nep-reg New Economics Papers
on Regulation
Issue of 2019‒08‒12
seventeen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Prosumage of solar electricity: tariff design, capacity investments, and power system effects By Claudia G\"unther; Wolf-Peter Schill; Alexander Zerrahn
  2. Analysis and Projections of BEVs, Renewable Electricity, and GHG Reductions through 2050 By Dominguez-Faus, Rosa PhD; Kiani, Behdad PhD; Fulton, Lew PhD
  3. The Non-Neutrality of the Arm's Length Principle with Imperfect Competition By Moreno Ruiz, Diego; Lemus Torres, Ana Belén
  4. The effect of Demand Response and wind generation on electricity investment and operation By Devine, Mel; Nolan, Sheila; Lynch, Muireann Á.; O’Malley, Mark
  5. Competition and Pass-Through: Evidence from Isolated Markets By Christos Genakos; Mario Pagliero
  6. Are environmental tax policies beneficial?: Learning from programme evaluation studies By Jonas Teusch; Nils Axel Braathen
  7. Strategic Incentives for Keeping One Set of Books under the Arm's Length Principle By Moreno Ruiz, Diego; Lemus Torres, Ana Belén
  8. Unregulated and regulated free banking. The case of Switzerland reinterpreted By Nils Herger
  9. Lobbying, Regulatory Enforcement and Corporate Governance: Theory and Evidence from Regulatory Enforcement Actions against US Banks By Panagiota Papadimitri; Ansgar Wohlschlegel
  10. Narrowing the 'Digital Divide': The Role of Complementarities Between Fixed and Mobile Data in South Africa By Ryan Hawthorne; Lukasz Grzybowski
  11. Assessing supply security - A compound indicator By Abrell, Jan; Chavaz, Léo; Weigt, Hannes
  12. Measuring liquidity in gas markets: The case of the UK National Balancing Point By de Menezes, Lilian M.; Russo, Marianna; Urga, Giovanni
  13. Corporate responses to public pressures and price increases:Evidence from Japan's electricity crisis By Hiroko Okajima; Shigeharu Okajima; Kenji Takeuchi
  14. Evaluating Alternative Institutions for Improving Water Allocation and Use Efficiency: Case Studies from the Western United States By Lee, Gi-Eu; Rollins, Kimberly S.; Singletary, Loretta
  15. Is competition in the transport industry bad?A welfare analysis of R&D with inter-regional transportation By Kazuhiro Takauchi; Tomomichi Mizuno
  16. Contract Enforcement and Productive Efficiency: Evidence from the Bidding and Renegotiation of Power Contracts in India By Nicholas Ryan
  17. The Impact of NAFTA on Prices and Competition: Evidence from Mexican Manufacturing Plants By Ayuma Ken Kikkawa; Yuan Mei; Pablo Robles Santamarina

  1. By: Claudia G\"unther; Wolf-Peter Schill; Alexander Zerrahn
    Abstract: We analyze how tariff design incentivizes households to invest in residential photovoltaic and battery systems, and explore selected power sector effects. To this end, we apply an open-source power system model featuring prosumage agents to German 2030 scenarios. Results show that lower feed-in tariffs substantially reduce investments in photovoltaics, yet optimal battery sizing and self-generation are relatively robust. With increasing fixed parts of retail tariffs, optimal battery capacities and self-generation are smaller, and households contribute more to non-energy power sector costs. When choosing tariff designs, policy makers should not aim to (dis-)incentivize prosumage as such, but balance effects on renewable capacity expansion and system cost contribution.
    Date: 2019–07
  2. By: Dominguez-Faus, Rosa PhD; Kiani, Behdad PhD; Fulton, Lew PhD
    Abstract: This report makes an initial investigation into the potential for combining very high penetration levels of electric vehicles with similarly very high penetration of variable renewable electricity (VRE) in California. A literature review is performed regarding the potential for high levels of EV sales and VRE penetration at both the U.S. and California level. Such scenarios have been developed by a number of researchers, such as U.S. national laboratories for the White House (under the Obama Administration), and by Energy and Environmental Economics, Inc. (E3) for the California Energy Commission. Such studies indicate that both of these “extreme” futures are entirely plausible and have the potential to coexist. However, none of the reviewed studies has undertaken detailed analysis of how large numbers of EVs could interact with and support a VRE-dominated system, and how these might interact in a useful way. This could include grid-to-vehicle (G2V) and vehicle- to-grid (V2G) movement of electricity, with vehicle batteries providing large scale electricity storage. We undertake our own preliminary simulation for a 2030 and 2050 scenario for California, using an 8760 hours (full year) electricity demand profile and VRE generation example. We assume a ramp- up of VRE to 60% of all electricity generation by 2030 and 100% by 2050, with a similar increase in the EV share of new LDV sales, creating a significant stock (about 7 million) by 2030 and nearly complete transition (to over 20 million vehicles) by 2050. Using an “averages, peaks and valleys” analysis on the electric side, and a typical spare battery storage potential on the vehicle side, our simulation shows that by 2030 a large share of excess VRE electricity generation could be stored, and a large share of electricity shortfall from VRE could be provided, by electric vehicle batteries throughout the year, though there would be many cases where they cannot provide full coverage of these situations. However by 2050, if nearly 100% of the fleet were EVs, only about half of their available, spare capacity is needed to store the excess electricity from a full VRE system on the highest generation day and only about 40% would be needed to store and supply the shortage from lack of VRE generation on the highest shortfall day. While these results are encouraging, a deeper simulation is needed to provide a true hour-by-hour assessment of battery use and the incidence of storage need compared to driving need. Management of charging times that could not be assessed here may also play a critical role. In addition, our initial assessment only covers a single day shortfall. Shortfalls could occur for longer periods, particularly if the VRE electricity system were sized to take better advantage of seasonal storage options. Vehicle batteries are best suited to very short duration storage and may not be adequate to keep the electricity reliable for many consecutive days of shortfall. Hydrogen (H2) has the potential to be a longer-term energy storage option and could be stored in fuel cell vehicle tanks (and the H2 system associated with generating, storing and distributing H2 to those tanks). The next stage of our research will involve running a full simulation using our (ITS-Davis) California ZEV power model (“CALZEV”), a version of the larger Message model, applied to consider both electricity and hydrogen (with large numbers of both of these types of vehicles) in order to: 1) gauge the relative storage potential and cost over a range of time frames and VRE scenarios, and 2) estimate the relative value and possible synergies in a system with both types of vehicles and fuels.
    Keywords: Engineering, energy modeling, distributed storage, V2G, G2V, renewable energy, EV, FCV, Hydrogen, Electricity
    Date: 2019–07–31
  3. By: Moreno Ruiz, Diego; Lemus Torres, Ana Belén
    Abstract: The Arm's Length Principle (ALP) has been broadly adopted by OECD countries to avoid the use of firms' internal transfer pricing as a device for shifting profits into low tax jurisdictions. While the ALP does not affect market outcomes under perfect competition, we show that under imperfect competition its adoption is non-neutral: a strict (lax) application of the ALP softens competition among subsidiaries (parents). Thus, under imperfect competition regulating transfer pricing optimally requires trading off its impact on market outcomes and tax revenue.
    Keywords: Vertical Separation; Imperfect Competition; Arm'S Length Principle; Transfer Pricing Regulation
    JEL: H26 L51 L13
    Date: 2019–07
  4. By: Devine, Mel; Nolan, Sheila; Lynch, Muireann Á.; O’Malley, Mark
    Date: 2019
  5. By: Christos Genakos; Mario Pagliero
    Abstract: We measure how pass-through varies with competition in isolated oligopolistic markets with captive consumers. Using daily pricing data from gas stations, we study how unanticipated and exogenous changes in excise duties (which vary across different petroleum products) are passed through to consumers in markets with different numbers of retailers. We find that pass-through increases from 0.44 in monopoly markets to 1 in markets with four or more competitors and remains constant thereafter. Moreover, the speed of price adjustment is about 60% higher in more competitive markets. Finally, we show that geographic market definitions based on arbitrary measures of distance across sellers, often used by researchers and policy makers, result in significant overestimation of the pass-through when the number of competitors is small.
    Keywords: pass-through, tax incidence, gasoline, market structure, competition
    JEL: H22 L1
    Date: 2019–07
  6. By: Jonas Teusch (OECD); Nils Axel Braathen (OECD)
    Abstract: This paper provides a concrete example of how policy analysts can use empirical programme evaluation studies to perform ex-post assessments of environmentally related tax policies. A number of studies credibly identify causal effects of environmentally related tax policies, but do not necessarily provide all the information needed to fully inform the policy-making process. This paper argues that cost-benefit analysis (CBA) could enrich ex-post assessments of environmentally related tax policies, given that CBA provides decision makers with a broader perspective of social costs and benefits and allows the identification of potential trade-offs among policy objectives.
    Keywords: Bonus/malus policies, Cost-benefit analysis, Environmental Taxes, Feebates, Quantitative Policy Evaluation, Vehicle Purchase Taxes
    JEL: D61 D62 H23 H31
    Date: 2019–08–12
  7. By: Moreno Ruiz, Diego; Lemus Torres, Ana Belén
    Abstract: The OECD's recommendation that transfer prices between multinational enterprises and their subsidiaries be consistent with the Arm's Length Principle (ALP) for tax purposes does not restrict internal pricing policies. However, we show that under imperfect competition firms may choose to keep one set of books (i.e., to set transfer prices consistent with the ALP), as a way of softening competition in the external market. As a result, firms' profits are greater, and the surplus is smaller, than under vertical integration. In contrast, when firms keep two sets of books (i.e., their transfer prices differ from those used for tax purposes), competition intensifies in both markets relative to vertical integration.
    Keywords: Arm's Length Principle; Vertical Separation; Imperfect Competition; Transfer Pricing Regulation
    JEL: H2 L5 L1
    Date: 2019–08–01
  8. By: Nils Herger (Study Center Gerzensee)
    Abstract: The free-banking history of Switzerland is commonly subdivided into a period with unfettered competition (1826 - 1881) and strong banknote regulation (1881 - 1907). This paper suggests that unrestricted competition between private note-issuing banks gave rise to a fragmented paper-money system, which suffered from a lack of standard- ised, and commonly accepted, banknotes. Minimum-reserve requirements and mutual- acceptance rules were introduced to standardise banknotes. Rather than overissuing, these regulatory interventions restricted the exibility (or \elasticity") of the paper- money supply. It turned out that a central note-issuing bank was needed to supply adequate amounts of standardised banknotes.
    Date: 2019–08
  9. By: Panagiota Papadimitri (Portsmouth Business School); Ansgar Wohlschlegel (Portsmouth Business School)
    Abstract: We explore protection against enforcement as a motive for lobbying and present evidence for bank holding companies with good corporate governance but a poorly performing portfolio of subsidiaries to be more likely to lobby. A simple theoretical model of lobbying as a means for banks to communicate otherwise private information on their quality rationalizes regulators' responsiveness to lobbying, even though lobbying banks inadvertently expose themselves as violators of the regulation. Using a composite governance indicator as a proxy for a bank's quality, we take the hypotheses from the model to a panel dataset of 173 large bank holding companies and their subsidiaries. In line with the theoretical hypotheses, we find that subsidiaries of lobbying, high-governance parent companies are less likely to receive a regulatory enforcement action, but the reverse is true for poor-governance parent companies. Furthermore, banks whose parent companies have lobbied perform better (worse) after five years if the bank holding has a high (low) governance indicator. On a policy note, our paper highlights a potential benefit of the lobbying system and makes the case for carefully designed incentives and commitment powers of bank regulators in order to make the most of this benefit.
    Keywords: Lobbying, enforcement, bank regulation, corporate governance
    JEL: D72 G28 G34 K42
    Date: 2019–07–31
  10. By: Ryan Hawthorne; Lukasz Grzybowski
    Abstract: We study substitution between fixed and mobile broadband services in South Africa using survey data on 134,000 individuals between 2009 and 2014. In our discrete-choice model, individuals choose fixed or mobile voice and data services in a framework that allows them to be substitutes or complements. We find that voice services are complements on average but data services are substitutes. However, many consumers see data services as complements. Our results show that having a computer and access to an internet connection at work or school are more important than reducing mobile data prices by 10% in driving broadband penetration.
    Keywords: fixed-to-mobile substitution, mobile broadband, fixed broadband
    JEL: L13 L43 L96
    Date: 2019
  11. By: Abrell, Jan (University of Basel); Chavaz, Léo (University of Basel); Weigt, Hannes (University of Basel)
    Abstract: Supply security is a prominent and crucial notion which nds application in various economic sectors (energy security, food security, supply chain risks). Yet, it remains particularly dicult to dene and measure. Currently used indicators of supply security focus on narrow approaches and oer limited guidance to policy makers. Considering this, we propose a novel indicator assessing the supply security of industries, conceptually or physically, based on a network structure. The indicator is based on a simulation methodology and evaluates the reaction of the market to disruptions of its network services, thereby capturing the various dimensions of supply security. Subsequently, we perform an exemplary application onto the European natural gas market, and evaluate the impact of currently debated network extensions projects and policy measures.
    Keywords: Supply security, natural gas
    Date: 2019–07
  12. By: de Menezes, Lilian M.; Russo, Marianna; Urga, Giovanni
    Date: 2019
  13. By: Hiroko Okajima (Towson University); Shigeharu Okajima (Osaka University of Economics); Kenji Takeuchi (Graduate School of Economics, Kobe University)
    Date: 2019–05
  14. By: Lee, Gi-Eu; Rollins, Kimberly S.; Singletary, Loretta
    Keywords: Resource/ Energy Economics and Policy
    Date: 2019–06–25
  15. By: Kazuhiro Takauchi (Faculty of Business and Commerce,Kansai University); Tomomichi Mizuno (Graduate School of Economics, Kobe University)
    Date: 2019–07
  16. By: Nicholas Ryan (Cowles Foundation, Yale University)
    Abstract: Weak contract enforcement may reduce the efficiency of production in developing countries. I study how contract enforcement affects efficiency in procurement auctions for the largest power projects in India. I gather data on bidding and ex post contract renegotiation and find that the renegotiation of contracts in response to cost shocks is widespread, despite that bidders are allowed to index their bids to future costs like the price of coal. Connected firms choose to index less of the value of their bids to coal prices and, through this strategy, expose themselves to cost shocks to induce renegotiation. I use a structural model of bidding in a scoring auction to characterize equilibrium bidding when bidders are heterogeneous both in cost and in the payments they expect after renegotiation. The model estimates show that bidders offer power below cost due to the expected value of later renegotiation. The model is used to simulate bidding and efficiency with strict contract enforcement. Contract enforcement is found to be pro-competitive. With no renegotiation, equilibrium bids would rise to cover cost, but markups relative to total contract value fall sharply. Production costs decline, due to projects being allocated to lower-cost bidders over those who expect larger payments in renegotiation.
    Keywords: Contracting, Procurement, Commitment
    JEL: O25 L94 L14 D44
    Date: 2019–02
  17. By: Ayuma Ken Kikkawa; Yuan Mei; Pablo Robles Santamarina
    Abstract: This paper assesses the impact of the North American Free Trade Agreement on Mexican manufacturing plants’ prices and markups. We distinguish between Mexican goods that are exported and those sold domestically, and decompose their prices separately into markups and marginal costs. We then analyze how these components were affected by reductions in Mexican output tariffs, intermediate input tariffs, and U.S. tariffs. We find that declines in these tariffs led to significant reductions in the marginal costs of Mexican products. However, prices of exported goods slightly increased as exporters increased their markups in response to declines in U.S. tariffs.
    Date: 2019

This nep-reg issue is ©2019 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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