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on Regulation |
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Issue of 2005‒04‒03
fourteen papers chosen by Christian Calmes Université du Québec en Outaouais, Canada |
| By: | W. Bentley MacLeod |
| Abstract: | Regulation of the employment contract is both wide spread and diverse. The diversity of regulation is surprising because it suggests that there is little consensus regarding optimal intervention into the labor market. This paper discusses several economic reasons why it may be efficient for employers and employees to enter into long term contracts that make employee dismissal expensive. This analysis suggests that employment contracts can be expected to be complex in practice, and hence can be viewed as part of the technology of exchange. Given that knowledge of a technology requires skill and know-how, one cannot expect all employee-employer matches to discover and use the most efficient contract terms possible. It is suggested that the regulation of the employment relationship might be improved with the creation of a market for contracts, similar to the one that currently exists in the United States for construction projects. |
| JEL: | J30 J41 K31 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:scp:wpaper:05-17&r=reg |
| By: | Mandell, Svante (Dept. of Economics, Stockholm University) |
| Abstract: | This paper takes on the issue of ‘Prices vs. Quantities’, see Weitzman (1974), applied to environmental regulations under uncertainty. It is shown that, from an efficiency point of view, it is generally preferable to divide the economy into two parts, one regulated through a tax and the other through cap-and-trade, rather than letting it be subject to either of these regulation mechanisms. This may be so even when the latter alternatives are cost effective while the former is not. Particular interest is devoted to determining the optimal size of each sector. Generally, a steeper marginal abatement cost function relative to the marginal abatement benefit function implies that a larger part of the economy should be taxed. |
| Keywords: | regulation; uncertainty; emissions tax; tradable permits |
| JEL: | H23 L51 Q28 Q58 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2004_0012&r=reg |
| By: | Isabelle Sin; Suzi Kerr; Joanna Hendy (New Zealand Treasury) |
| Abstract: | This paper provides an overview of key issues involved in the choice among market-based instruments for climate change policy. Specifically, it examines the potential net benefits from shifting to a permit system for emission reduction, and the preconditions necessary for this change. It also draws out the implications of New Zealand’s specific circumstances and current climate policies for future policy development. |
| Keywords: | climate change; emissions trading; permits; taxation; New Zealand |
| JEL: | Q28 Q48 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:05/02&r=reg |
| By: | H. Naci Mocan; Turan G. Bali |
| Abstract: | Recent theoretical models based on dynamic human capital formation, or social influence, suggest an inverse relationship between criminal activity and economic opportunity and between criminal activity and deterrence, but predict an asymmetric response of crime. In this paper we use three different data sets and three different empirical methodologies to document this previously-unnoticed regularity. Using nonparametric methods we show that the behavior of property crime is asymmetric over time, where increases are sharper but decreases are gradual. Using aggregate time-series U.S. data as well as data from New York City we demonstrate that property crime reacts more (less) strongly to increases (decreases) in the unemployment rate, to decreases (increases) in per capita real GDP and to decreases (increases) in the police force. The same result is obtained between unemployment and property crime in annual state-level panel data. These results suggest that it may be cost effective to implement mechanisms to prevent crime commission rates from rising in the first place. |
| JEL: | K4 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11210&r=reg |
| By: | Pierre Lefebvre; Philip Merrigan |
| Abstract: | On September 1st, 1997, a new childcare policy was initiated by the provincial government of Quebec, the second most populous province in Canada. Childcare services licensed by the Ministry of the Family (not-for-profit centres, family-based childcare, and for-profit centres under the agreement) began offering day care spaces at the reduced parental contribution of $5 per day child for children aged 4 years. In successive years, the government reduced the age requirement and engaged in a plan to create new childcare facilities and pay for the cost of additional $5 per day childcare spaces. By September 2000, the low-fee policy applied to all children aged 0 to 59 months (not in kindergarten) and the number of partly subsidized spaces increased from 77,000 in 1998 to 163,000 spaces, totally subsidized by the end of year 2002, while the number of eligible children, zero to four years old, declined from 428,000 to 369,000 over the same period. Using annual data (1993 to 2002), drawn from Statistics Canada's Suvey of Labour and Income Dynamics (SLID), this study attempts to estimate the effect of the policy on the labor supply behavior of Quebec mothers with pre-school children, aged from 0 to 5 years old. The analysis examines the impact of the policy on the following outcomes: labor force participation, annual number of weeks and hours at work, annual earned income and whether the job was full-time for mothers who declared having a job during the reference year. A non-experimental evaluation framework based on multiple pre- and post- treatment periods is used to estimate the effect of the childcare regime. The econometrics results support the hypothesis that the childcare policy, together with the transformation of public kindergarten from a part-time to a full-time basis, had a large and statistically significant impact on the labor supply of Quebec's mothers with pre-school children. The estimates also suggest, though less convincingly, that the size of the impact increased concurrently with the positive growth in the number of low-fee spaces. |
| Keywords: | Mother's labor supply, preschool children, childcare subsidy, natural experiment |
| JEL: | H42 J21 J22 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0508&r=reg |
| By: | Lawrence M. Kahn (Cornell University, CESifo and IZA Bonn) |
| Abstract: | Using 1994-98 International Adult Literacy Survey (IALS) microdata, this paper investigates the impact of employment protection laws on the incidence of temporary employment by demographic group. More stringent employment protection for regular jobs is predicted to increase the relative incidence of temporary employment for less experienced and less skilled workers. I test this reasoning using IALS data for Canada, Finland, Italy, the Netherlands, Switzerland, the United Kingdom and the United States, countries with widely differing levels of mandated employment protection. Across these countries, the strength of such mandates (as measured by the OECD) is positively associated with the relative incidence of temporary employment for young workers, native women, immigrant women and those with low cognitive ability. These effects largely hold up when I adjust for the possible sample selection due to the fact that employment to population ratios differ across countries. Moreover, the effects of protection on the young, women, and immigrants are stronger in countries with higher levels of collective bargaining coverage, suggesting a connection between binding wage floors and the allocative effects of employment protection mandates. |
| Keywords: | employment protection, temporary jobs |
| JEL: | J21 J23 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1548&r=reg |
| By: | Crampes, Claude; Langinier, Corinne |
| Abstract: | Intellectual property rights are legal constraints that limit entry in industries where incumbents are innovators. The set of legal constraints is the same for all industries, without considering that the externalities created by entry are not necessarily negative for the incumbent or that the incumbent's R&D expenditures can be detrimental to entrants. We show that one unique set of legal rules can foster innovation and increase total R&D expenditures in some industries and be detrimental in others. The model is illustrated by case studies from the information and communication technologies industry (software, hardware, music and videogame industries). |
| JEL: | L1 |
| Date: | 2005–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12267&r=reg |
| By: | Melissa S. Kearney |
| Abstract: | This paper reviews the government role in the legalized gambling sector and addresses some of the major issues relevant to any normative analysis of what the government role should be. In particular, the paper reviews evidence identifying the economic "winners" and "losers" associated with the three largest sectors of the industry: commercial casinos, state lotteries, and Native American casinos. The paper also includes a discussion of the growing internet gambling industry. In addition to reviewing existing literature and evidence, the paper raises relevant questions and policy issues that have not yet been adequately addressed in the economics literature. |
| JEL: | H2 H3 H7 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11234&r=reg |
| By: | Jacobsson, Adam (Dept. of Economics, Stockholm University); Naranjo, Alberto (Dept. of Economics, Stockholm University) |
| Abstract: | This paper models how drug lords in final destination countries respond to two types of government anti-drug policies: demand and supply oriented. Supply policies (crop eradication, interdiction, etcetera) are modeled in line with the previous literature, that is, they increase production costs. Demand policies (domestic law enforcement, demand reduction programs, etcetera) are modeled within a conflict framework with drug lords over the control of distribution channels for illegal drugs, which is novel. The model predicts drug use, price and indirectly drug related violent crime. These predictions appear to be consistent with the data. |
| Keywords: | drug policy; conflict; violent crime |
| JEL: | D74 I18 |
| Date: | 2004–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2004_0013&r=reg |
| By: | Cécile Carpentier; Jean-Marc Suret |
| Abstract: | To ease the financing of growing SMEs, governments found or indirectly fund venture capital companies. These companies act in a context of extreme information asymmetry and potentially exorbitant agency costs. The rigorous governance of these companies is thus pivotal to their performance. We analyze the financial reporting guidelines put in place for American SBICs by the Small Business Administration, along with the valuation guidelines issued by venture capital associations and institutions in several countries. SBICs are subject to rigorous uniform financial reporting and valuation standards, which likely partly explains their performance in recent years. We also describe the efforts of diverse institutions to develop venture capital valuation guidelines. The most rigorous methods entail filing the initial terms of the financial deal, which could allow more efficient control of the selection process of investments. The Quebec government would benefit from implementing more rigorous reporting and valuation guidelines. <P>Pour faciliter le financement des entreprises en croissance, les gouvernements mettent en place ou financent indirectement des sociétés de capital de risque. Celles-ci interviennent dans un contexte d’asymétrie informationnelle où les coûts d’agence sont potentiellement très élevés. L’encadrement strict de ces sociétés est donc une condition essentielle à leur performance. Nous analysons le cadre de reddition de comptes mis en place pour les Small Business Investment Companies (SBICs) par la Small Business Administration américaine, puis les normes d’évaluation des placements préconisés par les associations et organismes de capital de risque dans plusieurs pays. Les SBICs sont soumises à un cadre uniforme strict de reddition de comptes et d’évaluation, qui explique probablement en partie leur bonne performance dans les années récentes. Nous montrons également les efforts déployés par divers organismes pour développer un cadre d’évaluation des placements de capital de risque. Les méthodes les plus rigoureuses demanderaient l’archivage des conditions initiales du placement, ce qui contribuerait à un contrôle plus efficace du processus de sélection des investissements. Les initiatives québécoises gagneraient très certainement à disposer d’un cadre de reddition de comptes et d’évaluation plus strict que celui qui semble actuellement prévaloir. |
| Keywords: | public policy, venture capital, governance, reporting guidelines, valuation guidelines , politique publique, capital de risque, gouvernance, normes comptables, normes d’évaluation |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirpro:2005rp-07&r=reg |
| By: | Chang-Tai Hsieh; Enrico Moretti |
| Abstract: | From 1997 through early 2003, the United Nations Oil for Food Program allowed Iraq to export oil in exchange for humanitarian supplies. We measure the extent to which this program was corrupted by Iraq's attempts to deliberately set the price of its oil below market prices in an effort to solicit bribes, both in the form of direct cash bribes and in the form of political favors, from the buyers of the underpriced oil. We infer the magnitude of the potential bribe by comparing the gap between the official selling price of Iraq's two crude oils (Basrah Light and Kirkuk) and the market price of several comparison crude oils during the Program to the gap observed prior to the Program. We find consistent evidence that underpricing of Basrah Light averaged $1 per barrel from 1997 through 1999 and reaches a peak (almost $3 per barrel) from May 2000 through September 2001. The estimated underpricing quickly declines after the UN introduced a retroactive pricing scheme that reduced Iraq's ability to set the price of its oil. The evidence on whether Kirkuk was underpriced is less clear. Notably, we find that episodes of underpricing of Basrah Light are associated with a decline in the share of major oil multinationals among the oil buyers, and an increase in the share of obscure individual traders. The observed underpricing of Iraqi oil suggests that Iraq generated $5 billion in rents through its strategic underpricing. Of this amount, we estimate that Iraq collected $0.7 to $2 billion in bribes (depending on Iraq's share of the rents implied by the price gap), which is roughly 1 to 3 percent of the total value of oil sales under the Program. Finally, we find little evidence that underpricing was associated with increases in the relative supply or declines in the relative demand of Iraqi oil. |
| JEL: | J0 K4 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11202&r=reg |
| By: | Genevieve Boyreau-Debray; Shang-Jin Wei |
| Abstract: | State-owned financial institutions have been proposed as a way to address market failure, but the recent literature has also highlighted their pathological problems. This paper studies the case of China for pitfalls of a state-dominated financial system, including possible segmentation of the internal capital market due to local government interference and mis-allocation of capital. Even without formal legal prohibition to capital movement across regions, we find that capital mobility within China is low. Furthermore, to the extent some capital moves around the country, the government (as opposed to the private sector) tends to allocate capital systematically away from more productive regions toward less productive ones. In this context, a smaller role of the government in the financial sector might increase economic efficiency and the rate of economic growth. |
| JEL: | G1 F3 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11214&r=reg |
| By: | Armin Falk (IZA Bonn and University of Bonn); Josef Zweimüller (University of Zurich and IZA Bonn) |
| Abstract: | Right-wing extremism is a serious problem in many societies. A prominent hypothesis states that unemployment plays a crucial role for the occurrence of right-wing extremist crime. In this paper we empirically test this hypothesis. We use a previously not used data set which includes all officially recorded right-wing criminal acts in Germany. These data are recorded by the German Federal Criminal Police Office on a monthly and state level basis. Our main finding is that there is in fact a significant positive relation between unemployment and rightwing criminal activities. We show further that the big difference in right-wing crime between East and West German states can mostly be attributed to differences in unemployment. This finding reinforces the importance of unemployment as an explanatory factor for right-wing crime and questions explanations based solely on the different socialization in former communist East Germany and the liberal West German states. Our data further allow us to separate violent from non-violent right-wing crimes. We show that unemployment is closely related to both types of crimes, but that the association with non-violent crimes is much stronger. Since right-wing crime is committed particularly by relatively young males, we also explore whether the youth unemployment rate is a better predictor for right-wing crime than total unemployment. This hypothesis can be rejected: given total unemployment, a higher share of youth unemployment does not affect right-wing extremist crime rates. |
| Keywords: | hate crime, right-wing extremism, unemployment, cost of unemployment |
| JEL: | K14 J60 J15 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1540&r=reg |
| By: | Sun, Junjie |
| Abstract: | This paper reviews both theoretical and empirical studies of financial transmission rights (FTRs) in the major U.S. wholesale power markets. Although the current literature hold more negative views about FTRs, this paper presents a simple illustrative 2-stage model to study the competitive behaviors of electricity generators and load serving entities (LSEs) and analyzes the welfare effects of FTRs in the restructuring U.S. wholesale power market framework. The analysis focuses on a competitive two-node electricity network model where there is one generator and one LSE in each node with linear marginal cost and demand function, supervised by an independent system operator (ISO). In the first-stage of modelling, a no-rights benchmark model is developed to solve for the optimal quantity of power production and consumption and derive the locational marginal price for each node, which serve as the building blocks to solve for the optimal FTR hedge positions in the second-stage model. Once a stochastic parameter shock is introduced, the second-stage model shows that the acquisition of optimal FTRs by the risk averse generators and LSEs increases and in general strictly increases the social welfare compared with the case where there is no FTRs available. This result provides a counterexample to the somewhat negative views about FTRs held by other economists in the literature and provides some economic explanations to the fact that FTRs are widely adopted as a financial hedge instrument in the major U.S. wholesale power markets. |
| Date: | 2005–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12266&r=reg |