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on Regulation |
| By: | Mary T. Kelly (Department of Economics and Statistics, Villanova School of Business, Villanova University); John S. Ying (Department of Economics,University of Delaware) |
| Abstract: | Regulation of the cable television industry was marked by remarkable periods of deregulation, re-regulation, and re-deregulation during the 1980s and 1990s. Using FCC firm-level survey data spanning 1993 to 2001, we model and econometrically estimate the effect of regulation and competition on cable rates. Our calculations indicate that while regulation lowered rates for small system operators, it raised them for medium and large systems. Meanwhile, competition consistently decreased rates from 5.6 to 8.8 percent, with even larger declines during periods of regulation. Our results suggest that competition is more effective than regulation in containing cable prices. |
| Keywords: | cable rates, regulation, competition |
| JEL: | L51 L96 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:vil:papers:3&r=reg |
| By: | Pamina Koenig; Megan MacGarvie |
| Abstract: | This paper examines the relationship bewteen cross-country differences in drug price regulation and the location of biopharmaceutical Foreign Direct Investment (FDI) in Europe. We use a theoretically-grounded location-choice model and data on 294 investments initiated in 27 European countries between 2002 and 2006 to test the hypothesis that biopharmaceutical companies are less likely to locate new investments in countries with more stringent price regulation. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2009-11&r=reg |
| By: | Pollitt, M.G.; Stern, J. |
| Abstract: | We provide strong evidence that there are significant human resource constraints which limit the scale and, hence, the scope and potential effectiveness of electricity/energy regulatory agencies in developing countries. We summarise the key findings in our earlier Domah, Pollitt and Stern paper (2002). We then consider what new evidence there is on regulatory staffing levels since 2001/2002 and on the implications of high fixed costs for developing countries’ electricity and regulatory policies. Our conclusion is that little has changed over the intervening period. |
| Keywords: | electricity regulation, human resource constraints, developing countries. |
| JEL: | L30 N40 O15 |
| Date: | 2009–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0914&r=reg |
| By: | Ojo, Marianne |
| Abstract: | Amongst other things, this paper aims to address complexities and challenges faced by regulators in identifying and assessing risk, problems arising from different perceptions of risk, and solutions aimed at countering problems of risk regulation. It will approach these issues through an assessment of explanations put forward to justify the growing importance of risks, well known risk theories such as cultural theory, risk society theory and governmentality theory. In addressing the problems posed as a result of the difficulty in quantifying risks, it will consider a means whereby risks can be quantified reasonably without the consequential effects which result from the dual nature of risk that is, risks emanating from the management of institutional risks. Current attempts by the European Union to regulate risks will also be discussed. This discussion will be facilitated through a consideration of recent developments in the EU which are aimed at addressing risks posed by hedge funds. The results obtained from a consultation process on hedge funds, and which will be discussed in the concluding section of this paper, reveal whether the systemic relevance of hedge funds and prime brokerage regulation need to be reviewed. Questions also addressed during the consultation process, which include whether indirect prudential regulation is inadequate to shield the financial system from hedge funds’ failure and whether prudential authorities have necessary tools to monitor exposures of the core financial system to hedge funds, will also be discussed. |
| Keywords: | risk; management; regulation; hedge funds |
| JEL: | K2 |
| Date: | 2009–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14503&r=reg |
| By: | Antonio Nicita; Matteo Rizzolli |
| Abstract: | In this paper we outline the economic rationale behind the virtual strike, and workers’ incentives to use this bargaining solution rather than resorting to standard strike action. We show that, from a welfare perspective, a virtual strike always dominates a standard strike and it would be most needed precisely when workers have weaker incentives to adopt it. We then discuss the pros and cons of legally regulating the virtual strike rather than leaving it to self-regulation. Finally, we apply our findings to the analysis of Italy’s draft legislation on virtual strikes |
| Keywords: | Stoppage strike, virtual strike, penal code, labor law and economics |
| JEL: | D74 D78 J52 J83 K31 M55 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:557&r=reg |
| By: | Elisabetta Gualandri; Andrea Landi; Valeria Venturelli |
| Abstract: | This paper aims to stress the importance of market liquidity for the stability of the financial system, emphasizing the pivotal role played by liquidity risk in the development of the current financial crisis, pointing out the flaws of regulation and supervision and stressing the need for their reform. We first investigate the evolution of the concept of liquidity and the nexus between the transformations of financial systems and their increased vulnerability to liquidity risks. Then we focus on the causes of the emergence of liquidity risk in the ongoing financial crisis. We point out two intertwined processes: firstly, the huge increase in financial assets stemming from the shift to an “originate-to-distribute” intermediation model; secondly, the growth of a parallel financial circuit. After this, we focus on the main lessons for regulation and supervision: first of all we address the case for adjustments to or reform of Basel 2 in view of the nexus between solvency and liquidity. Further crucial points relate to market liquidity and OTC markets, scale and scope of LLR function, architecture of supervisory authorities and perimeter of controls. Finally we stress the need for harmonization, or at least coordination, of national liquidity regimes, at least for cross-border groups. |
| Keywords: | financial innovation; financial crisis; market liquidity risk; financial regulation; supervision |
| JEL: | D53 E58 F37 G1 G18 G21 G24 G28 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:mod:wcefin:09011&r=reg |
| By: | Joan-Ramon Borrell (PPRE-IREA, Universitat de Barcelona); Laura Fernández-Villadangos (PPRE-IREA, Universitat de Barcelona) |
| Abstract: | Entry regulations affecting professional services such as pharmacies are common practice in many European countries. We assess the impact of entry regulations on profits estimating a structural model of entry using the information provided by a policy experiment. We use the case of different regional policies governing the opening of new pharmacies in Spain to show that structural models of entry ought to be estimated with data from policy experiments to pin down how entry regulations change payoffs functions of the incumbents. Contrary to the public interest rationales, regulations are not boosting only small town pharmacies payoffs nor increasing all pharmacies payoffs alike. The gains from regulations are very unevenly distributed,suggesting that private interests are shaping the current mix of entry and markup regulations. |
| Keywords: | Entry, regulation, professional services |
| JEL: | L51 H51 L84 I18 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2009-3&r=reg |
| By: | Paolo Lupi (Servizio Analisi di Mercato e Concorrenza, Autorità per le Garanzie nelle Comunicazioni (ITALY)); Fabio M. Manenti (Universita' di Padova); Antonio Scialà (Università di Padova); Cristiano Varin (Università di Venezia) |
| Abstract: | This paper offers a methodology to assess the internal productive efficiency of National Regulatory Authorities (NRAs) based on the performances of regulated markets, measured in terms of the degree of market efficiency (either static or dynamic). The estimation procedure is based on a Data Envelopment Analysis (DEA), along with a smoothed bootstrap method and it is applied to telecommunications sector across 18 European countries, 5 of which are new accession countries, in 2005. After the discussion of several desirable outcomes for a telecom regulator, we construct an ad hoc database containing information about NRAs regulatory inputs and outputs. We run three bootstrapped DEAs in order to rank NRAs according to their efficiency in carrying out their regulatory activities. We find the NRAs in 2004 accession countries are more efficient in pursuing dynamic efficiency goals than the more experienced NRAs, while they perform generally worse when the regulatory outcomes are measured in terms of retail efficiency. |
| Keywords: | regulators efficiency, Data Envelopment analysis, bootstrapping, telecommunications |
| JEL: | L86 L96 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0098&r=reg |
| By: | Di Tella, Rafael; Dubra, Juan |
| Abstract: | We propose a model where voters experience an emotional cost when they observe a firm that has displayed insufficient concern for other people's welfare (altruism) in the process of making high profits. Even when there exist few truly altruistic firms, an equilibrium may emerge where all firms pretend to be kind, refraining from charging "abusive" prices to their customers (or "exploiting" workers). Our main result is that as competition decreases, the set of parameters for which such pooling equilibria exist is smaller and firms are more liekly to anger voters by displaying low levels of altruism. As a consequence, when firms have been shown to be unkind, the welfare of consumers will go up when these firms are punished (for example through fines), even when this does not imply a change in prices. Indeed, regulation affects welfare through three channels: First, there is the standard channel whereby a reduction in monopoly price lads to the production of units that cost less than their value to consumers. Second, regulation calms down existing consumers: a reduction in the profits of a firm viewed as excessively selfish increases total welfare by reducing consumer anger. Finally, there is a third (mixed) channel arising because individuals who were out of the market when they were excessively angry in the unregulated market, decide to purchase once the firm is regulated, reducing the standard distortions described in the first channel. |
| Keywords: | Anger; regulation; public relations; commercial legitimacy; altruism; populism. |
| JEL: | D64 L4 |
| Date: | 2008–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14442&r=reg |
| By: | Batiz-Lazo, Bernardo; Maixe-Altes, J. Carles |
| Abstract: | In this article we explore organisational changes associated with the computarization of British savings banks while making a running comparison with developments in Spain. This international comparison addresses the evolution of the same organisational form in two distinct competitive environments in the late 20th century. Changes in regulation and technological developments (particularly applications of information technology) are said to be responsible for enhancing competitiveness of retail finance. Archival research on the evolution of savings banks helps to ascertain how, prior to competitive changes taking place, participants in bank markets had to develop capabilities to compete. Moreover, assess the response of collaborative agreements to opportunities opened by technological change (in particular resolve apparent scale disadvantages to contest bank markets). Of particular interest are choices made between applications of computer technology to redefine the relation between head office and retail branches as well as between staff at retail branches and customers. |
| Keywords: | comparative financial markets; United Kingdom; Spain; market structure; technological change; regulatory change; savings banks; banks; TSB; cajas de ahorro. |
| JEL: | N20 O33 N84 |
| Date: | 2008–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14479&r=reg |
| By: | Cécile Carpentier; Douglas Cumming; Jean-Marc Suret |
| Abstract: | We analyze the economic consequences of disclosure and regulation within a context of significant information asymmetry and lenient regulation. In Canada, firms can enter the stock market at a pre-revenue stage, using full disclosure (initial public offerings, IPOs) or the minimal disclosure allowed by reverse mergers (RMs). Our sample is a set of 1,455 IPOs and RMs between 1993 and 2003. Controlling for several dimensions, including self-selection, we find that the level of disclosure and regulation significantly influence the value and long-run performance of newly listed firms. Overall, our results suggest that disclosure has a significant economic impact. These results are consistent with theories suggesting that a commitment by a firm to increase its disclosure level lowers the information asymmetry component of the cost of capital. The results are also consistent with the hypothesis that increased disclosure reduces the heterogeneity of expectations and mispricing. <P>Nous analysons les conséquences économiques des règles de divulgation et d’inscription en Bourse dans un contexte où l’asymétrie informationnelle est grande et la réglementation des valeurs mobilières peu contraignante. L’échantillon porte sur 1 455 émissions initiales et prises de contrôle inversées, effectuées entre 1993 et 2003. Au Canada, les entreprises peuvent accéder au marché boursier avant même de percevoir des revenus, en effectuant soit un appel public à l’épargne qui implique une divulgation complète, soit une prise de contrôle inversée comportant une divulgation minimale. En contrôlant pour diverses dimensions, incluant l’auto-sélection du mode d’entrée, nous montrons que le niveau de divulgation et de réglementation auquel se soumet l’émetteur influence de façon significative la valeur et la performance à long terme des entreprises nouvellement inscrites en Bourse. Nos résultats indiquent que la divulgation a un effet économique important, et sont en accord avec les propositions qui lient l’augmentation de la divulgation à la réduction de l’asymétrie et du coût du capital. Ils sont également cohérents avec l’hypothèse qui veut que l’augmentation de l’information réduit l’hétérogénéité des anticipations et les erreurs d’évaluation. |
| Keywords: | Disclosure, Securities Regulation, Initial Public Offerings, Reverse Mergers, Listing Standards , Divulgation, réglementation des valeurs mobilières, prise de contrôle inversée, norme minimales d’inscription en Bourse |
| JEL: | G24 G32 G14 G1 |
| Date: | 2009–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2009s-06&r=reg |
| By: | Francesca Barigozzi; Dominique Henriet |
| Abstract: | We compare the alternative approaches for regulating genetic information in the health insurance market when prevention measures are available. In the model, firms offer insurance contracts to consumers who are initially uninformed of their risk type but can obtain such information by performing a costless genetic test. A crucial ingredient of our analysis is that information has decision-making value since it allows for optimal choice of a self-insurance action (secondary prevention). We focus on the welfare properties of market equilibria obtained under the different regulatory schemes and, by using an intuitive graphical analysis, we rank them unambiguously. Our results show that Disclosure Duty weakly dominates the other regulatory schemes and that Strict Prohibition represents the worst regulatory approach. |
| Keywords: | health insurance markets, information gathering, discrimination risk, classification risk, self-insurance |
| JEL: | D82 D83 G22 L52 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:wpc:wplist:wp01_09&r=reg |
| By: | Pollock, R. |
| Abstract: | In 2003, the UK `liberalised' its telephone directory enquiries service with the aim of introducing competition so as to improve quality and lower costs. Unfortunately the results did not match expectations. Proliferation of numbers led to consumer confusion and high price firms with no discernible quality advantages but which employed heavy advertising came to dominate the market. Consumer and total welfare appear to have declined. This example raises important questions for regulators. In particular, with limits on information and rationality, it may sometimes be better to limit choice but increase competition to supply that choice. |
| Keywords: | Competition, Deregulation, Advertising, Bounded Rationality |
| JEL: | L51 L43 |
| Date: | 2009–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0916&r=reg |
| By: | Marianna Succurro (Dipartimento di Economia e Statistica, Università della Calabria) |
| Abstract: | This paper examines the relationship between the insolvency systems and the investment share of GDP across countries. The objective is to find out the relationship between bankruptcy procedures and economic performances around the world. Empirical evidence suggests that: 1) the investment share of GDP is higher in those countries characterized by highly efficient bankruptcy system; the more efficient the insolvency procedures in terms of time, cost and recovery rate, the more readily available debt is and the higher the Investment/GDP ratio is; 2) the investment share of gross domestic product is positively associated with the degree of sophistication of the Bankruptcy Law, at least below a certain level of legal production; 3) data suggest some complementary effect between Bankruptcy Law and Enforcement for rich countries, while the interaction term indicates some substitution effect when poor countries are considered. Some policy implications conclude the work |
| Keywords: | Bankruptcy Law, Enforcement, Investments, Economic Performance |
| JEL: | G33 K40 O40 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:200801&r=reg |
| By: | Surfield, Christopher; Welch, William |
| Abstract: | Atypical work forms – such as independent contracting, on-call, or temporary work – have been criticized as providing employment that is more precarious than that offered by regular (open-ended) employment. One of the concerns attached to these work forms is that they allow employers to evade labor market protections afforded to regular workers. In such cases, we might be expected to see a greater prevalence of atypical workers in those states with greater labor market protections. We test for this possibility using Current Population Survey data from 1995 to 2005. Our results would suggest that at least one form of atypical work – contracting and consulting work – is less likely to be observed in right-to-work states after controlling for state-level characteristics. |
| Keywords: | Atypical work; Employment regulation; Temporary employment |
| JEL: | J40 M51 J50 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14462&r=reg |
| By: | Bonardi, Jean-Philippe; Urbiztondo, Santiago; Quélin, Bertrand |
| Abstract: | Previous studies have shown that regulated firms tend to diversify for different reasons than unregulated ones. This is the case for product but also for geographical diversification, i.e. international expansion. The logic generally advanced is that regulated firms tend to diversify when they face costly and difficult relationships with the regulatory authority in charge of their sector. This approach, however, does not explain (1) what is really at the core of the problem in regulated firms’ relationships with regulators, (2) why these firms cannot overcome part of the problem by developing nonmarket strategies –lobbying, campaign contributions, etc.– to influence regulatory decisions, and (3) why they sometimes opt for international expansion rather than product diversification. In this paper, we propose a theoretical model that provides potential answers to these questions. We start by considering the firm-regulator relationship as an incomplete information problem, in which the firms know things that the regulator does not, but can cannot convey hard information about these things. In this setting, we show that when firms face tough nonmarket competition domestically, going abroad can create a mechanism that makes information transmission credible and therefore strengthen their position in their home market. International expansion, in consequence, can be a way to solve some of the problems that regulated firms face at home in addition to a way for these firms to grow their business abroad. |
| Keywords: | International diversification; regulated firms; lobbying |
| JEL: | L25 L51 F23 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14436&r=reg |