nep-reg New Economics Papers
on Regulation
Issue of 2004‒12‒12
nineteen papers chosen by
Christian Calmes
Université du Québec en Outaouais, Canada
  1. Taxes, Regulations, and the Value of U.S. and U.K. Corporations By Ellen R. McGrattan; Edward C. Prescott
  2. Is bank capital procyclical? A cross-country analysis By Jaap Bikker; Paul Metzemakers
  3. Wage Bargaining Under the National Labor Relations Act By Jesse A. Schwartz; Quan Wen
  4. Regulatory Ambivalence and the Limitations of Pharmaceutical Policy in Spain By Joan Costa; Jaume Puig
  5. Electricity Market Reform in the European Union: Review of progress towards liberalisation and integration By Tooraj Jamasb; Michael Pollitt
  6. Strong equilibrium implementation for a principal with heterogeneous agents By Alexey Savvateev
  7. Banking regulation and financial stability By Rustam Bakirov; Maxim Grishan
  8. Employment Regulations through the Eyes of Employers: Do They Matter and How Do Firms Respond to Them? By Pierre, Gaëlle; Scarpetta, Stefano
  9. Basel and Procyclicality: A comparison of the Standardised and IRB Approaches to an Improved Credit Risk Method By Miguel Segoviano; Charles Goodhart
  10. Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency By Karl Markiewicz; Nancy L. Rose; Catherine Wolfram
  11. Determinants of Organizational Form: Transaction Costs and Institutions in the European Trucking Industry By Benito Arruñada; Manuel González; Alberto Fernández
  12. The Concept of Systematic Corruption in American Political and Economic History By John Joseph Wallis
  13. How to Eliminate Pyramidal Business Groups - The Double Taxation of Inter-Corporate Dividends and Other Incisive Uses of Tax Policy By Randall Morck
  14. Patent Protection As A Stimulant for Risky Innovation. Could TRIPS be Counterproductive? By Andreas Panagopoulos
  15. Effects of leniency programs on cartel stability By Motchenkova,E.
  16. Determination of optimal penalties for antitrust violations in a dynamic setting By Motchenkova,E.
  17. Dynamic regulation and entry in telecommunications markets : a policy framework By Bijl,P.W.J. de; Peitz,M.
  18. Three principals of transnational corporate bankruptcy law : a review By Franken,S.F.
  19. Deregulation By Rohan Pitchford
  1. By: Ellen R. McGrattan; Edward C. Prescott
    Date: 2004–12–02
    URL: http://d.repec.org/n?u=RePEc:cla:levrem:122247000000000715&r=reg
  2. By: Jaap Bikker; Paul Metzemakers
    Abstract: This paper investigates the determinants of commercial banks' own internal capital targets and potential sensitivity of these levels to the business cycle . World-wide results make clear that banks' own risk is only slightly dependent on the business cycle. Banks tend to hold substantial capital buffers on top of minimum requirements, reflecting that they hold capital for other reasons than strictly meeting the capital requirements. These results suggest that actual capital levels may not become substantially more procyclical under the new risk-sensitive Basel II regime. However, a number of banks, especially smaller ones, combine a relatively risky portfolio with limited buffer capital. A more risk-sensitive capital regulation regime could force these banks to obtain higher capital levels, which would make them more procyclical.
    JEL: E32 G21 G28 G31
    Date: 2004–09
    URL: http://d.repec.org/n?u=RePEc:dnb:dnbwpp:009&r=reg
  3. By: Jesse A. Schwartz (Department of Economics, Vanderbilt University); Quan Wen (Department of Economics, Vanderbilt University)
    Abstract: Sections 8(a)(3) and 8(a)(5) of the National Labor Relations Act prohibit a firm from unilaterally increasing the wage it pays the union during the negotiation of a new wage contract. To understand this regulation, we study a counterfactual model where the firm can unilaterally increase wages during contract negotiations. Comparing this model to the case where the firm must pay the wage from the expired contract, we show that the firm may strategically increase the union's temporary wage to upset the union's incentive to strike and to decrease the union's bargaining power. Consequently, increasing temporary wages may shrink the set of equilibrium contracts in the firm's favor. Indeed, as the union becomes more patient, the set of equilibrium wages converges to the expired wage, the best equilibrium outcome to the firm. We further demonstrate that our counterfactual model is valid since our results maintain even if the union is allowed to block the firm's temporary wage increase.
    Keywords: Collective Bargaining, National Labor Relations Act
    JEL: C72 C73 C78
    Date: 2004–05
    URL: http://d.repec.org/n?u=RePEc:van:wpaper:0412&r=reg
  4. By: Joan Costa; Jaume Puig
    Abstract: Broadly speaking, pharmaceutical policy in Spain has been unable to control either the price or the volume of drugs prescribed. Limited attempts have been made to bring together the regulation of the pharmaceutical market and policies, in pursuit of the desired goals of efficiency and quality. This paper assesses the regulation of the Spanish pharmaceutical market over the last two decades by examining regulation and policy and the available empirical evidence on their appreciable effects, and presents recommendations for policy design. Our findings suggest that policies aiming to improve efficiency and quality have not managed to contain costs, while cost-effectiveness is still overlooked. We argue that future policies should encourage broader participation in the decision-making processes and promote a higher degree of competition, especially from generic drugs.
    Keywords: Spain, generic penetration, reference pricing, negative lists, pharmaceutical regulation
    JEL: I18 L51 L52 L65
    Date: 2004–06
    URL: http://d.repec.org/n?u=RePEc:upf:upfgen:762&r=reg
  5. By: Tooraj Jamasb; Michael Pollitt
    Abstract: The energy market liberalisation process in Europe is increasingly focused on electricity market integration and related cross border issues. This signals that the liberalisation of national electricity markets is now closer to the long-term objective of a single European energy market. The interface between the national electricity markets requires physical interconnections and technical arrangements. However, further progress towards this objective also raises important issues regarding the framework within which the integrated market is implemented. This paper reviews the progress towards a single European electricity market. We then discuss the emerging issues of market concentration, investments, and security of supply as well as some aspects of market design and regulation that are crucial for dynamic performance of a single European market.
    Keywords: Electricity, energy, liberalisation, regulation, integration, European Union
    JEL: L11 L22 L Q48
    Date: 2004–11
    URL: http://d.repec.org/n?u=RePEc:cam:camdae:0471&r=reg
  6. By: Alexey Savvateev
    Abstract: The author models the interaction between the “Center”, represented by inspectors, and free riders in local trains (“hares” in the Russian slang). In order to characterize the optimal deterring strategy of the Center, one must look into the nature the interaction among parties in this game. After accomplishing this task, the author considers a more general class of phenomena that are intimately related to the one just described. Such phenomena will be analyzed in the framework of a “Center-offenders” model (a special case of the “Crime and Punishment” problem). The appropriate solution concept may be called a “natural Stackelberg solution”.
    JEL: K14 K42
    Date: 2003–04–03
    URL: http://d.repec.org/n?u=RePEc:eer:wpalle:00-103e&r=reg
  7. By: Rustam Bakirov; Maxim Grishan
    Abstract: Panic and a massive withdrawal of deposits triggered by an expectation of bankruptcy may force the bank to sell off valuable assets, causing sizeable losses and, in some cases, closure of an initially healthy financial institution. The traditional way of preventing bank runs has to do with the imposition of various restrictions on the bank’s activity. Yet, restrictions and regulations can vary. Based on a theoretical model, the authors analyze the effect of alternative banking regulation instruments on the stability of the Russian financial system.
    JEL: E00 G00
    Date: 2003–04–03
    URL: http://d.repec.org/n?u=RePEc:eer:wpalle:99-088e&r=reg
  8. By: Pierre, Gaëlle (World Bank); Scarpetta, Stefano (World Bank and IZA Bonn)
    Abstract: In this paper, we present evidence on how employers perceive labor regulations and react when these are perceived to constrain the operation of their firm. The paper draws from harmonized surveys of (up to) 17,000 firms around the world, and compares employers’ responses with actual labor legislation. We find that employers’ concerns about labor regulations are closely matched by the relative stringency of de jure labor laws. Countries that have, from an international perspective, tight labor regulations tend to have higher proportions of employers reporting these regulations as severe constraints. But not all firms are affected in the same way by onerous labor regulations. Medium sized firms are those whose business and prospect for growth are most negatively affected. Similarly, innovating firms are disproportionally affected by tight labor regulations. There is also clear evidence in the data that firms facing tight regulations invest more in training and make greater use of temporary employment. Small firms mainly rely on temporary employment, while medium and large firms, as well as innovating firms, tend to rely more on on-the-job training if labor regulations make hiring and firing very costly.
    Keywords: employment protection indices, firms surveys, training, temporary employment
    JEL: J23 J65 K31
    Date: 2004–12
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1424&r=reg
  9. By: Miguel Segoviano; Charles Goodhart
    Abstract: The regulation of bank capital in the form of capital adequacy requirements is itself inherently procyclical; it bites in downturns, but fails to restrain in booms. The more ¶risk-sensitive¶ the regulation, the greater the scope for pro-cyclicality to become a problem, particularly in view of the changing nature of macroeconomic cycles. The simulation exercises performed in this paper suggest that the new Basel II accord, which deliberately aimed at significantly increasing the risk sensitiveness of capital requirements, may in fact considerably accentuate the procyclicality of the regulatory system. Since the experience in the past, also discussed in this paper, suggests that a required hoisting of capital ratios in downturns may be brought about by cutting back lending rather than raising capital, the new capital accord may therefore lead to an amplification of business cycle fluctuations, especially in downturns.
    Date: 2004–11
    URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp524&r=reg
  10. By: Karl Markiewicz; Nancy L. Rose; Catherine Wolfram
    Abstract: This paper explores the empirical effects of competition on technical efficiency in the context of electricity industry restructuring. Restructuring programs adopted by many U.S. states made utilities residual claimants to cost savings and increased their exposure to competitive markets. We estimate the impact of these changes on annual generating plant-level input demand for non-fuel operating expenses, the number of employees and fuel use. We find that municipally-owned plants, whose owners were for the most part unaffected by restructuring, experienced the smallest efficiency gains over the past decade. Investor-owned utility plants in states that restructured their wholesale electricity markets had the largest reductions in nonfuel operating expenses and employment, while investor-owned plants in nonrestructuring states fell between these extremes. The analysis also highlights the substantive importance of treating the simultaneity of input and output decisions, which we do through an instrumental variables approach.
    Keywords: Efficiency, Production, Competition, Electricity restructuring, Electric Generation, Regulation
    JEL: L11 L43 L51 L94 D24
    Date: 2004–11
    URL: http://d.repec.org/n?u=RePEc:cam:camdae:0472&r=reg
  11. By: Benito Arruñada; Manuel González; Alberto Fernández
    Abstract: We explain why European trucking carriers are much smaller and rely more heavily on owner-operators (as opposed to employee drivers) than their US counterparts. Our analysis begins by ruling out differences in technology as the source of those disparities and confirms that standard hypotheses in organizational economics, which have been shown to explain the choice of organizational form in US industry, also apply in Europe. We then argue that the preference for subcontracting over vertical integration in Europe is the result of European institutions—particularly, labor regulation and tax laws—that increase the costs of vertical integration.
    Keywords: Transaction costs, governance, hybrids, transportation
    JEL: D23 L14 L22 L92
    Date: 2004–06
    URL: http://d.repec.org/n?u=RePEc:upf:upfgen:767&r=reg
  12. By: John Joseph Wallis
    Abstract: The critical role of governance in the promotion of economic development has created intense interest in the manner in which the United States eliminated corruption. This paper examines the concept of corruption in American history; tracing the term corruption to its roots in British political philosophy of the 17th and 18th century, and from there back to Machiavelli, Polybius and Artistole. Corruption was defined prior to 1850 in a way that was significantly different from how it was defined in the Progressive Era. "Systematic corruption" embodied the idea that political actors manipulated the economic system to create economic rents that politicians could use to secure control of the government. In other words, politics corrupts economics. The classic cure for systematic corruption was balanced government. Americans fought for independence because they believed that the British government was corrupt. The structure of American constitutions was shaped by the need to implement balanced government. Conflict and debate over the implementation of balanced government dominated the political agenda until the 1840s, when states began moving regulatory policy firmly towards open entry and free competition. By the 1890s, systematic corruption had essentially appeared from political discourse. By then corruption had come to take on its modern meaning: the idea that economic interests corrupt the political process. What modern developing countries with corrupt governments need to learn is how the United States eliminated systematic corruption.
    JEL: B1 N0 N2 N4
    Date: 2004–12
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:10952&r=reg
  13. By: Randall Morck
    Abstract: Arguments for eliminating the double taxation of dividends apply only to dividends paid by corporations to individuals. The double (and multiple) taxation of dividends paid by one firm to another %uF818 intercorporate dividends - was explicitly included in the 1930s as part of a package of tax and other policies aimed at eliminating United States pyramidal business groups. These structures remain the predominant form of corporate organization outside the United States. The first Roosevelt administration associated them with corporate governance problems, corporate tax avoidance, market power, and an objectionable concentration of economic power. Future tax reforms in the United States should mind the original intent of Congress and the President regarding intercorporate dividend taxation. Foreign governments may find the American experience of value should they desire to eliminate their business groups.
    JEL: H1 G3
    Date: 2004–12
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:10944&r=reg
  14. By: Andreas Panagopoulos
    Abstract: This paper introduces the idea that strong patent protection can lead innovators to rest on their laurels, into a simple tournament based framework. Concentrating on optimal patent protection, the one that maximizes production, the model shows that there is a positive relationship between the ability of the economy (firm) to innovate and how strong patent protection should be. This line of thinking runs counter to the uniÞed intellectual property regime, as introduced by TRIPS.
    Keywords: Intellectual property, sequential innovation, tournaments.
    JEL: K0 O11
    Date: 2004–11
    URL: http://d.repec.org/n?u=RePEc:bri:uobdis:04/566&r=reg
  15. By: Motchenkova,E. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:2004020&r=reg
  16. By: Motchenkova,E. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:2004019&r=reg
  17. By: Bijl,P.W.J. de; Peitz,M. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:2004010&r=reg
  18. By: Franken,S.F. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:2004017&r=reg
  19. By: Rohan Pitchford
    Abstract: It is well known in the theoretical literature on deregulation, that any informative signal will be used to give the firm appropriate incentives. This paper presents a model of deregulation that draws on the multi-task model of Holmstrom and Milgrom (1991). Sufficient conditions are derived for deregulation to be optimal despite the existence of a signal that contains information about the firm’s activity. The conditions ensure that there is an adverse response by the firm whenever the regulator tries to use the signal for incentives.
    JEL: D23
    Date: 2001
    URL: http://d.repec.org/n?u=RePEc:idc:wpaper:idec01-9&r=reg
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