|
on Regulation |
| By: | Aghion, Philippe; Bergeaud, Antonin; Van Reenen, John |
| Abstract: | Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labor regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm’s innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation’s negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to “swing for the fence” with more radical (and labor saving) breakthroughs. |
| Keywords: | innovation; regulation; patents; firm size |
| JEL: | O31 L11 L51 J80 L25 |
| Date: | 2021–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:114352&r= |
| By: | Mark Armstrong; John Vickers |
| Abstract: | Edgeworth’s paradox of taxation occurs when an increase in the unit cost of a product causes a multiproduct monopolist to reduce prices. We give simple illustrations of the paradox, we show how it can arise with uniform pricing, and we give an analysis of the case of linear marginal cost and demand conditions. We show how the matrix of cost-passthrough terms must be similar to a positive definite matrix. When the firm supplies two substitute products we show how the paradox always occurs with a suitable choice of cost function. We then show a connection between Ramsey pricing and the paradox in a form relating to consumer surplus, and use it to find further examples where consumer surplus increases with cost. |
| Date: | 2022–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:967&r= |
| By: | Gomes, Renato; Mantovani, Andrea |
| Abstract: | Online intermediaries greatly expand consumer information, but also raise sellers’ marginal costs by charging high commissions. To prevent disintermediation, some platforms adopted price parity and anti-steering provisions, which restrict sellers’ ability to use alternative sales channels. Whether to uphold, reform, or ban these provisions has been at the center of the policy debate, but, so far, little consensus has emerged. As an alternative, this paper studies how to cap platforms’ commissions. The utilitarian cap reflects the Pigouvian precept according to which the platform should charge net fees no greater than the informational externality it exerts on other market participants. |
| Keywords: | platforms, price parity; regulation; commission caps; extreme value theory |
| JEL: | D83 L10 L41 |
| Date: | 2022–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126835&r= |
| By: | James B. Bushnell; Erich Muehlegger; David S. Rapson |
| Abstract: | This paper presents evidence that gasoline prices have a larger effect on demand for electric vehicles (EVs) than electricity prices in California. We match a spatially-disaggregated panel dataset of monthly EV registration records to detailed records of gasoline and electricity prices in California from 2014-2017, and use these to estimate the effect of energy prices on EV demand. Two distinct empirical approaches (panel fixed-effects and a utility-border discontinuity) yield remarkably similar results: a given change in gasoline prices has roughly four to six times the effect on EV demand as a similar percentage change in electricity prices. We explore the implications for optimal EV subsidies, which promote externality reduction benefits and correct for consumer misoptimization stemming from the undervaluation of future electricity costs. |
| JEL: | H23 Q49 Q55 R4 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29842&r= |
| By: | Yaya, OlaOluwa S.; Vo, Xuan Vinh |
| Abstract: | Day-of-the-week persistence and seasonality of electricity prices in Spain, spanning 01/01/2006 to 04/11/2021, are investigated by employing updated fractional persistence frameworks in nonlinear settings. The results show marginal higher persistence in electricity prices during the working days (Tuesday, Wednesday, Thursday and Friday), compared to weekend days. In all cases, electricity prices are mean-reverting with long-range dependence properties. Results also show that the monthly electricity price series contain no seasonal effect. |
| Keywords: | Electricity prices; Fractional persistence; Unit root; Day-of-the-week effect; seasonality; Spain |
| JEL: | C22 Q47 |
| Date: | 2021–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112652&r= |
| By: | De Groote, Olivier; Gautier, Axel; Verboven, Frank |
| Abstract: | We analyze the political impact of a generous solar panel subsidization program. Subsidies far exceeded their social benefit and were partly financed by new taxes to adopters and by electricity surcharges to all consumers. We use local panel data from Belgium and find a decrease in votes for government parties in municipalities with high adoption rates. This shows that the voters’ punishment for a costly policy exceeded a potential reward by adopters who received the generous subsidies. Further analysis indicates that punishment mainly comes from non-adopters, who change their vote towards anti-establishment parties. |
| Keywords: | financing climate policy; photovoltaic systems; retrospective voting, buying votes |
| JEL: | C23 D72 H23 Q48 |
| Date: | 2022–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126863&r= |
| By: | Alex Hollingsworth; Taylor Jaworski; Carl Kitchens; Ivan J. Rudik |
| Abstract: | We develop a spatial equilibrium model to evaluate the efficiency and distributional impacts of the leading air quality regulation in the United States: the National Ambient Air Quality Standards (NAAQS). We link our economic model to an integrated assessment model for air pollutants which allows us to capture endogenous changes in emissions, amenities, labor, and production. Our results show that the NAAQS generate over $23 billion of annual welfare gains. This is roughly 80 percent of welfare gains of the second-best NAAQS design, but only 25 percent of the first-best emission pricing policy. The NAAQS benefits are concentrated in a small set of cities, impose substantial costs on manufacturing workers, improve amenities in counties in compliance with the NAAQS, and reduce emissions in compliance counties through general equilibrium channels. These findings highlight the importance of accounting for geographic reallocation and equilibrium responses when quantifying the effects of environmental regulation. |
| JEL: | F18 Q52 Q53 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29845&r= |
| By: | Marie-Laure Cabon-Dhersin (LERN - Laboratoire d'Economie Rouen Normandie - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université); Nicolas Drouhin (CREM - Centre de recherche en économie et management - CNRS - Centre National de la Recherche Scientifique - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - UNICAEN - Université de Caen Normandie - NU - Normandie Université, UNICAEN UFR SEGGAT - Université de Caen Normandie - UFR de Sciences Économiques, Gestion, Géographie et Aménagement des Territoires - UNICAEN - Université de Caen Normandie - NU - Normandie Université) |
| Abstract: | We show that the long-term properties of price and cost in Chamberlin's (1933) monopolistic competition model can be reproduced with a soft-capacity constrained price competition oligopoly model for a homogeneous good with free entry. |
| Keywords: | price competition,soft-capacity constraint,free entry,U-shaped cost function,monopolistic competition,Chamberlin |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03378500&r= |
| By: | Gomes, Renato; Lozachmeur, Jean-Marie; Maestri, Lucas |
| Abstract: | We study oligopolistic competition by firms practicing second-degree price discrimination. In line with the literature on demand estimation, our theory allows for comovements between consumers’ taste for quality and propensity to switch brands. If low-type consumers are sufficiently less (more) brand loyal than high types, (i) quality provision is inefficiently low at the bottom (high at the top) of the product line, and (ii) informational rents are negative (positive) for high types, while positive (negative) for low types. We produce testable comparative statics on pricing and quality provision, and show that more competition (in that consumers become less brand-loyal) is welfare-decreasing whenever it tightens incentive constraints (so much so that monopoly may be welfare-superior to oligopoly). Interestingly, pure-strategy equilibria fail to exist whenever brand loyalty is sufficiently different across consumers types. Accordingly, price/quality dispersion ensues from the interplay between self-selection constraints and heterogeneity in brand loyalty. |
| Keywords: | competition; price discrimination; asymmetric information; preference correlation; price dispersion |
| JEL: | D82 |
| Date: | 2022–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126836&r= |
| By: | Keith M. Drake; Thomas McGuire |
| Abstract: | Settlements of drug patent disputes that involve a potential payment from the brand to the generic signal a possible collusive profit split with a threat to competition, and have undergone intensive scrutiny in the literature on law and economics. A common feature of these brand-generic settlements, so-called “most-favored entry” (MFE) clauses, have not been investigated to the same extent. The expectation that brand drug companies make settlement decisions rationally implies that an otherwise unexplained brand payment above savings from expected future litigation costs derives from a delay in competition achieved by the settlement. This paper applies the condition of brand rationality to settlements with MFE clauses, with the added consideration that an MFE clause may affect two dates: the date of entry for the settling generic and the date of entry of third-party generic challengers. A brand payment from an MFE clause above future expected litigation costs implies delays in at least one and possibly two of these expected dates for competition. We find that MFE clauses can constitute a reverse payment. When a payment takes the form of an MFE clause, the pay-above-saved-litigation-cost criterion is, however, vulnerable to suggesting that a settlement is not anticompetitive, when in fact it is. |
| JEL: | D22 D43 K21 L41 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29801&r= |
| By: | Tomomichi Mizuno (Graduate School of Economics, Kobe University); Kazuhiro Takauchi (Faculty of Business and Commerce, Kansai University / Research Fellow, Graduate School of Economics, Kobe University) |
| Abstract: | We build a successive Bertrand model with homogenous good. We show that increasing the pro- duction efficiency of upstream industry can reduce upstream Firms' profits. We also show that increasing the production efficiency of downstream industry may reduce downstream Firms' prof- its. Hence, an industrial policy that aims at improving production efficiency may be undesirable for Firms. |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:2208&r= |
| By: | Langella, Monica; Manning, Alan |
| Abstract: | There has been increasing interest in recent years in monopsony in the labour market. This paper discusses how we can measure monopsony power by combining insights from models based on both frictions and idiosyncrasies. It presents some evidence from the United Kingdom and the United States about how monopsony power varies across the wage distribution within markets, over the business cycle and over time. |
| Keywords: | 834455 “LPIGMANN” |
| JEL: | I21 |
| Date: | 2021–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:114476&r= |
| By: | Elliott Ash; Daniel L. Chen; Suresh Naidu |
| Abstract: | This paper provides a quantitative analysis of the effects of the early law-and- economics movement on the U.S. judiciary. We focus on the Manne Economics Institute for Federal Judges, an intensive economics course that trained almost half of federal judges between 1976 and 1999. Using the universe of published opinions in U.S. Circuit Courts and 1 million District Court criminal sentencing decisions, we estimate the within-judge effect of Manne program attendance. Selection into attendance was limited—the program was popular across judges from all backgrounds, was regularly oversubscribed, and admitted judges on a first-come first-served basis—and results are robust to a variety of automatically selected covariates predicting the timing of attendance. We find that after attending economics training, participating judges use more economics language in their opinions, issue more conservative decisions in economics-related cases, rule against regulatory agencies more often, favor more lax enforcement in antitrust cases, and impose more/longer criminal sentences. The law-and- economics movement had policy consequences via its influence on U.S. federal judges. |
| JEL: | B2 K0 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29788&r= |
| By: | Balisacan, Arsenio |
| Abstract: | Competition law—also known as antitrust in some jurisdictions—has become part of governments’ policy arsenal to achieve efficient and welfare-improving market outcomes. From only a handful of economies in North America and Europe, the adoption of competition law and policy has spread rapidly to Asian economies since 1990. Like their Western counterparts several decades earlier, most Asian jurisdictions have exempted agriculture, albeit in varying degrees, from the prohibitions of competition law, such as those involving the exercise of market power by farmers’ associations. Public choice considerations suggest that the exemption serves as a countervailing force for the farmers’ comparatively weak position in the balance of political influence for agricultural policy and in bargaining power over the more concentrated wholesale-retail segments of the agri-food value chain. Farm heterogeneity and farm-operation consolidation, induced in part by the economy’s structural transformation, weaken the case for broad exemption. |
| Keywords: | Competition policy, competition law, antitrust, political economy, agricultural development, Asia |
| JEL: | K21 L40 O13 O53 |
| Date: | 2022–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112650&r= |
| By: | Franziska Holz; Robin Sogalla; Christian von Hirschhausen; Claudia Kemfert |
| Abstract: | Der russische Angriffskrieg auf die Ukraine und die Abhängigkeit Deutschlands von Energielieferungen aus Russland erfordern ein Umdenken: Während die Debatte über ein sofortiges Energie-Embargo hochkocht, könnte auch Russland jederzeit seine Lieferungen einstellen. Deutschland bezog bisher rund 55 Prozent seines Erdgases aus Russland. Das DIW Berlin hat Szenarien entwickelt, wie das deutsche Energiesystem im europäischen Kontext schnellstmöglich von diesen Importen unabhängig werden könnte: Auf der Angebotsseite können Lieferungen anderer Erdgasexportländer einen Teil der russischen Exporte kompensieren. Die Versorgungssicherheit würde es erheblich stärken, wenn die Pipeline- und Speicherinfrastruktur effizienter genutzt wird. Auf der Nachfrageseite gibt es ein kurzfristiges Einsparpotenzial von 19 bis 26 Prozent der bisherigen Erdgasnachfrage. Mittelfristig ist insbesondere ein Schub in Richtung erneuerbarer Wärmeversorgung und höherer Energieeffizienz notwendig. Wenn Einsparpotenziale maximal genutzt und gleichzeitig die Lieferungen aus anderen Erdgaslieferländern so weit wie technisch möglich ausgeweitet werden, ist die deutsche Versorgung mit Erdgas auch ohne russische Importe im laufenden Jahr und im kommenden Winter 2022/23 gesichert. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwakt:83de&r= |
| By: | Bouckaert, Jan (University of Antwerp); Stennek, Johan (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | We study how the legal profession manages representational conflicts of interest. Such conflicts arise when the same law firm represents clients with adverse interests. They may compromise the legal process, ultimately jeopardizing social welfare. We argue that current ethical standards, emphasizing disqualification over Chinese walls, may actually worsen the clients’ situation. Instead, the clients’ interests are today mainly protected by law firms being small. Despite low market concentration, law firms enjoy high earnings as representational conflicts create negative network externalities at the firm level. These profits are not eroded even in the long run as entry occurs through firm splitups. |
| Keywords: | law firms; professional services; dual representation; representational conflicts of interest; ethical standards; Chinese walls; recusals; negative network externalities; competition; self-regulation |
| JEL: | K40 L13 L22 L44 L84 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0820&r= |
| By: | Leandro Arozamena; Federico Weinschelbaum; Juan-José Ganuza |
| Abstract: | In order to make competition open, fair and transparent, procurement regulations often require equal treatment for all bidders. This paper shows how a favorite supplier can be treated preferentially (opening the door to home bias and corruption) even when explicit discrimination is not allowed. We analyze a procurement setting in which the optimal design of the project to be contracted is unknown. The sponsor has to invest in specifying the project. The larger the investment, the higher the probability that the initial design is optimal. When it is not, a bargaining process between the winning firm and the sponsor takes place. Profits from bargaining are larger for the favorite supplier than for its rivals. Given this comparative advantage, the favored firm bids more aggressively and then, it wins more often than standard firms. Finally, we show that the sponsor invests less in specifying the initial design, when favoritism is stronger. Underinvestment in design specication is a tool for providing a comparative advantage to the favored firm. |
| Keywords: | Auctions, Favoritism, Auction Design, Renegotiation, Corruption. |
| JEL: | C72 D44 D82 |
| URL: | http://d.repec.org/n?u=RePEc:udt:wpecon:2021_09&r= |
| By: | Saunders, Harry D.; Roy, Joyashree; Azevedo, Inês M.L.; Chakravarty, Debalina; Dasgupta, Shyamasree; De La Rue Du Can, Stephane; Druckman, Angela; Fouquet, Roger; Grubb, Michael; Lin, Boqiang; Lowe, Robert; Madlener, Reinhard; McCoy, Daire M.; Mundaca, Luis; Oreszczyn, Tadj; Sorrell, Steven; Stern, David; Tanaka, Kanako; Wei, Taoyuan |
| Abstract: | This article presents a critical assessment of 40 years of research that may be brought under the umbrella of energy efficiency, spanning different aggregations and domains-from individual producing and consuming agents to economy-wide effects to the role of innovation to the influence of policy. After 40 years of research, energy efficiency initiatives are generally perceived as highly effective. Innovation has contributed to lowering energy technology costs and increasing energy productivity. Energy efficiency programs in many cases have reduced energy use per unit of economic output and have been associated with net improvements in welfare, emission reductions, or both. Rebound effects at the macro level still warrant careful policy attention, as they may be nontrivial. Complexity of energy efficiency dynamics calls for further methodological and empirical advances, multidisciplinary approaches, and granular data at the service level for research in this field to be of greatest societal benefit. |
| Keywords: | efficiency policy; energy efficiency; energy efficiency gap; energy intensity; public policy; Grantham Research Institute on Climate Change and the Environment at the London School of Economics and from the ESRC Centre for Climate Change Economics and Policy (CCCEP) (ref. ES/R009708/1; UKRI/EPSRC under the Heat; Buildings; Digital and Flexibility Themes of the Centre for Energy Demand Solutions (CREDS) (ref. EP/R 035288/1). |
| JEL: | R14 J01 |
| Date: | 2021–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:114344&r= |
| By: | Argenton, Cedric (Tilburg University, School of Economics and Management); Ivanova-Stenzel, Radosveta; Müller, Wieland (Tilburg University, School of Economics and Management) |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:03d1f1c4-0f0f-4d7c-8428-406bc1002e97&r= |
| By: | Roscoe, Philip; Willman, Paul |
| Abstract: | The literature on financial market design is predicated on the efficient market hypothesis (EMH), advocating transparency, liquidity and universal information with a view to capturing efficient prices. We provide a counterfactual: the 1995 formation of AIM, the London Stock Exchange’s junior market. AIM employs an alternative mode of market organization based on market imperfections. Our empirical study shows how AIM draws on reputation, social relationships and practitioner knowledge to organize market governance. We argue that the market’s design should be understood as capable of producing informationally efficient prices. We characterize AIM as having a ‘Whitean’ structure, compared with the ‘Fama’ structure of main markets. We conclude that the ‘Whitean’ producer market is a viable design option for financial markets. |
| Keywords: | Alternative Investment Market (AIM); efficient market hypothesis (EMH); Fama; Harrison White; market design; market imperfections |
| JEL: | F3 G3 |
| Date: | 2021–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:114480&r= |