|
on Regulation |
|
Issue of 2006‒01‒24
thirty-six papers chosen by Christian Calmes Université du Québec en Outaouais, Canada |
| By: | Fabiano Schivardi (Banca d'Italia); Roberto Torrini (Banca d'Italia) |
| Abstract: | We study the role of employment protection legislation (EPL) in explaining the relative small average size of Italian firms. We construct a simple model that shows that the smooth relation between size and growth probability is disturbed in proximity of the thresholds at which EPL applies differentially. We use a comprehensive dataset of all Italian firms between 1986 and 1998 to estimate the effects of EPL in terms of discouraging small firms from growing. We then construct a stochastic transition matrix for firm size that, together with the estimates, allows for a quantitative evaluation of the effects of EPL in the long run. Our results show that EPL does influence firm size distribution, but that its effects are quantitatively modest: average firm size would increase by less than 1% when removing the threshold effect. In terms of policy, these findings suggest that changes in EPL are not likely to have a large impact on the propensity of small firms to grow. |
| Keywords: | Firm size distribution, firing costs, employment protection |
| JEL: | J65 D21 L11 |
| Date: | 2004–06 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_504_04&r=reg |
| By: | Marco Moscadelli (Banca d'Italia) |
| Abstract: | The revised Basel Capital Accord requires banks to meet a capital requirement for operational risk as part of an overall risk-based capital framework. Three distinct options for calculating operational risk charges are proposed (Basic Approach, Standardised Approach, Advanced Measurement Approaches), reflecting increasing levels of risk sensitivity. Since 2001, the Risk Management Group of the Basel Committee has been performing specific surveys of banks’ operational loss data, with the main purpose of obtaining information on the industry’s operational risk experience, to be used for the refinement of the capital framework and for the calibration of the regulatory coefficients. The second loss data collection was launched in the summer of 2002: the 89 banks participating in the exercise provided the Group with more than 47,000 observations, grouped by eight standardised Business Lines and seven Event Types. A summary of the data collected, which focuses on the description of the range of individualgross loss amounts and of the distribution of the banks’ losses across the business lines/event types, was returned to the industry in March 2003. The objective of this paper is to move forward with respect to that document, by illustrating the methodologies and the outcomes of the inferential analysis carried out on the data collected through 2002. To this end, after pooling the individual banks’ losses according to a Business Line criterion, the operational riskiness of each Business Line data set is explored using empirical and statistical tools. The work aims, first of all, to compare the sensitivity of conventional actuarial distributions and models stemming from the Extreme Value Theory in representing the highest percentiles of the data sets: the exercise shows that the extreme value model, in its Peaks Over Threshold representation, explains the behaviour of the operational risk data in the tail area well. Then, measures of severity and frequency of the large losses are gained and, by a proper combination of these estimates, a bottom-up operational risk capital figure is computed for each Business Line. Finally, for each Business Line and in the eight Business Lines as a whole, the contributions of the expected losses to the capital figures are evaluated and the relationships between the capital charges and the corresponding average level of Gross Incomes are determined and compared with the current coefficients envisaged in the simplified approaches of the regulatory framework. |
| Keywords: | operational risk, heavy tails, conventional inference, Extreme Value Theory, Peaks Over Threshold, median shortfall, Point Process of exceedances, capital charge, Business Line, Gross Income, regulatory coefficients |
| JEL: | C11 C13 C14 C19 C29 C81 G21 G28 |
| Date: | 2004–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_517_04&r=reg |
| By: | Aureo de Paula; Jose A. Scheinkman |
| Date: | 2006–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:122247000000001030&r=reg |
| By: | Henk Kox; Arjan Lejour |
| Abstract: | International trade in services is hampered by non-tariff barriers that originate from national regulations. Not only the level of regulation in home or export country matters, but also the inter-country differences in regulation for service markets. Regulatory measures tend to affect fixed costs rather than variable costs. The fact that regulations often differ by market, means that the fixed costs of complying with regulations in an export market are in fact sunk market-entry costs. <P> We prove that policy heterogeneity between countries has a negative impact on bilateral service trade. We develop a new index of bilateral policy heterogeneity, and apply it in a gravity model for explaining service trade among EU countries. <P> The empirical results support our theoretical prediction: the degree of regulatory heterogeneity is inversely related to the level of bilateral service trade. Simulations for the EU show that if countries make more use of mutual recognition, bilateral trade in commercial services among EU countries could increase by 30 to 60 percent. |
| Keywords: | services trade; regulatory barriers; policy heterogeneity; EU; internal market EU |
| JEL: | L1 L5 L8 F12 F14 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:49&r=reg |
| By: | Axel Dreher; Friedrich Schneider |
| Abstract: | This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a cross-section of 120 countries and a panel of 70 countries for the period 1994-2002. Our results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. We also find that stricter regulations increase both corruption and the shadow economy. |
| Keywords: | Corruption; Shadow Economy; Regulation; Tax Burden |
| JEL: | D73 H26 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2006-01&r=reg |
| By: | Sadowski, B.M. (Ecis, Technische Universiteit Eindhoven); Straathof, B. (Ecis, Technische Universiteit Eindhoven) |
| Keywords: | VoIP |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:tuecis:0516&r=reg |
| By: | Laszlo Goerke; Markus Pannenberg |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp541&r=reg |
| By: | Epictetus E. Patalinghug (U.P. College of Business Administration); Gilberto M. Llanto (Philippine Institute for Development Studies) |
| Abstract: | Following the global trend in using private sector participation in infrastructure financing and development, the Philippines has largely utilized privatization as a major approach to the development of infrastructure, particularly in power, water, transport, and telecommunications sectors. To provide a legal framework for private sector participation in infrastructure projects, Congress passed the build-operate-transfer (BOT)law, as amended, to expand the scope of private sector involvement in infrastructure provision. Regulatory reform has accompanied the effort to ensure operational efficiency and competitive provision. This paper intends to review and evaluate the regulatory framework that has been established or suggested for the Philippines, focusing on the power and telecommunications sectors. This study will primarily evaluate the existing regulatory framework. It aims to identify issues and gaps, paying particular attention on the competition-related provisions as well as the institutional capacities of regulatory institutions. |
| Keywords: | telecommunications, competition policy, BOT scheme, private sector participation, infrastructure development,regulatory framework,power sector,Electric Power Industry Reform Act (EPIRA), voice over internet protocol (VOIP), |
| JEL: | L96 F12 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:660&r=reg |
| By: | Enrico Perotti (Univerity of Amsterdam); Bernardo Bortolotti (University of Turin, and Fondazione Eni Enrico Mattei) |
| Abstract: | This paper reviews the state of thinking on the governance role of public ownership and control. We argue that the transfer of operational control over productive assets to the private sector represents the most desirable governance, due to the inherent difficulty for citizens to constrain political abuse relative to the ability of governments to regulate private activity. However in weak institutional environments the process needs to be structured so as to avoid capture of the regulatory process. The speed of transfer should be timed on the progress in developing a strong regulatory governance system, to which certain residual rights of intervention must be vested. After all, what are “institutions” if not governance mechanisms with some degree of autonomy from both political and private interests? The gradual creation of institutions partially autonomous from political power must become central to the development of an optimal mode of regulatory governance. We advance some suggestions about creating accountability in regulatory governance, in particular creating an internal control system based on a rotating board representative of users, producers and civil society, to be elected by a process involving frequent reporting and disclosure. |
| Keywords: | Regulatory Governance, Privatization |
| JEL: | G38 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.151&r=reg |
| By: | Persson, Mats (Institute for International Economic Studies); Siven, Claes-Henric (Dept. of Economics, Stockholm University) |
| Abstract: | Two real-world observations are not easily replicated in models of crime. First, although capital punishment is optimal in Becker’s (1968) model, it is rarely observed in the real world. Second, criminal procedure and the evaluation of evidence vary across societies and historical periods, the standard of proof being sometimes very high and sometimes quite low. In this paper, we develop a general equilibrium model of judicial procedure allowing for innocent persons being convicted. We show that the median voter theorem applies to this model, making judicial procedure endogenous. So formulated, the model can replicate both empirical observations. |
| Keywords: | Criminal law; Judicial error; Burden of proof |
| JEL: | K40 |
| Date: | 2006–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2006_0001&r=reg |
| By: | Fabrizio Trifiró |
| Abstract: | This paper aims at illustrating through a close reading of the works of John Rawls the anti-foundationalist cosmopolitan deliberative democratic approach to liberalism that I have sketched in the IIIS Discussion Paper N.47. I shall argue that despite what some of his critics believe Rawls' liberal theory of justice 1) is not concerned with foundational preoccupations (e.g. Michael Sandel); 2) does not ignore concrete processes of collective deliberation over matters of public interests (e.g. Amy Guttman, Dennis Thomson, Brian Barry); 3) nor does it endorse rigid limits to the scope of democratic deliberation (e.g. Jeremy Waldron, John Gray, Richard Bellamy ). Yet I shall claim, following Andrew Kuper, that 4) there is a real risk of infringing individuals' primary moral significance in trying to stretch too much the limits of liberal toleration in order to accommodate political liberalism with multiculturalism in the international sphere. |
| Date: | 2005–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp93&r=reg |
| By: | Amelie Constant (IZA Bonn); Klaus F. Zimmermann (University of Bonn, IZA Bonn and DIW Berlin) |
| Abstract: | There are concerns about the attachment of immigrants to the labor force, and the potential policy responses. This paper uses a bi-national survey on immigrant performance to investigate the sorting of individuals into full-time paid-employment and entrepreneurship and their economic success. Particular attention is paid to the role of legal status at entry in the host country (worker, refugee, and family reunification), ethnic networks, enclaves and other differences among ethnicities for their integration in the labor market. Since the focus is on the understanding of the self-employment decision, a two-stage structural probit model is employed that determines the willingness to work full-time (against part-time employment and not working), and the choice between full-time paid work and self-employment. The choices are determined by the reservation wage for full-time work, and the perceived earnings from working in paid-employment and as entrepreneur, among other factors. Accounting for sample selectivity, the paper provides regressions explaining reservation wages, and actual earnings for paid-employment and self-employment, which provide the basis for such an analysis. The structural probit models suggest that the expected earnings differentials from working and reservation wages and for self-employment and paid-employment earnings matter much, although only among a number of other determinants. For Germany, legal status at entry is important; former refugees and those migrants who arrive through family reunification are less likely to work full-time; refugees are also less self-employed. Those who came through the employment channel are more likely to be in full-time paid work. In Denmark, however, the status at entry variables do not play any significant role. This suggests that the Danish immigrant selection system is ineffective. |
| Keywords: | self-employment, entrepreneurship, ethnicity, migration, asylum seekers, refugees, migrant workers, family reunification, citizenship, discrimination |
| JEL: | C25 F22 J15 J23 J31 J61 J82 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1910&r=reg |
| By: | Susanne Büchner (Max-Planck-Institute for Economics); Andreas Freytag (University of Jena, Faculty of Economics); Luis G. Gonzalez; Werner Güth (Max-Planck-Institute for Economics) |
| Abstract: | A procurement contract is granted by a bureaucrat (the auctioneer) who is interested in a low price and a bribe from the provider. The optimal bids and bribes are derived based on an iid private cost assumption. In the experiment, bribes are negatively framed (betweensubjects treatment) to capture that society is better off if bribes are rare or low. Although bids are lower than predicted, behavior is qualitatively in line with the linear equilibrium prediction. When bribes generate a negative externality, there is a significant increase in the variability of the data. |
| Keywords: | Corruption, Procurement Auctions |
| Date: | 2006–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:jen:jenasw:2006-06&r=reg |
| By: | Thomas Harr (Danske Bank Group); Thomas Rønde (Department of Economics, University of Copenhagen) |
| Abstract: | We study the optimal regulation of banking groups (“banks”), taking both minimum capital requirements and legal structure into account. A bank can set up either as one legal unit facing limited liability jointly (branch structure) or as a bank holding company with subsidiaries (subsidiary structure). Banks are exposed to risk from their unobservable asset choices and to exogenous risk from their environment. We show that banks with branches are more prudent in normal times than banks with subsidiaries, but are also less prudent when problems arise. A regulator that observes banks’ exogenous risk should optimally determine both capital requirements and legal structure. If the exogenous risk is private information to banks, it can be optimal to screen banks according to risk by setting capital requirements appropriately, and letting banks choose their legal structure. |
| Keywords: | banking groups; capital requirements; legal structure |
| JEL: | G21 G28 L51 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiefr:200601&r=reg |
| By: | P R Agénor |
| Abstract: | This paper examines the effect of external shocks on urban poverty in a two-household (rich and poor) intertemporal optimizing model of an open economy with segmented labor markets. Skilled and unskilled labor are used in the formal sector, whereas only unskilled labor is used in the informal economy. Using the minimum wage in the formal sector as the poverty line, various poverty indicators are defined and computed. The analysis shows that the extent to which an increase in the world risk-free interest rate affects the incidence and depth of poverty depends crucially on the wedge between consumption and product wages in the formal economy. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:68&r=reg |
| By: | John Beshears; James J. Choi; David Laibson; Brigitte Madrian |
| Abstract: | We propose a regulatory framework that helps consumers who have difficulty sticking to their own long-run plans. Early Decision regulations help long-run preferences prevail by allowing consumers to partially commit to their long-run goals, making it harder for a momentary impulse to reverse past decisions. In the cigarette market, examples of Early Decision regulations include restricting the locations or times at which cigarettes are sold, delaying the receipt of cigarettes following purchase, and allowing a consumer to choose in advance the legal restrictions on her own cigarette purchases. A formal model of Early Decision regulations demonstrates that Early Decisions are optimal when consumer preferences are heterogeneous. Intuitively, each consumer knows his own preferences, so self-rationing - which is what Early Decisions enable - is better than a one-size-fits-all regulation like a sin tax. Of course, Early Decision regulations incur social costs and therefore require empirical evaluation to determine their net social value. |
| JEL: | D11 D69 D91 H21 H31 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11920&r=reg |
| By: | W. Kip Viscusi |
| Abstract: | This paper provides a systematic review of the economic analysis of health, safety, and environmental regulations. Although the market failures that give rise to a rationale for intervention are well known, not all market failures imply that market risk levels are too great. Hazard warnings policies often can address informational failures. Some market failures may be exacerbated by government policies, particularly those embodying conservative risk assessment practices. Labor market estimates of the value of statistical life provide a useful reference point for the efficient risk tradeoffs for government regulation. Guided by restrictive legislative mandates, regulatory policies often strike a quite different balance with an inordinately high cost per life saved. The risk-risk analysis methodology enables analysts to assess the net safety implications of policy efforts. Inadequate regulatory enforcement and behavioral responses to regulation may limit their effectiveness, while rising societal wealth will continue to generate greater levels of health and safety. |
| JEL: | K32 Q2 J28 J17 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11934&r=reg |
| By: | Sougata Poddar (Department of Economics, National University of Singapore) |
| Abstract: | Contrary to the earlier findings under end-users piracy where the existence of strong network externality was shown to be a reason for allowing limited piracy, we find when the piracy is commercial in nature the optimal policy for the original software developer is to protect its product irrespective of the strength of network externality in the software users market. |
| Keywords: | Copyright violations, Commercial/Retail piracy, Network externality, Quality |
| JEL: | D23 D43 L13 L86 |
| URL: | http://d.repec.org/n?u=RePEc:nus:nusewp:wp0516&r=reg |
| By: | Mehmet Bac (Sabanci University); Parimal Kanti Bag (University of Surrey) |
| Abstract: | We analyze a corruption model where a principal seeks to control an agent’s corruption by supplementing a costless noncollusive outside detector such as the media with a collusive internal supervisor. The principal’s objective is to minimize the overall costs, made up of enforcement costs and social costs of corruption. If the penalties on the corrupt agent and a failing supervisor are nonmonetary in nature and yet the two parties can engage in monetary side-transfers, the principal may stand to benefit by allowing supervisor-agent collusion. This benefit may even prompt the principal to actively encourage collusion by hiring a dishonest supervisor in strict preference over an honest supervisor. |
| Keywords: | Corruption, monitoring, collusion, bounty hunter mechanism |
| JEL: | K42 D73 D78 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0205&r=reg |
| By: | Shah, Anwar |
| Abstract: | This paper examines the conceptual and empirical basis of corruption and governance and concludes that decentralized local governance is conducive to reduced corruption in the long run. This is because localization helps to break the monopoly of power at the national level by bringing decisionmaking closer to people. Localization strengthens government accountability to citizens by involving citizens in monitoring government performance and demanding corrective actions. Localization as a means to making government responsive and accountable to people can help reduce corruption and improve service delivery. Efforts to improve service delivery usually force the authorities to address corruption and its causes. However, one must pay attention to the institutional environment and the risk of local capture by elites. In the institutional environments typical of some developing countries, when in a geographical area, feudal or industrial interests dominate and institutions of participation and accountability are weak or ineffective and political interference in local affairs is rampant, localization may increase opportunities for corruption. This suggests a pecking order of anticorruption policies and programs where the rule of law and citizen empowerment should be the first priority in any reform efforts. Localization in the absence of rule of law may not prove to be a potent remedy for combating corruption. |
| Keywords: | National Governance,Governance Indicators,Corruption & Anitcorruption Law,Public Sector Corruption & Anticorruption Measures,Government Diagnostic Capacity Building |
| Date: | 2006–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3824&r=reg |
| By: | Matthews, Kent (Cardiff Business School); Shepherd, Jonathan; Sivarajasingham, Vaseekaran |
| Abstract: | This paper examines the influence of the real price of beer on violence-related injuries across the economic regions in England and Wales. The data are monthly frequency of violent-injury collected from a stratified sample of 58 National Health Service Emergency Departments 1995-2000. An econometric model based on economic, socio-demographic and environmental factors was estimated using panel techniques. We show that the rate of violence-related injury is negatively related to the real price beer, as well as economic, sporting and socio-demographic factors. The principal conclusion of the paper is that the regional distribution of the incidence of violent injury is related to the regional distribution of the price of beer. The major policy conclusion is that increased alcohol prices would result in substantially fewer violent injuries and reduced demand on trauma services. |
| Keywords: | Violence; Alcohol; Price of Beer |
| JEL: | I18 K42 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2006/3&r=reg |
| By: | Jordi Gual (IESE Business School, University of Navarra, Avenida Pearson 21, 08034 Barcelona, Spain, gual@lacaixa.es); Martin Hellwig (Max Planck Institute on Collective Goods, Kurt Schumacher Str. 10, 53110 Bonn, Germany, hellwig@mpp-rdg.mpg.de); Anne Perrot (Conseil de la concurrence, 11 rue de l'Echelle, 75 001 Paris, France, anne.perrot@conseil-concurrence.fr); Michele Polo (IGIER, Università Bocconi, Via Salasco 5, 20136 Milan, Italy, michele.polo@uni-bocconi.it); Patrick Rey (IDEI, University of Toulouse I, 31042 Toulouse Cedex, France, prey@cict.fr); Klaus Schmidt (Department of Economics, University of Munich, Ludwigstr. 28, 80539 München, Germany, klaus.schmidt@lrz.uni-muenchen.de); Rune Stenbacka (Department of Economics, Swedish School of Economics, P.O. Box 479, 00101 Helsinki, Finland, stenback@hanken.fi) |
| Abstract: | This report argues in favour of an economics-based approach to Article 82, in a way similar to the reform of Article 81 and merger control. In particular, we support an effects-based rather than a form-based approach to competition policy. Such an approach focuses on the presence of anti-competitive effects that harm consumers, and is based on the examination of each specific case, based on sound economics and grounded on facts. |
| Keywords: | Competition Policy, Abuse of Market Power, Article 82 |
| JEL: | D4 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:82&r=reg |
| By: | Jordan A. Otten; Hans Schenk; Pursey M.A.R. Heugens |
| Abstract: | Corporate governance reforms have traditionally been studied from the opposing perspectives of global convergence and local persistence, but empirical support for each of these alternatives is mixed at best. Our study of corporate governance reforms in no less than 22 wealthy nations around the world suggests an alternative conceptualization of the reform process: local repairs in light of global ideals. We find that the direction of governance change can be predicted from the dominant ownership patterns in a given country, if we assume that all developed nations seek greater wealth through the broadening and deepening of capital markets. |
| Keywords: | Corporate governance, Comparative studies, Governance reforms, Managerial control, Information disclosure, Privatization. |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0601&r=reg |
| By: | Axel Dreher (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH)); Lars Siemers (Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI Essen), Division „Public Economics“) |
| Abstract: | The paper develops a theoretical model showing a mutual relationship between corruption and capital account restrictions. According to the model, higher corruption induces stricter restrictions and vice versa. We test the model using panel data for 112 countries over the period 1984-2002 and find that corruption and restrictions are indeed mutually determined. Estimating the model simultaneously, capital account restrictions induce higher corruption. Higher corruption, in turn, is associated with more restrictions on the capital account. The empirical relationship is, however, not completely robust. |
| Keywords: | corruption, capital account restrictions, dynamic panel |
| JEL: | C33 D19 F33 G11 H26 O17 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:05-113&r=reg |
| By: | Blackman, Allen (Resources For the Future); Boyd, James (Resources For the Future) |
| Abstract: | Increasingly popular tailored regulation (TR) initiatives like EPA’s Project XL allow plants to voluntarily substitute site-specific environmental performance standards for command-and-control regulations that dictate pollution abatement strategies. TR can significantly reduce participants’ costs of complying with environmental regulations. But in doing so, it can also provide participants with a competitive advantage. We show that this can have undesirable welfare consequences when it enables relatively inefficient firms in oligopolistic markets to "steal" market share from more efficient firms. One critical determinant of whether or not TR has such adverse welfare impacts is the regulator’s policy regarding the diffusion of TR agreements among non-participating firms. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-03-rev&r=reg |
| By: | Boyd, James (Resources For the Future) |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-12&r=reg |
| By: | Brennan, Timothy (Resources For the Future) |
| Abstract: | We examine the suggestion that if consumers in sufficient numbers are willing to pay the premium to have power generated using low-emission technologies, tax or permit policies become less necessary or stringent. While there are implementation difficulties with this proposal, our purpose is more fundamental- can economics make sense of using preferences as a regulatory instrument? If “green” preferences are exogenously given, to what extent can or should they be regarded as a substitute for other policies? Even with green preferences, production and consumption of polluting goods continues to impose social costs not borne in the market. Moreover, if green preferences are regarded as a policy instrument, the “no policy” baseline would require a problematic specification of counterfactual “non-green” preferences. Viewing green preferences as a regulatory policy instrument is conceptually sensible if the benchmark for optimal emissions is based on value judgments apart from preferences consumers happen to have. If so, optimal environmental protection would be defined by reference to ethical theory or, even less favorably, by prescriptions from policy advocates who give their own preferences great weight while giving those of the public at large (and the costs they bear) very little consideration. |
| Keywords: | Environmental regulation, preference change |
| JEL: | Q2 B4 D6 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-01&r=reg |
| By: | Probst, Katherine (Resources For the Future); Davies, J. Clarence (Resources For the Future) |
| Abstract: | Federal, state, and local governments are major polluters of the environment. They account for more than 7% of SO2 air pollution emissions and more than 5% of all NO2 air emissions in the United States. Public entities are more likely than private ones to be in violation of the Clean Water Act, and they account for two-thirds of all major facilities in significant noncompliance with the act. Department of Energy nuclear sites are the worst hazardous waste problems in the nation. A lack of adequate data makes it difficult to fully characterize the extent of pollution caused by government agencies and to compare the performance of the public and private sectors. There are many reasons why government pollution is difficult to regulate. The paper discusses political dimensions, legal problems, resource constraints, psychological dimensions, and public opinion. Further research is urgently needed, and the paper delineates areas that require more investigation. |
| Keywords: | pollution control, federal facilities, regulation, intergovernmental relations |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-29&r=reg |
| By: | Sterner, Thomas; Kathuria, Vinish |
| Abstract: | The regulation of industrial pollution is clearly difficult in a rapidly industrializing, low-income setting. In addition to the general lack of resources for monitoring and enforcement, authorities must deal with the asymmetric nature of the information and multiple nonpoint sources of pollution. In this study we look at efforts to regulate chemical plants in Ankleshwar, in the Indian state of Gujarat. The plants are located in an industrial estate, which provides interesting preconditions for a form of two-tier regulation, in which an industry association becomes an intermediary between the government and individual firms- it monitors its members’ pollution and promotes compliance with the government’s environmental regulations. The Indian agency responsible for environmental protection cannot effectively control the many small individual plants within such estates. The local industry association is much better informed and has an incentive to regulate its members to maintain a good reputation but does not possess much formal authority, and its voluntary monitoring and abatement program is akin to managing a common property resource. We study four preconditions for the success of such management- suitable design principles, effective monitoring, objective implementation of rules, and enforcement. We show that these conditions are satisfied at least to some extent in Ankleshwar and that the fines decrease pollution. |
| Keywords: | Industrial estate, two-tier monitoring, common property resource, industry association, nonpoint sources of pollution |
| JEL: | Q25 P28 K42 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-17&r=reg |
| By: | Gruenspecht, Howard |
| Abstract: | Although real-world energy supply systems are subject to stochastic failures, the impacts of proposed regulations affecting these systems have typically been evaluated using non-stochastic models. This paper develops an energy market model that explicitly allows for stochastic failures and demonstrates they play an important, or even dominant, role in determining the market impacts of environmental regulations that tailor product specifications to address local or regional conditions, such as fuel-formulation requirements specific to certain regional markets within the United States. While traditional non-stochastic analyses view the tailoring of regulatory requirements by location as an efficiency-enhancing alternative to a "one size fits all" regulatory approach, they fail to consider the adverse impact on reliability in all market segments resulting from the loss of product fungibility due to tailoring. We show that regulatory impact estimates developed without explicit consideration of reliability considerations may be highly inaccurate. |
| Keywords: | reliability, boutique fuels, gasoline price spikes, stochastic failures, environmental regulation, tailored regulation |
| JEL: | Q2 Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-37&r=reg |
| By: | Harrington, Winston (Resources For the Future) |
| Abstract: | The performance of the industrial point-source water pollution abatement program in the U.S. Clean Water Act is examined. I begin with a brief description of the statute and then turn to a description of the process used to develop the rules that govern effluent discharges. This is followed by a discussion of the outcomes resulting from efforts to apply these rules to industrial pollutant sources. Two types of outcomes are considered- administrative outcomes and outcomes in the water. Last, the issue of implementation is discussed- how the Clean Water Act may have affected the incentives governing the behavior of industrial dischargers, municipal waste treatment plant operators, and regulators. Surprisingly, there is some evidence that the Clean Water Act, at least as far as industrial point sources are concerned, may be evolving into an effluent fee policy, or at least a mixed policy. |
| Keywords: | effluent guidelines, indirect dischargers, water quality |
| JEL: | Q25 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-03&r=reg |
| By: | Stavins, Robert; Snyder, Lori; Miller, Nolan |
| Abstract: | We use a hazard model to estimate the effect of environmental regulation on the diffusion of membrane cell production technology in the chlorine manufacturing industry. We estimate the effect of regulation on both the adoption of the membrane technology at existing plants and on the exit of existing plants using older technologies. We find that environmental regulation did affect the diffusion of the cleaner technology in the chlorine industry. However, it did so not by encouraging the adoption of membrane cells by existing facilities, but by reducing the demand for chlorine and hence encouraging the shutdown of facilities using the environmentally inferior options. |
| Keywords: | regulation, technological change, environment, hazard model |
| JEL: | Q20 Q28 L50 L65 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-25&r=reg |
| By: | Morgenstern, Richard (Resources For the Future); Harrington, Winston (Resources For the Future) |
| Abstract: | Federal agencies in the United States are required to prepare regulatory impact analyses (RIAs) for every major regulatory action they undertake. Increasingly, other OECD countries are imposing similar requirements. However, there has been little examination of the quality of these documents or of the uses to which they have been put in the regulatory process or elsewhere. In this paper we survey previous efforts to evaluate RIAs and find a fair amount of evaluation of RIAs as stand-alone documents, but much less evaluation of their contribution to producing better regulations. |
| Keywords: | regulation, RIA, benefit-cost analysis, cost-effectiveness analysis |
| JEL: | H11 H43 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-04&r=reg |
| By: | Stavins, Robert |
| Abstract: | Vintage-differentiated regulations (VDRs) are standards that are fixed with respect to the date of entry of regulated units, with later vintages facing more stringent standards. VDRs play prominent roles under major Federal, state, and local environmental laws. This paper synthesizes what is known about the effects of environmental VDRs, and develops lessons for public policy and for research. Economic theory suggests that such age-discriminatory regulations retard turnover of the capital stock, drive up the cost of environmental protection, and can increase pollution levels. Empirical studies validate theoretical predictions that VDRs delay replacement of durable goods, and thereby increase aggregate pollution abatement costs. In some cases, empirical studies also validate the perverse consequence that environmental progress is itself retarded. |
| Keywords: | vintage-differentiated regulation, new source review, cost-effective environmental regulation |
| JEL: | Q58 Q55 Q52 Q53 L51 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-12&r=reg |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | Progress toward electricity market deregulation has brought controversy over whether or not utilities are entitled to compensation for "stranded costs," i.e., costs utilities will not be able to recover due to the advent of competition in their markets. This paper uses a legal and economic analysis of contracts to address the desirability of utility cost recovery. First, underlying principles of law are reviewed to determine whether or not there is a legal presumption of recovery. Then, the analysis considers whether or not an implicit "regulatory compact" between utilities and regulators follows from principles in the economic analysis of law, particularly theories of efficient breach and implicit contracts. The paper concludes that recovery should occur in only a proscribed set of circumstances and that, when called for, compensation should be partial, rather than full. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-01&r=reg |
| By: | Morgenstern, Richard (Resources For the Future); Harrington, Winston (Resources For the Future); Nelson, Per-Kristian (Resources For the Future) |
| Abstract: | This study compares ex ante estimates of the direct costs of individual regulations to ex post assessments of the same regulations. A review of more than two dozen environmental and occupational safety regulations indicates that ex ante estimates of total (direct) costs have tended to exceed actuals. The authors find this to be true of 12 of the 25 rules in their data set, while for only 6 were the ex ante estimates too low. The overestimation of total costs is often due to errors in the quantity of emission reductions achieved by the rule which, in turn, suggest that the rule's benefits may also be overestimated. The quantity errors are driven by both baseline and compliance issues. At least for EPA and OSHA rules, overestimation of per-unit abatement costs occurs about as often as underestimation. In contrast, for those rules that use economic incentives, per-unit costs are consistently overestimated. Much of the overestimation can be attributed to technical innovations unanticipated at the time the rule is issued, and to quantity errors. In addition, several methodological and procedural explanations also apply- changes in the regulation after the cost estimate is prepared, use of maximum cost estimates, and asymmetric error correction. Since a number of environmental laws encourage the development of cost estimates that reflect a maximum rather than a mean, regulatory agencies could issue a "best estimate" along with the statutorily preferred cost estimate. Likewise, they could ensure that rule changes made in the course of the regulatory development process are manifest in revised cost estimates. Indeed, discovering how and when to adjust ex ante estimates provides the strongest possible justification for more credible ex post studiesa research activity that merits greater emphasis. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-18&r=reg |