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on Regulation |
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Issue of 2006‒07‒21
five papers chosen by Christian Calmes Universite du Quebec en Outaouais, Canada |
| By: | Michele Moretto (University of Brescia); Paola Valbonese (University of Padova) |
| Abstract: | To avoid high profit levels often experienced in countries where monopolies in public utility sectors are regulated through price-cap mechanisms, several regulatory agencies have recently introduced profit-sharing (PS) clauses aimed at obtaining price reductions to the benefit of consumers. However, the implementation of these PS clauses has often turned out to be severely con- trained by the incompleteness of the price-cap itself and the non-verifiability of firms’profits. This paper studies the properties of a second-best optimal PS mechanism designed by the regulator to induce the regulated monopolist to divert part of its profits to custormers. In a dynamic model where a reg- ulated monopolist manages a long-term franchise contract and the regulator has the option to revoke the contract if there are serious welfare losses, we first derive the welfare maximising PS mechanism under verifiability of prof- its. Subsequently, we explore the sustainability of the PS mechanism under non-verifiability of profits. In a infinite-horizon game, it is showed that the dynamic sustainability of the PS clause crucially depends upon the magni- tude of the regulator’s revocation cost: the higher this cost, the lower the profit shared and the less frequent the regulator’s PS introduction. Finally, we present the endogenous and dynamic price adjustment which follows the adoption of the investigated PS mechanism in a price-cap regulation setting. |
| Keywords: | Price-cap regulation, Profit-sharing, Real options |
| JEL: | C73 L33 L5 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.7&r=reg |
| By: | Eric M. Uslaner (University of Maryland) |
| Abstract: | Some researchers claim that diverse populations lead to less trust. Generalized trust is a core value that leads to positive outcomes in societies--from greater tolerance of minority groups and immigrants and willingness to do good deeds, to less corruption, more social welfare and education spending, more open markets, and better functioning government. Generalized trust fundamentally rests upon a foundation of respect for diversity, but at the same time arguing that societies have a common culture. It is the idea that people have a shared fate. Generalized trust rests upon a foundation of economic equality. Yet some claim that diversity leads to less trust rather than more trust. Trusting people who are different from yourself is atypical of most people, they claim. I dispute this--arguing that generalized trust is largely unrelated to population diversity. It is not diversity that matters--it is how populations are distributed. I show that trust is lower not in diverse societies, but rather in societies with large minority groups that are segregated from the majority groups. Minority residential segregation leads to less trust because it leads to less interaction across different groups in society--and leads minorities to associate only with each other, to form their own political organizations, and to see their fate as less dependent upon majority groups. I then discuss how economic inequality and the rule of law shape the relationship between trust and minority residential segregation. |
| Keywords: | Trust, Diversity, Corruption |
| JEL: | Z13 O57 D73 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.69&r=reg |
| By: | Nicoletta Ferro (Fondazione Eni Enrico Mattei) |
| Abstract: | In the past only a few of the major Italian companies spontaneously adopted self- regulatory tools such as codes of corporate conduct or codes of ethics, claiming the set of values that should guide their conduct and their shareholders and stakeholders were called to comply with. As a reaction to national corporate scandals such as those involving Cirio and Parmalat, things started to change as the need for corporate governance reforms was felt at the institutional as well as at the corporate level. This new wave was mainly due to the enactment of Legislative Decree no. 231 of June 8 2001 by Italian Legislators that marked an important turning point for the Italian corporate regulatory framework as it made codes of ethics and codes of conduct a legal requirement for Italian companies rather than an additional public relations tool as they were generally considered by the business environment. The aim of this paper is to fill the information gap on the Italian corporate codes scenario and to foster the dissemination of knowledge about the current situation, giving an introductory sketch on Leg. Decree. 231/2001. |
| Keywords: | Code of Corporate Conduct , Codes of Ethics, Corporate Governance, Corporate Law |
| JEL: | F23 M14 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.82&r=reg |
| By: | Krisztina Tóth (Chaire de Finances Publiques) |
| Abstract: | Scholars evaluating national and local budget procedures in Central and Eastern Europe generally advocate a greater role for legislative bodies and citizens. Mature federations and decentralised countries in Western Europe are often cited as prime examples of participatory budgeting which is supposed to lead to greater fiscal discipline, a better allocation of public resources and higher administrative efficiency. This paper investigates the strengths and weaknesses of legislative activism in Switzerland, with special regard to its ability to answer the double challenge resulting from a push for new expenditures and lower taxes, on one side, and an attempt to maintain deficit levels close to zero, on the other. While the strong consensus orientation, the careful regulation of revenue and expenditure assignment, as well as the systematic use of voters' right to direct participation are perceived as key to the success of the Swiss democracy, this study also highlights how these features can limit the effective influence of the parliament on budgeting and planning. Central and East European countries may learn several lessons from the Swiss case, all of which are rather thought to add an input to long-term reforms rather than provide immediate solutions. The analysis points out some serious limitations of the hierarchical budgeting model as well as the consequences of a haphazard and opaque expenditure and revenue assignment. It reminds, however, that the dynamic process of post-socialist transition requires governments and parliaments to preserve a great deal of flexibility in the budget procedure. At the same time, new methods of public management and a greater transparency of public budgets are examples of tools that may be introduced on the medium term without the risk of slowing down the transition process. |
| Keywords: | parliament; legislative; budgetary procedure; direct democracy; intergovernmental fiscal relations; public administration; transition economies; Switzerland |
| JEL: | H61 H62 H70 H83 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:fri:fribow:387&r=reg |
| By: | Knack, Stephen |
| Abstract: | This paper assesses corruption levels and trends among countries in the transition countries of Eastern Europe and Central Asia (ECA) based on data from several sources that are both widely used and cover most or all countries in the region. Data from firm surveys tend to show improvement in most types of administrative corruption, but little change in " state capture " in the region. Broader, subjective corruption indicators tend to show somewhat greater improvement in ECA than in non-ECA countries on average. A " primer on corruption indicators " discusses definitional and methodological differences among data sources that may account in large part for the apparently conflicting messages they often provide. This discussion concludes that depending on one ' s purpose, it may be more appropriate to use data from a single source rather than a composite index because of the loss of conceptual precision in aggregation. A second conclusion is that the gains in statistical precision from aggregating sources of corruption data likely are far more modest than often claimed because of interdependence among data sources. The range of detailed corruption measures available in firm surveys are exploited to show that broad, perceptions-based corruption assessments appear to measure primarily administrative corruption, despite their stated criteria placing great weight on " state capture. " Finally, the paper emphasizes the need for scaling up data initiatives to fill significant gaps between our conceptual definitions of corruption and the operational definition embodied in the existing measures. |
| Keywords: | Governance Indicators,Poverty Monitoring & Analysis,Scientific Research & Science Parks,Science Education,Corruption & Anitcorruption Law |
| Date: | 2006–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3968&r=reg |