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on Regulation |
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Issue of 2005‒12‒14
eighteen papers chosen by Christian Calmes Université du Québec en Outaouais, Canada |
| By: | Fabio Schiantarelli (Boston College and IZA) |
| Abstract: | The main purpose of this paper is to provide a critical overview of the recent empirical contributions that use cross-country data to study the effects of product market regulation and reform on a country's macroeconomic performance. After a brief review of the theoretical literature and of relevant micro-econometric evidence, the paper discusses the main data and methodological issues related to empirical work on this topic. It then critically evaluates the cross-country evidence on the effects of product market regulation on mark-ups, firm dynamics, investment, employment, innovation, productivity, and output growth. The paper concludes with a summary of lessons learned from the econometric results. |
| Keywords: | Governance, Labor and employment, Macroeconomics and growth |
| Date: | 2005–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3770&r=reg |
| By: | Karla Hoff (The World Bank); Joseph E. Stiglitz (Columbia University) |
| Abstract: | How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? The authors investigate the demand for the rule of law in post-communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets cannot be fully protected under a change in the legal regime toward rule of law, and that the number of agents with control rights over assets is large. They show that a demand for broadly beneficial legal reform may not emerge because the expectation of weak legal institutions increases the expected relative return to stripping assets, and strippers may gain from a weak and corrupt state. The outcome can be inefficient even from the narrow perspective of the asset-strippers. |
| Keywords: | ??? |
| Date: | 2005–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3779&r=reg |
| By: | Rita Almeida (The World Bank); Pedro Carneiro (University College London) |
| Abstract: | This paper investigates how enforcement of labor regulation affects the firm's use of informal employment and its impact on firm performance. Using firm level data on informal employment and firm performance, and administrative data on enforcement of regulation at the city level, the authors show that in areas where law enforcement is stricter firms employ a smaller amount of informal employment. Furthermore, by reducing the firm's access to unregulated labor, stricter enforcement also decreases average wages, productivity, and investment. The results are robust to several specification changes, and to instrumenting enforcement with (1) measures of access of labor inspectors to firms, and (2) measures of general law enforcement in the area where the firm is located. |
| Keywords: | Private sector development, Transition, Labor and employment |
| Date: | 2005–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3756&r=reg |
| By: | Norman V. Loayza (The World Bank); Ana María Oviedo (University of Maryland); Luis Servén (The World Bank) |
| Abstract: | The authors study the effects of regulation on economic growth and the relative size of the informal sector in a large sample of industrial and developing countries. Along with firm dynamics, informality is an important channel through which regulation affects macroeconomic performance and economic growth in particular. The authors conclude that a heavier regulatory burden-particularly in product and labor markets-reduces growth and induces informality. These effects are, however, mitigated as the overall institutional framework improves. |
| Keywords: | Private sector development, Governance, Labor and employment, Macroeconomics and growth |
| Date: | 2005–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3623&r=reg |
| By: | John Cubbin (City University); John Stern (London Business School) |
| Abstract: | The authors assess for 28 developing countries over the period 1980-2001 whether the existence of a regulatory law and higher quality regulatory governance are significantly associated with superior electricity outcomes. Their analysis draws on theoretical and empirical work on the impact of independent central banks and of developing country telecommunications regulators. The authors' empirical analysis concludes that a regulatory law and higher quality governance are positively and significantly associated with higher per capita generation capacity levels. In addition, this positive impact continues to increase for at least three years and probably for over 10 years as experience develops and regulatory reputation grows. The results are robust to alternative dynamic specifications and show no sign of any significant endogeneity. |
| Keywords: | Infrastructure, Governance |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3535&r=reg |
| By: | John Cubbin (City University); John Stern (London Business School) |
| Abstract: | The authors review a number of studies on the effectiveness of utility regulatory agency and governance arrangements for the electricity industry, particularly for developing countries. They discuss governance criteria and their measurement, both legal frameworks and surveys of regulatory practice. They also discuss the results from econometric studies of effectiveness for regulatory agencies in the electricity and telecommunications industries and compare these with the results from econometric studies of independent central banks and their governance. The authors conclude with a discussion of policy implications and of priorities for information collection to improve understanding of these issues. |
| Keywords: | Infrastructure, Governance |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3536&r=reg |
| By: | Constantinos Stephanou (The World Bank); Juan Carlos Mendoza (The World Bank) |
| Abstract: | The objective of this paper is to provide an overview of the changes in the calculation of minimum regulatory capital requirements for credit risk that have been drafted by the Basel Committee on Banking Supervision (Basel II). Even though the revised credit capital rules represent a dramatic change compared to Basel I, it is shown that Basel II merely seeks to codify (albeit incompletely) existing good practices in bank risk measurement. However, its effective implementation in many developing countries is hindered by fundamental weaknesses in financial infrastructure that will need to be addressed as a priority. |
| Keywords: | Domestic finance, International economics |
| Date: | 2005–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3556&r=reg |
| By: | Mark A. Jamison (University of Florida) |
| Abstract: | Being a utility regulator has perils because the independence of the regulator necessarily removes power from politicians, operators, and others. Furthermore, regulators are sometimes scapegoats for unpopular policies and unavoidably become involved in shaping the policies that they are supposed to implement. As a result of such frictions, regulators are sometimes removed from office or marginalized in some way. How can regulators not only survive in such an environment, but also thrive? Jamison describes a leadership concept called adaptive leadership that regulators can use to help their countries adapt to new policies and changing situations, while allowing the regulator to stay in the game. The first leadership skill he discusses is the ability to get on the balcony to see what is really going on with operators, politicians, consumers, and others. Once this perspective is obtained, then the regulator can engage stakeholders in an adaptive process in which people make necessary changes to traditions and expectations, while hanging on to the things that are truly important. Regulators can do this by bringing attention to problems that people want to ignore because they involve difficult tradeoffs, providing certainty and stability when tensions become too high for work to be done, and keeping attention focused on the work and the issues. |
| Keywords: | Infrastructure, Private sector development, Public sector management |
| Date: | 2005–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3620&r=reg |
| By: | George Allayannis (University of Virginia); Gregory W. Brown (The University of North Carolina at Chapel Hill); Leora F. Klapper (The World Bank) |
| Abstract: | Previous research has documented weak, and sometimes conflicting, effects of legal quality on measures of firm debt. Using WorldScope data for 1,689 firms, as well as more detailed proprietary data for 315 firms across nine East Asian countries, the authors find that access to foreign financing appears to loosen borrowing constraints associated with poor legal systems. This helps resolve inconsistencies in prior findings and explains how legal protection is important for borrowing by firms. In particular, they find that legal effectiveness is important for determining the amount, maturity, and currency denomination of debt. The authors discuss several mechanisms by which firms can avoid the costs of poor legal systems with foreign borrowing. The paper contributes to the policy debate surrounding the importance of creditor rights for domestic lending. |
| Keywords: | Domestic finance, Private sector development, International economics |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3530&r=reg |
| By: | Patrick W. Schmitz |
| Abstract: | Consider an employer who wants her employee to work hard. As is well known from the e.ciency wage literature, the employer must pay the (wealth-constrained) employee a positive rent to provide incentives for exerting unobservable e.ort. Alternatively, the employer could make effort observable by costly workplace surveillance. It is argued that a privacy protection law preventing surveillance may increase the total surplus. While such a law reduces the employer’s profit, this loss can be overcompensated by the employee’s gain, because the employer invests in surveillance not only to implement higher effort, but also to reduce the employee’s rent. |
| Keywords: | Privacy protection laws; workplace surveillance; moral hazard |
| JEL: | K31 J83 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse25_2005&r=reg |
| By: | Antonio Estache (The World Bank); Ana Goicoechea (The World Bank) |
| Abstract: | This note provides a snapshot as of 2004 of the share of countries with an independent regulatory agency and with at least some private sector financing of its sectoral investment needs for electricity, water and sanitation, and telecommunications. Among other things, they show that: For respectively, electricity, water and sanitation, and telecommunications, 51 percent, 21 percent, and 66 percent of the developing countries in the sample have an independent regulator, that is, an agency separate from a ministry and from the operator. For respectively, electricity generation, electricity distribution, water and sanitation, and telecommunications, 47 percent, 36 percent, 35 percent, and 59 percent of the developing countries in the sample have at least some private sector financing. The shares of both agencies and private sector involvement tend to increase with income levels. Latin and Central America and Eastern Europe are outliers among regions as almost systematically they have among the highest shares for both indicators across sectors (except water). |
| Keywords: | Infrastructure, Private sector development |
| Date: | 2005–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3595&r=reg |
| By: | Maria Martens |
| Keywords: | European Commission; implementation; networks; institutions; organization theory; Norway; Denmark; Finland |
| Date: | 2005–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:erp:arenax:p0210&r=reg |
| By: | Patrick W. Schmitz |
| Abstract: | Recent work in the field of mechanism design has led some researchers to propose institutional changes that would permit parties to enter into nonmodifiable contracts, which is not possible under current contract law. This paper demonstrates that it may well be socially desirable not to enforce contractual terms that explicitly prevent renegotiation, even if rational and symmetrically informed parties have deliberately signed such a contract. The impossibility to prevent renegotiation can constrain the principal’s abilities to introduce distortions in order to reduce the agent’s rent, so that the first-best benchmark solution will more often be attained. |
| Keywords: | Contract modification; Renegotiation; Moral hazard |
| JEL: | K12 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse26_2005&r=reg |
| By: | Joselito Gallardo (The World Bank); Korotoumou Ouattara (The World Bank); Bikki Randhawa (The World Bank); William F. Steel (The World Bank) |
| Abstract: | The authors investigate the microfinance regulatory regimes in Benin, Ghana, and Tanzania, with a view to identifying key issues and lessons on how the overall regulatory framework affects integration of microfinance institutions into the financial system. The authors find that recognizing different tiers of both regulated and unregulated institutions in a financial structure facilitates financial deepening and outreach to otherwise underserved groups in urban and rural areas. That environment promotes sustainable microfinance under shared performance standards and encourages regulatory authorities to develop appropriate prudential regulations and staff capacity. Case studies of the three countries raise important issues on promoting microfinance development vis-à-vis regulating them. Laws to regulate activities other than intermediation of public deposits into loans can result in disproportionately restrictive and unmanageable standards, even as dynamic microfinance sectors have emerged without conducive regulatory regimes. The authors use the three countries' regulatory experiences to highlight the importance of differentiating when prudential supervision is warranted and when regulatory oversight suffices, and to identify the agencies to carry out regulation. They address an important issue that has received scant attention, measuring and paying for the costs of regulating microfinance, and the need to build technical capacity of supervisory and regulatory staff. |
| Keywords: | Domestic finance, Private sector development |
| Date: | 2005–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3585&r=reg |
| By: | Kelton, Christina M.L. (College of Business, University of Cincinnati); Rebelein, Robert P. (Vassar College Department of Economics) |
| Abstract: | Retail sales of prescription drugs totaled $154.5 billion in 2001. The National Institute for Health Care Management estimates annual sales will exceed $400 billion by the year 2010. This paper analyzes the welfare and distributional effects of two policy families that could be used to cope with high and rising pharmaceutical costs. We employ a general-equilibrium approach to contrast the current patented-monopoly system with a) a price ceiling imposed on the pharmaceutical sector of the economy; and b) a universal insurance program covering pharmaceutical purchases. We use a version of the Kelton and Wallace (1995) monopoly production environment: a two-good general-equilibrium model in which a license is required to produce one of the goods. Individuals in the model are heterogeneous with respect to preferences, but have identical production technologies and labor resources. Results indicate potential welfare gains for both the price-ceiling and universal-insurance policies, with very distinct distributional effects. |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:vas:papers:78&r=reg |
| By: | Nathan M Jensen (Washington University) |
| Abstract: | Thanks to Nitsan Chorev, Robert Connolly, David Leblang, Quan Li, Andy Mertha, Layna Mosley, Bumba Mukherjee, Eric Reinhardt, Peter Rosendorff, Matthew Slaughter, Andy Sobel, participants of the 2004 Midwest Political Science Association annual meeting and the 2004 Duke Summer Institute on Globalization and Equity for comments and suggestions. Funding for data collection and interviews with WTO legal affairs staff was provided by the Weidenbaum Center on the Economy, Government, and Public Policy at Washington University and other financial support by the UCLA International Institute. |
| Keywords: | World Trade Organization, Tariffs, Trade, Steel, Protectionism |
| JEL: | F1 F2 |
| Date: | 2005–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0512008&r=reg |
| By: | Julio J. Nogués (Universidad Di Tella); Elías Baracat (Independent consultant and former President of the Comisión Nacional de Comercio Exterior) |
| Abstract: | Beginning in the late 1980s, Argentina implemented a series of reforms that were revolutionary in speed and scope, including trade liberalization. After the implementation of these policies, a record number of antidumping petitions came forward. Under a situation of high inflation, the government reinforced its fiscal and monetary policies by announcing that it would minimize the use of such measures. The flexible disciplines of the existing domestic antidumping regulations facilitated this objective. Later, when the GATT/WTO-sanctioned trade remedies were implemented, the government made a serious attempt to establish discipline by including liberal regulations and creating special institutional arrangements. A presumption built into the construction of the new mechanisms was that adhering to WTO requirements would strengthen the resistance against protection. This presumption turned out to be false. Changing circumstances, including severe peso overvaluation, had significant effects on the number and outcome of antidumping investigations. Regarding safeguards, the government followed the letter and the spirit of the WTO agreement. In relation to the number of petitions, few measures have been implemented. Rejections were based on a concern for consumer costs and on failure of the industry seeking protection to provide a convincing modernization plan. This, plus the fact that some cases were brought to the WTO Dispute Settlement Body, have made safeguards a less attractive instrument for protection-seekers than antidumping. An important positive side of the story is that unlike previous balance of payments adjustments, in spite of the major crisis that followed the recent devaluation, the hard-won liberalization has been maintained. |
| Keywords: | Industry, International economics, Public sector management |
| Date: | 2005–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3587&r=reg |
| By: | Tom Kellermann (The World Bank); Valerie McNevin (The World Bank) |
| Abstract: | The technological dependency of securities exchanges on internet-based (IP) platforms has dramatically increased the industry's exposure to reputation, market, and operational risks. In addition, the convergence of several innovations in the market are adding stress to these systems. These innovations affect everything from software to system design and architecture. These include the use of XML (extensible markup language) as the industry IP language, STP or straight through processing of data, pervasive or diffuse computing and grid computing, as well as the increased use of Internet and wireless. The fraud is not new, rather, the magnitude and speed by which fraud can be committed has grown exponentially due to the convergence of once private networks on-line. It is imperative that senior management of securities markets and brokerage houses be properly informed of the negative externalities associated with e-brokerage and the possible critical points of failure that exist in today's digitized financial sector as they grow into tomorrow's exchanges. The overwhelming issue regarding e-finance is to determine the true level of understanding that senior management has about on-line platforms, including the inherent risks and the depth of the need to use it wisely. Kellermann and McNevin attempt to highlight the various risks that have been magnified by the increasing digitalization of processes within the brokerage arena and explain the need for concerted research and analysis of these as well as the profound consequences that may entail without proper planning. An effective legal, regulatory, and enforcement framework is essential for creating the right incentive structure for market participants. The legal and regulatory framework should focus on the improvement of internal monitoring of risks and vulnerabilities, greater information sharing about these risks and vulnerabilities, education and training on the care and use of these technologies, and better reporting of risks and responses. Public/private partnerships and collaborations also are needed to create an electronic commerce (e-commerce) environment that is safe and sound. |
| Keywords: | Domestic finance |
| Date: | 2005–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3586&r=reg |