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on Regulation |
| By: | Yakovlev, Evgeny; Zhuravskaya, Ekaterina |
| Abstract: | What determines the enforcement of deregulation reform of business activities? What are the outcomes of deregulation? We address these questions using an episode of a drastic reform in Russia between 2001 and 2004 which liberalized registration, licensing, and inspections. Based on the analysis of micro-level panel data on regulatory burden, we find that: 1) On average, the reform reduced the administrative costs of firms; but, the progress of reform had a substantial geographical variation. 2) The enforcement of deregulation reform was better in regions with a transparent government, low corruption, better access of the public to independent media sources, a powerful industrial lobby, and stronger fiscal autonomy. 3) Using the exogenous variation in regulation generated by the interaction of reform and its institutional determinants, we find a substantial positive effect of deregulation on net entry and small business employment and no effect on pollution and public health. The results support public choice theory of the nature of regulation and are inconsistent with the predictions of public interest theory. |
| Keywords: | Deregulation; Enforcement; Entry; Public choice; Reform; Regulation; Transparency |
| JEL: | H10 K2 K20 L50 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6610&r=reg |
| By: | Felix Höffler; Sebastian Kranz |
| Abstract: | We study an industry with a monopolistic bottleneck (e.g. a transmission network) supplying an essential input to several downstream firms. Under legal unbundling the bottleneck must be operated by a legally independent upstream firm, which may be partly or fully owned by an incumbent active in downstream markets. Access prices are regulated but the upstream firm can perform non-tariff discrimination. Under perfect legal unbundling the upstream firm maximizes only own profits; with imperfections it considers to some extend also the profits of its downstream mother. We find that reducing imperfections in legal unbundling (keeping ownership fixed) generally increases total output. Increasing the incumbent's ownership share increases total output if imperfections are sufficiently small, otherwise the effects are ambiguous. Surprisingly, higher ownership shares of the downstream incumbent may sometimes lead to lower degrees of imperfections. Our analysis suggests that consumers may benefit most from legal unbundling with strong regulation and parts of ownership given to a minority outside shareholder. |
| Keywords: | Network industries, regulation, vertical relations, ownership, corruption, sabotage |
| JEL: | D2 D4 L1 L42 L43 L51 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse16_2007&r=reg |
| By: | Felix Höffler; Sebastian Kranz |
| Abstract: | We study an industry in which an upstream monopolist supplies an essential input at a regulated price to several downstream firms. Legal unbundling means that a downstream firm owns the upstream firm but this upstream firm is legally independent and maximizes its own upstream profits. We allow for non-tariff discrimination by the upstream firm and show that under quite general conditions legal unbundling yields (weakly) higher quantities in the downstream market than vertical separation and integration. Therefore, typically consumer surplus will be largest under legal unbundling. Outcomes under legal unbundling are still advantageous when we allow for discriminatory capacity investments, investments into marginal cost reduction and investments into network reliability. If access prices are unregulated, however, legal unbundling may be quite undesirable. |
| Keywords: | Network industries, regulation, vertical relations, investments, ownership, sabotage |
| JEL: | D2 D4 L1 L42 L43 L51 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse15_2007&r=reg |
| By: | Ryan Stever |
| Abstract: | This study examines bank risk by investigating the equity and loan portfolio characteristics of publicly-traded bank holding companies. Unlike the pattern for non-financial firms, equity betas of large banks are two to five times greater than those of small banks. In explaining this, we note that regulation imposes an effective cap on banks' equity volatility. Because the portfolios of small banks are less diversified, this cap has a greater effect on small banks than large banks. But we reject the hypothesis that small banks lower their equity volatility through lower leverage. Instead, we find that the reduced ability of small banks to diversify forces them to either pick borrowers whose assets have relatively low credit risk or make loans that are backed by relatively more collateral. |
| Keywords: | FBank size, beta, idiosyncratic, volatility |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:238&r=reg |