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on Regulation |
| By: | Patricia M. Danzon; Andrew J. Epstein |
| Abstract: | This study examines the effect of price regulation and competition on launch timing and pricing of new drugs. Our data cover launch experience in 15 countries for drugs in 12 therapeutic classes that experienced significant innovation over the decade 1992-2003. We use prices of established products as a measure of the direct effect of a country's own regulatory system, and find that launch timing and prices of innovative drugs are influenced by prices of established products. Thus, if price regulation reduces drug prices, it contributes to launch delay in the home country. New drug launch hazards and launch prices in low-price countries are also affected by referencing by other, high-price countries, especially within the EU, as expected if manufacturers delay launch in low-price markets to avoid undermining higher prices in other countries. Thus, referencing policies adopted in high-price countries can impose welfare loss on low-price countries. Prices of new drugs are influenced mainly by prices of other drugs within the same subclass; however, dynamic competition from new subclasses undermines new drug launch in older subclasses. Association with a local firm accelerates launch only in certain regulated markets. These findings have implications for US proposals to constrain pharmaceutical prices in the US through external referencing and drug importation. |
| JEL: | I11 I18 K2 L5 L65 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14041&r=reg |
| By: | Martin T. Bohl, Judith Lischewski and Svitlana Voronkova |
| Abstract: | This paper presents an analysis of pension funds’ performance in Poland and Hungary as representative Eastern Central European countries. In the theoretical literature it is argued that investment limits and performance regulations may have a negative influence on the performance of funds. In particular for Poland, our empirical findings do not support this prediction. Consequently, strict regulations do not necessarily harm the performance of the pension funds. |
| Date: | 2008–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp247&r=reg |
| By: | Ivan Ledezma |
| Abstract: | This paper studies theoretically and empirically the consequences of defensive strategies in R&D races. Using a quality ladders model we allow for endogeneous incumbent R&D advantages explained by strategies seeking to limit knowledge diffusion. Market institutions appear to be crucial to foster aggregate R&D intensity and to determine who innovates. Regulatory provisions reducing the possibilites of defensive strategies in the process of production may indeed increase the incentives to carry out R&D. This effect is more likely to be observed when the size of innovation is high. Using time-series cross-section data of manufacturing industries among 17 OECD countries we test the relationship between regulation and R&D expenditure over value added. We allow for a differentiated effect of regulation for industries producing and using ICT. The evidence is consistent with the model's predictions. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-29&r=reg |
| By: | Santella, Paolo; Baffi, Enrico; Drago, Carlo; Lattuca, Dino |
| Abstract: | Starting from the observation that at the multilateral level shareholder activism is considered as an important aspect of good corporate governance, this paper examines several legal and economic obstacles to institutional investor activism in the EU and in the US. We also examine the voting record of 76 institutional investors in the US and of several others in the EU. We find that US investors seem to have easier access to proxy voting than in the EU (although recent EU legislation should remove several of the present legal obstacles); that conflicts of interest seem to limit the activism of several categories of institutional investors both in the US and in the EU; that some national legislations limit the ability of institutional investors to coordinate their voting policies; and that recourse to stock lending and other forms of separation of financial risk from voting rights seems to be practiced more by controlling shareholders at the expense of institutional investors than the opposite. We also find that institutional investors in the US seem to have a more adversarial voting pattern vis-à-vis company managements than in the UK; this might be due to the fewer voting rights given to shareholders by the US regulatory framework. As for Europe, institutional investors' voting pattern is by far the most adversarial in France, where there is a high incidence of control-enhancing mechanisms. Institutional investors seem to have an adversarial voting stance also in Greece, Belgium and Sweden, where control-enhancing mechanisms are also present, while in Italy they tend to have a low voting turnout. More in general, EU investors’ voting pattern seems to be sensitive to the presence of control-enhancing mechanisms, ownership concentration, and to the origin of the national legal system. |
| Keywords: | Shareholder activism; shareholder voting; proxy voting; acting in concert; securities lending; institutional investors; legal origins; control-enhancing mechanisms; corporate governance; ownership concentration |
| JEL: | K2 G2 G34 G3 G24 |
| Date: | 2008–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8929&r=reg |
| By: | Lucas W. Davis; Lutz Kilian |
| Abstract: | A direct consequence of imposing a ceiling on the price of a good for which secondary markets do not exist, is that, when there is excess demand, the good will not be allocated to the buyers who value it the most. The resulting allocative cost has been discussed in the literature as a potentially important component of the total welfare loss from price ceilings, but its practical importance has yet to be established empirically. In this paper, we address this question using data for the U.S. residential market for natural gas which was subject to price ceilings during 1954-1989. This market is well suited for such an empirical analysis and natural gas price ceilings affected millions of households. Using a household-level, discrete-continuous model of natural gas demand, we estimate that the allocative cost in the U.S. residential market for natural gas averaged $4.6 billion annually since the 1950s, effectively tripling previous estimates of the net welfare loss to U.S. consumers. We quantify the evolution of this allocative cost and its geographical distribution during the post-war period, and we highlight implications of our analysis for the regulation of other markets. |
| JEL: | D45 L51 L71 Q41 Q48 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14030&r=reg |
| By: | Mangatchev, Ivan |
| Abstract: | The aim in this article is to compare the effect of the financial collateral arrangements under Directive 2002/47 EC. The starting point is the definitions of these contracts provided by the FCD. The financial collateral arrangements have his historical roots in Roman law. Their effect introduces new legal framework in EU secured transaction legislation. For appropriate understanding of their legal nature a comparative examination between two secured transactions is needed. The conclusions of the article summarize the ideas which may useful in future amendments of the Directive 2002/47 EC. |
| Keywords: | financial collateral arrangements; secured transactions; netting |
| JEL: | K0 K12 N2 K11 N40 K22 G15 F36 G21 |
| Date: | 2008–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8902&r=reg |
| By: | Emma Hall; Carol Propper; John Van Reenen |
| Abstract: | Labor market regulation can have harmful unintended consequences. In many markets, especially for publicsector workers, pay is regulated to be the same for individuals across heterogeneous geographical labor markets.We would predict that this will mean labor supply problems and potential falls in the quality of serviceprovision in areas with stronger labor markets. In this paper we exploit panel data from the population ofEnglish acute hospitals where pay for medical staff is almost flat across the country. We predict that areas withhigher outside wages should suffer from problems of recruiting, retaining and motivating high quality workersand this should harm hospital performance. We construct hospital-level panel data on both quality - as measuredby death rates (within hospital deaths within thirty days of emergency admission for acute myocardialinfarction, AMI) - and productivity. We present evidence that stronger local labor markets significantly worsenhospital outcomes in terms of quality and productivity. A 10% increase in the outside wage is associated with a4% to 8% increase in AMI death rates. We find that an important part of this effect operates through hospitals inhigh outside wage areas having to rely more on temporary "agency staff" as they are unable to increase(regulated) wages in order to attract permanent employees. By contrast, we find no systematic role for an effectof outside wages of performance when we run placebo experiments in 42 other service sectors (includingnursing homes) where pay is unregulated. |
| Keywords: | labor market regulation, hospital quality, hospital productivity, skills |
| JEL: | J45 F12 I18 J31 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0843&r=reg |
| By: | Anger, Niels; Sathaye, Jayant A. |
| Abstract: | This paper quantitatively assesses the economic implications of crediting carbon abatement from reduced deforestation for the emissions market in 2020 by linking a numerical equilibrium model of the global carbon market with a dynamic partial equilibrium model of the forestry sector. We find that integrating avoided deforestation in international emissions trading considerably decreases the costs of post-Kyoto climate policy – even when accounting for conventional abatement options of developing countries under the CDM. At the same time, tropical rainforest regions receive substantial net revenues from exporting carbon-offset credits to the industrialized world. Moreover, reduced deforestation can increase environmental effectiveness by enabling industrialized countries to tighten their carbon constraints without increasing mitigation costs. Regarding uncertainties of this future carbon abatement option, we find both forestry transaction costs and deforestation baselines to play an important role for the post-Kyoto carbon market. |
| Keywords: | Climate Change, Kyoto Protocol, Emissions Trading, Deforestation |
| JEL: | C60 D61 Q23 Q58 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7225&r=reg |
| By: | Niko Matouschek; P Ramezzana; Frédéric Robert-Nicoud |
| Abstract: | We endogenize separation in a search model of the labor market and allow for bargaining over the continuation of employment relationships following productivity shocks to take place under asymmetric information. In such a setting separation may occur even if continuation of the employment relationship is privately efficient for workers and firms. We show that reductions in the cost of separation, owing for example to a reduction in firing taxes, lead to an increase in job instability and, when separation costs are initially high, may be welfare decreasing for workers and firms. We furthermore show that, in response to an exogenous reduction in firing taxes, workers and firms may switch from rigid to flexible employment contracts, which further amplifies the increase in job instability caused by policy reform. |
| Keywords: | search, bargaining, asymmetric information, labor market reform |
| JEL: | J41 D82 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0865&r=reg |
| By: | Rangan Gupta (Department of Economics, University of Pretoria); Emmanuel Ziramba (Department of Economics, University of South Africa) |
| Abstract: | Using two dynamic monetary general equilibrium models characterized by endogenous growth, financial repression and endogenously determined tax evasion, we analyze whether financial repression can be explained by tax evasion. When calibrated to four Souther European economies, we show that higher degrees of tax evasion within a country, resulting from a higher level of corruption and a lower penalty rate, yields higher degrees of financial repression as a social optimum. However, a higher degree of tax evasion, due to a lower tax rate, reduces the severity of the financial restriction. In addition, we find the results to be robust across growth models with or without productive public expenditures. The only difference being that the policy parameters in the former case have higher optimal values. |
| Keywords: | Underground Economy, Tax evasion, Macroeconomic Policy |
| JEL: | E26 E63 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:200808&r=reg |