gas consumption behavior has become a first-order problem. In this paper, we provide the first ever causally identified, microdata-based estimates of residential natural gas demand elasticities using a panel of approximately 300 million bills in California. To overcome multiple sources of endogeneity, we employ a two-pronged empirical strategy: (1) we exploit a discontinuity along the border between two major natural-gas utilities in conjunction with (2) an instrumental variables strategy based upon the differences in the utilities’ rules/behaviors for internalizing changes in the upstream natural gas spot market. We estimate that the elasticity of demand for residential natural gas is between -0.23 and -0.17. We also provide evidence of significant seasonal and income-based heterogeneity in this elasticity. This heterogeneity suggests unexplored policy avenues that may be simultaneously efficiency-enhancing–in the absence of first best pricing—and pro-poor.
    JEL: O13 Q41
    Date: 2018–02
  12. By: Michelle Connolly (Duke University); Nelson Sa (Brandeis University); Azeem Zaman (Harvard University); Chris Roark (University of Chicago); Akshaya Trivedi (Trinity College,Duke University)
    Abstract: We consider 1997 to 2015 data from FCC spectrum auctions related to cellular services to attempt to identify intrinsic spectrum values. Relative to previous literature, we control for license specific auction rules, and introduce measures to separate out technological progress that effectively reduces spectrum scarcity from progress that increases demand. Results confirm that technological changes have led to increases in the relative value of higher frequencies. Surprisingly, 47 percent of these licenses have been won by “small” bidders, representing 27 percent of the real value of these licenses. The use of bidding credits further appears to consistently reduce auction competition.
    Keywords: HSpectrum, spectrum Scarcity, Auctions, FCC, Auction Rules, Mobile Applications, Spectral Efficiency, Broadband Speeds, Closed Auctions, Small Bidders, "The Google Effect"
    JEL: L5 O3 K2
    Date: 2018–02

This nep-reg issue is ©2018 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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