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on Regulation |
|
Issue of 2006‒12‒09
seven papers chosen by Christian Calmes Universite du Quebec en Outaouais, Canada |
| By: | W. Stanley Siebert (University of Birmingham and IZA Bonn) |
| Abstract: | Why should floors be set under wages and working conditions by labour market regulations? This paper finds that efficiency arguments are questionable, because of the disemployment effects of strict regulation. Regulation is better explained in terms of the choices of the employed semi- and unskilled worker group. This group contains the median voter, who rationally desires strict regulation to divert rent from other groups such as the skilled workers and the unemployed. Legal origin may also be important: some countries have fallen under the influence of the interventionist French (or German) legal tradition. Given a predisposition to intervene, these countries begin with some degree of labour regulation, which then creates its own constituency of rent protectors and rent growers. |
| Keywords: | labour market regulation, European Union, median voter, legal origin, minimum wages, working conditions floors, wage inequality, job opportunity inequality, long-term unemployment |
| JEL: | J38 J41 J58 J68 J83 K31 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2430&r=reg |
| By: | David Martimort; Stephane Straub |
| Abstract: | This paper offers a theory of how the degree of corruption that prevails in a society responds to changes in the ownership structure of major public service providers. We show that there are cases in which privatization, even though it fosters investments in infrastructure, also opens the door to more corruption. The public dissatisfaction towards privatization is then crucially affected by the changes in the degree and pattern of corruption. Our model thus helps understand the seemingly paradoxical situation prevailing in Latin America, where most studies find that privatizations have been efficiency-enhancing and have fostered investments and, at the same time, popular dissatisfaction with the process is extremely high, especially among the middle class. We show that this line of explanation is supported by evidence from surveys in the region. |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:147&r=reg |
| By: | Grout, Paul A; Jewitt, Ian; Sonderegger, Silvia |
| Abstract: | This paper discusses proposed governance reforms of legal services markets. The model distinguishes between a status quo position supported by a system of professionally enforced collective reputation and forms of governance based more squarely on market mechanisms. We identify a number of forces which determine the success of reform. Focussing particularly on the rent recapture and relationship substitution effects, we highlight their impact on client welfare and quality of legal services in different types of market according to whether clients are transient or repeated users of the service. |
| Keywords: | governance; legal services |
| JEL: | D02 D78 D86 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5959&r=reg |
| By: | René Fahr (University of Cologne and IZA Bonn); Uwe Sunde (IZA Bonn and University of Bonn) |
| Abstract: | Starting in January 2003, Germany implemented the first two so-called Hartz reforms, followed by the third and fourth packages of Hartz reforms in January 2004 and January 2005, respectively. The aim of these reforms was to accelerate labor market flows and reduce unemployment duration. Without attempting to evaluate the specific components of these Hartz reforms, this paper provides a first attempt to evaluate the overall effectiveness of the first two reform waves, Hartz I/II and III, in speeding up the matching process between unemployed and vacant jobs. The analysis is conceptually rooted in the flow-based view underlying the reforms, estimating the structural features of the matching process. The results indicate that the reforms indeed had an impact in making the labor market more dynamic and accelerating the matching process. |
| Keywords: | empirical matching function, stock-flow matching, Hartz reform |
| JEL: | J6 J63 J64 J65 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2470&r=reg |
| By: | Pastine, Ivan; Pastine, Tuvana |
| Abstract: | This paper extends Che and Gale (1998) by allowing the incumbent politician to have a preference for the policy position of one of the lobbyists. The effect of a contribution cap is analyzed where two lobbyists contest for a political prize. The cap always helps the lobbyist whose policy position is preferred by the politician no matter whether it is the high-valuation or the low-valuation contestant. In contrast to Che and Gale, once the cap is binding a more restrictive cap always reduces expected aggregate contributions. However, the politician might support the legislation of a barely binding cap. When politician policy preferences perfectly reflect the will of the people, a more restrictive cap is always welfare increasing. When lobbyist's valuations completely internalize all social costs and benefits, a cap is welfare improving if and only if the politician favors the high-value policy. Even a barely binding cap can have significant welfare consequences. |
| Keywords: | all-pay auction; campaign finance reform; explicit ceiling |
| JEL: | C72 D72 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5913&r=reg |
| By: | John Haltiwanger (University of Maryland, U.S. Census Bureau, NBER and IZA Bonn); Stefano Scarpetta (World Bank and IZA Bonn); Helena Schweiger (European Bank for Reconstruction and Development) |
| Abstract: | This paper reviews the process of job creation and destruction across a sample of 16 industrial and emerging economies over the past decade. It exploits a harmonized firm-level data-set drawn from business registers and enterprise census data. The paper assesses the importance of technological factors that characterize different industries in explaining crosscountry differences in job flows. It shows that industry effects play an important role in shaping job flows at the aggregate level. Even more importantly, differences in the size composition of firms - within each industry - explain a large fraction of the overall variability in job creation and destruction. However, even after controlling for industry/technology and size factors there remain significant differences in job flows across countries that could reflect differences in business environment conditions. In this paper, we look at one factor shaping the business environment, namely, regulations on hiring and firing of workers. To minimize possible endogeneity and omitted variable problems associated with cross-country regressions, we use a difference-in-difference approach. The empirical results suggest that stringent hiring and firing costs reduce job turnover, especially in those industries that require more frequent labor adjustment. Regulations also distort the patterns of industry/size flows. Within each industry, medium and large firms are more severely affected by stringent labor regulations, while small firms are less affected, probably because they are partially exempted from such regulations or can more easily circumvent them. |
| Keywords: | gross job flows, firm dynamics, firm size, product and labor market regulations, firm-level data |
| JEL: | J23 J53 K31 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2450&r=reg |
| By: | Ray Barrell; Sylvia Gottschalk |
| Abstract: | We investigate the macroeconomic impacts of changes in capital adequacy requirements, as developed in the Basel Capital Accords, on Brazil and Mexico. Changes in the capital adequacy requirements of international and domestic banks are considered, since the former adopted the Basel Capital Accord in 1988 and the latter in the mid-90s. Unlike most papers in the budding literature on the effects of the Basel Capital Accords on developing countries, we adopt an empirical approach, grounded in a general equilibrium macroeconometric model, which allows us to examine indirect transmission mechanisms. We first estimate a reduced financial block for Brazil and Mexico, which we integrate into the National Institute's General Equilibrium Model (NiGEM). We then simulate a shock to domestic and international capital adequacy ratios. The simulations show that an increase in capital adequacy ratios-either domestic or international-has adverse impacts on Brazilian and Mexican GDPs. A moderate credit crunch occurs in both cases and in both countries and is accompanied by a rise in lending rates. However, there are important differences in banks' reaction to tighter solvency ratios in each country. In Brazil, international and domestic banks adjust their portfolios by switching from higher-risk loans (private sector) to zero-risk loans (sovereign and public sector), instead of increasing their capital provisions. Sovereign lending, and hence government spending, thus rises sharply in Brazil. This offsets the negative impacts of the fall in private investment that follows the credit crunch. In Mexico, sovereign lending from domestic banks remains largely unaffected by changes in capital adequacy ratios, whereas foreign loans to the Mexican public sector decrease. In both cases, the Mexican private sector bears the bulk of the adjustment of domestic and foreign banks to the new regulatory rules. These findings suggest the existence of a financial "crowding-out", where government borrowing replaces private sector borrowing in domestic banks loans portfolios. Household borrowing including housing loans represents around 5 per cent of GDP in Mexico and about 8 per cent of GDP in Brazil, on average over 1997-2004. These ratios are considerably lower than those of countries such as the UK and the US. In 2000, for instance, total consumer credit in the UK and the US amounted to 73 and 78 per cent of GDP respectively (See Byrne and Davis 2003). This may account for our finding that consumer credit in both countries is not sensitive to changes in solvency ratios. Nonetheless, our simulations show that household consumption in Brazil and Mexico drops following a rise in capital adequacy ratios. The transmission mechanism is carried out through household net wealth. Higher solvency ratios lead to higher interest rates, which, other things unchanged, increase net interest payments of households and thus their net financial wealth. In our model, lower financial wealth results into lower consumption. Overall, given an increase of ½ percentage point in solvency ratios, we found that GDP falls by 3.5 per cent in Brazil, and by 2.2 per cent in Mexico. |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:269&r=reg |