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on Regulation |
| By: | Höeffler, Felix; Schmidt, Klaus M. |
| Abstract: | In some markets vertically integrated firms sell directly to final customers but also to independent downstream firms with whom they then compete on the downstream market. It is often argued that resellers intensify competition and benefit consumers, in particular when wholesale prices are regulated. However, we show that (i) resale may increase prices and make consumers worse off and that (ii) standard 'retail minus X regulation' may increase prices and harm consumers. Our analysis suggests that this is more likely if the number of integrated firms is small, the degree of product differentiation is low, and/or if competition is spatial. |
| Keywords: | non-spatial product differentiation; resale regulation; spatial product differentiation; vertical restraints; wholesale |
| JEL: | D43 L11 L42 L51 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6248&r=reg |
| By: | Robert Gagné (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - [Université de Montréal]); Simon Van Norden (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - [Université de Montréal]); Bruno Versaevel (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]) |
| Abstract: | We analyse the effects of a price floor on price wars (or deep price cuts) in the retail market for gasoline. Bertrand supergame oligopoly models predict that price wars should last longer in the presence of price floors. In 1996, the introduction of a price floor in the Quebec retail market for gasoline serves as a natural experiment with which to test this prediction. We use a Markov Switching Model with two latent states to simultaneously identify the periods of price-collusion/price-war and estimate the parameters characterizing each state. Results support the prediction that price floors reduce the intensity of price wars but increase their expected duration. |
| Keywords: | gasoline prices ; Markov switching model ; oligopoly supergame ; price regulation |
| Date: | 2007–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00142516_v1&r=reg |
| By: | Benjamin Bridgman; Shi Qi; James A. Schmitz, Jr. |
| Abstract: | We study the impact of regulation on productivity and welfare in the U.S. sugar manufacturing industry. While this U.S. industry has been protected from foreign competition for nearly 150 years, it was regulated only during the Sugar Act period, 1934–74. We show that regulation significantly reduced productivity, with these productivity losses leading to large welfare losses. Our initial results indicate that the welfare losses are many times larger than those typically studied—those arising from higher prices. We also argue that the channels through which regulation led to large productivity and welfare declines in this industry were also present in many other regulated industries, like banking and trucking. |
| Keywords: | Sugar |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:389&r=reg |
| By: | Dannenberg, Astrid; Mennel, Tim; Moslener, Ulf |
| Abstract: | This paper analyses the macroeconomic costs of environmental regulation in European energy markets on the basis of existing macroeconomic simulation studies. The analysis comprises the European emssion trading scheme, energy taxes, measures in the transport sector, and the promotion of renewable energy sources. We find that these instruments affect the European economy, in particular the energy intensive industries and the industries that produce internationally tradeable goods. From a macroeconomic point of view, however, the costs of environmental regulation appear to be modest. The underlying environmental targets and the efficient design of regulation are key determinants for the cost burden. |
| Keywords: | Environmental regulation, energy market, macroeconomic costs |
| JEL: | Q21 Q28 Q41 Q43 Q48 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:5507&r=reg |
| By: | Christian A. Johnson; Tara Rice |
| Abstract: | U.S. banking regulation has historically prohibited the ability of a bank to open or own a branch located outside of its home state, commonly referred to as interstate branching. Only since the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) in 1994 have banks have been able to engage in interstate branching, though subject to state restrictions. Despite IBBEA’s removal of branching barriers, it still allowed the states to impose restrictions on the entry of out-of-state branch offices. This article describes the changes in Federal and state interstate branching law since passage of IBBEA and reviews how initial (1994-1997) and evolving (1998-2004) interstate branching laws affect out-of-state branch growth. It concludes that anticompetitive state provisions restricted out-of- state growth when those provisions were more restrictive than the provisions set by IBBEA or by neighboring states. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-07-03&r=reg |
| By: | Alberto Chong (Inter-American Development Bank); César Caldeón (World Bank); Gianmarco León (Inter-American Development Bank) |
| Abstract: | This paper study the issue of institutional enforcement of regulations by focusing on labor-market policies and their potential link to economic performance. It test the different impacts of enforceable and non-enforceable labor regulations by proxying non-enforceable labor rigidity measures using data on conventions from the International Labor Organization (ILO). It has been argued that non-enforceable conventions -that is, those that exist on paper and are simply de jure regulations -appear to be more distortionary and tend to be the least enforced in practice (Squire and Suthiwart-Narueput, 1997). According to Freeman (1993), these conventions reflect the ideal regulatory framework from an institutionalist perspective and cover a variety of labor market issues, from child labor to placement agencies. Whereas in theory, a country's ratification of ILO conventions gives the country legal status and thus supersedes domestic regulations relating to those issues, in practice the degree of labor-market rigidity depends on how the conventions are enforced. It is the outcome of the regulations that matters, rather than their number. |
| Keywords: | Institutions; Enforcement; Labor Rigidities; Growth; GMM-IV |
| JEL: | O10 E60 J08 O40 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:1036&r=reg |
| By: | Daron Agemoglu; Davide Ticchi; Andrea Vindigni |
| Abstract: | Inefficiencies in the bureaucratic organization of the state are often viewed as important factors in retarding economic development. Why certain societies choose or end up with such inefficient organizations has received very little attention, however. In this paper, we present a simple theory of the emergence and persistence of inefficient states. The society consists of rich and poor individuals. The rich are initially in power, but expect to transition to democracy, which will choose redistributive policies. Taxation requires the employment of bureaucrats. We show that, under certain circumstances, by choosing an inefficient state structure, the rich may be able to use patronage and capture democratic politics. This enables them to reduce the amount of redistribution and public good provision in democracy. Moreover, the inefficient state creates its own constituency and tends to persist over time. Intuitively, an inefficient state structure creates more rents for bureaucrats than would an efficient state structure. When the poor come to power in democracy, they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats. Anticipating this, when the society starts out with an inefficient organization of the state, bureaucrats support the rich, who set lower taxes but also provide rents to bureaucrats. We show that in order to generate enough political support, the coalition of the rich and the bureaucrats may not only choose an inefficient organization of the state, but they may further expand the size of bureaucracy so as to gain additional votes. The model shows that an equilibrium with an inefficient state is more likely to arise when there is greater inequality between the rich and the poor, when bureaucratic rents take intermediate values and when individuals are sufficiently forward-looking. |
| Keywords: | bureaucracy, corruption, democracy, patronage politics, political economy, public goods, redistributive politics. |
| JEL: | P16 H11 H26 H41 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wplabo:54&r=reg |
| By: | John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); Carlos A. Chavez (Departmento de Economia, Universidad de Concepcion, Chili); Mauricio G. Villena (School of Business, Universidad Adolfo Ibanez, Santiago, Chili) |
| Abstract: | We consider the pricing of a uniformly mixed pollutant when enforcement is costly with a model of optimal, possibly firm-specific, emissions taxes and their enforcement. We argue that optimality requires an enforcement strategy that induces full compliance by every firm. This holds whether or not regulators have complete information about firms’ abatement costs, the costs of monitoring them for compliance, or the costs of collecting penalties from noncompliant firms. Moreover, ignoring several unrealistic special cases, optimality requires discriminatory emissions taxes except when regulators are unable to observe firms’ abatement costs, the costs of monitoring individual firms, or any firm-specific characteristic that is known to be jointly distributed with either the firms’ abatement costs or their monitoring costs. In many pollution control settings, especially those that have been subject to various forms of environmental regulation in the past, regulators are not likely to be so ill-informed about individual firms. In these settings, policies that set or generate a uniform pollution price like conventional designs involving uniform taxes and competitive emission trading with freely-allocated or auctioned permits will not be efficient. |
| Keywords: | Compliance, Enforcement, Emissions Taxes, Monitoring, Asymmetric Information, Uncertainty |
| JEL: | L51 Q58 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:dre:wpaper:2007-6&r=reg |
| By: | Carolyn L. Evans; Shane M. Sherlund |
| Abstract: | As successive rounds of global trade liberalization have lowered broad industry-level tariffs, antidumping duties have emerged as a WTO-consistent means of protecting certain industries. Using the Grossman-Helpman (GH) "Protection for Sale" model, we examine the extent to which political contributions affect the outcomes of decisions in antidumping cases. We find that antidumping duty rates tend to be higher for politically-active petitioners. The relationship between the import penetration ratio and duties imposed depends on whether or not petitioners in a case are politically active. Consistent with the predictions of the GH model, antidumping duties are positively correlated with the import penetration ratio for politically inactive petitioners, but negatively correlated for politically active petitioners. Thus, our paper supports the predictions of the Grossman-Helpman model using a fresh set of data that allows us to avoid some of the compromises made in previous empirical work. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:888&r=reg |