|
on Regulation |
| By: | Philippe Aghion (Department of Economics, Harvard University - (-)); Yann Algan (Sciences Po, OFCE - Commencez à saisir le nom d'un établissement); Pierre Cahuc (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Andrei Shleifer (Department of Economics, Harvard University - (-)) |
| Abstract: | In a cross-section of countries, government regulation is strongly negatively correlated with social capital. We document this correlation, and present a model explaining it. In the model, distrust creates public demand for regulation, while regulation in turn discourages social capital accumulation, leading to multiple equilibria. A key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt. We test this and other implications of the model using country- and individual-level data on social capital and beliefs about government's role, as well as on changes in beliefs and in trust during the transition from socialism. |
| Date: | 2009–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00396268_v1&r=reg |
| By: | Matthew J. Kotchen; Stephen W. Salant |
| Abstract: | We derive conditions under which cost-increasing measures – consistent with either regulatory constraints or fully expropriated taxes – can increase the profits of all agents active within a common-pool resource. This somewhat counterintuitive result is possible regardless of whether price is exogenously fixed or endogenously determined. Consumers are made no worse-off and, in the case of an endogenous price, can be made strictly better-off. The results simply require that total revenue be decreasing and convex in aggregate effort, which is an entirely reasonable condition, as we demonstrate in the context of a renewable natural resource. We also show that our results are robust to heterogeneity of agents and, under certain conditions, to costless entry and exit. Finally, we generalize the analysis to show its relation to earlier work on the effects of raising costs in a model of Cournot oligopoly. |
| JEL: | H23 Q2 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15086&r=reg |
| By: | Prantl, Susanne (WZB - Social Science Research Center Berlin); Spitz-Oener, Alexandra (Humboldt University, Berlin) |
| Abstract: | We analyze how an entry regulation that imposes a mandatory educational standard affects entry into self-employment and occupational mobility. We exploit the German reunification as a natural experiment and identify regulatory effects by comparing differences between regulated occupations and unregulated occupations in East Germany to the corresponding differences in West Germany after reunification. Consistent with our expectations, we find that entry regulation reduces entry into self-employment and occupational mobility after reunification more in regulated occupations in East Germany than in West Germany. Our findings are relevant for transition or emerging economies as well as for mature market economies requiring large structural changes after unforeseen economic shocks. |
| Keywords: | occupational mobility, self-employment, entry regulation |
| JEL: | J24 J62 K20 L11 L51 M13 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4221&r=reg |
| By: | Gregory, DE WALQUE; Olivier, PIERRARD; Abdelaziz, ROUABAH |
| Abstract: | We develop a dynamic stochastic general equilibrium model with an heterogeneous banking sector. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbank market. Our aim is to understand the interactions between the banking sector and the rest of the economy, as well as the importance of supervisory and monetary authorities to restore financial stability. The model is calibrated against real US data and used for simulations. We show that Based regulation reduces the steady state but improves the resilience of the economy to shocks, and that moving from Basel I to Basel II is procyclical. We also show that liquidity injections relieve financial instability but have ambiguous effects on output fluctuations |
| Keywords: | DGSE; Banking sector; Default risk; Supervision; Central Bank |
| JEL: | E13 E20 G21 G28 |
| Date: | 2009–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2009006&r=reg |
| By: | Ojo, Marianne |
| Abstract: | This paper considers developments which have necessitated greater involvement and a greater role for the central bank in financial regulation and supervision. The aftermath of the 2007/08 financial crisis has witnessed the enactment of legislation such as the Banking Act of 2009 which has not only introduced greater statutory powers for the central bank, but also the Special Resolution Regime. As well as a consideration of arguments which are in favour of the central bank’s role as supervisor and lender of last resort, the importance of central bank independence and safeguards which exist to ensure that sufficient accountability is fostered, will be considered. Safeguards and accountability mechanisms which are adequate, such that, whilst ensuring that the regulator is not susceptible to regulatory capture, do not impede the ability of such a regulator to obtain vital and necessary information from systemically important individual financial institutions. In its support of the view that central banks should assume a greater role in supervision, this paper not only seeks to justify why such a degree of involvement is vital to ensuring and maintaining stability in the financial system, but also those factors which are considered to be necessary if such a role is to be effective. |
| Keywords: | central; bank; lender; last; resort;regulation;monetary;policy |
| JEL: | K2 E58 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15771&r=reg |
| By: | Zahrnt, Valentin |
| Abstract: | Sanitary and phytosanitary (SPS) measures that protect human, animal, and plant health are impeding trade and provoking high-profile disputes. This paper argues that the WTOâs Trade Policy Review Mechanism (TPRM) could play an important role in defusing the trade-disrupting potential of SPS regulation. The most promising avenue is to review in greater detail the policy-making procedures that lead to SPS measures. How transparent and independent are countriesâ risk assessments of health hazards? Which provisions have countries taken to account for trade effects when selecting SPS measures? Do countries give foreign interests adequate possibility to voice their concerns over proposed SPS regulation? If reviews motivate countries to improve their policy-making processes, this will contribute to making SPS regulation less trade restrictive and more effective in protecting health. To reach this objective, special trade policy reviews dedicated exclusively to SPS regulation would have to be introduced as a complement to the current reviews of countriesâ overall trade policies. Such a move could serve as a model for establishing further issue-specific reviews that address technical barriers to trade, trade in services, and other complex regulatory challenges. |
| Keywords: | SPS, food safety, transparency, TPRM, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, International Relations/Trade, Political Economy, |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ecipwp:50365&r=reg |
| By: | Aghion, Ph.; Askenazy, Ph.; Bourlès, R.; Cette, G.; Dromel, N. |
| Abstract: | This paper investigates the effects of the education level, product market rigidities and employment protection legislation on growth. It exploits macro-panel data for OECD countries. For countries close to the technological frontier, education and rigidities are significantly related to TFP growth. The contribution of the interaction between product market regulation and labour market rigidity seems particularly substantial. |
| Keywords: | Productivity ; Growth ; Regulations ; Market Rigidities ; Education |
| JEL: | O47 J24 J68 L40 O57 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:229&r=reg |
| By: | Flandreau, Marc; Gaillard, Norbert; Packer, Frank |
| Abstract: | During the 1930s, rating agencies took up a central role in regulatory supervision that they still have today. We study the process through which they received this regulatory license. The proximate cause for this changeover was the economic shock of the Great Depression. Exploring the performance of rating agencies in assessing the risks of sovereign debt, an important segment of the bond market, we show that superior forecasting capacities cannot explain the agencies’ growing importance. We argue that the agencies’ perceived lack of conflicts of interest (in contrast to other financial intermediaries) was a major factor in bringing them to the forefront of a new regulatory regime. |
| Keywords: | great depression; Rating agencies regulatory licence; sovereign debt |
| JEL: | F34 G28 N2 N40 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7328&r=reg |
| By: | Degryse, H.A.; Jong, F.C.J.M. de; Lefebvre, J.J.G. (Tilburg University, Center for Economic Research) |
| Abstract: | In this paper, we employ a registry of legal insider trading for Dutch listed firms to investigate the information content of trades by corporate insiders. Using a standard event-study methodology, we examine short-term stock price behavior around trades. We find that purchases are followed by economically large abnormal returns. This result is strongest for purchases by top execu- tives and for small market capitalization firms, which is consistent with the hypothesis that legal insider trading is an important channel through which information flows to the market. We analyze also the impact of the implementation of the Market Abuse Directive (European Union Directive 2003/6/EC), which strengthens the existing regulation in the Netherlands. We show that the new regulation reduced the information content of sales by top executives. |
| Keywords: | Insider trading;Financial market regulation |
| JEL: | G14 G28 K22 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200948&r=reg |
| By: | Kalemli-Ozcan, Sebnem; Papaioannou, Elias; Peydró-Alcalde, José Luis |
| Abstract: | Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro's effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the past thirty years. We also construct a dataset that records the timing of legislative-regulatory harmonization policies in financial services across the European Union. We find that the euro's impact on financial integration is primarily driven by eliminating the currency risk. Legislative-regulatory convergence explains part of the total effect, whereas trade has no role in explaining the euro's positive effect on integration. |
| Keywords: | euro; exchange rate; financial integration; legislation; regulation; trade |
| JEL: | F10 F15 F30 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7314&r=reg |
| By: | Dorothea Schäfer; Klaus F. Zimmermann |
| Abstract: | With banking sectors worldwide still suffering from the effects of the financial crisis, public discussion of plans to place toxic assets in one or more bad banks has gained steam in recent weeks. The following paper presents a plan how governments can efficiently relieve ailing banks from toxic assets by transferring these assets into a publicly sponsored work-out unit, a so-called bad bank. The key element of the plan is the valuation of troubled assets at their current market value - assets with no market would thus be valued at zero. The current shareholders will cover the losses arising from the depreciation reserve in the amount of the difference of the toxic assets' current book value and their market value. Under the plan, the government would bear responsibility for the management and future resale of toxic assets at its own cost and recapitalize the good bank by taking an equity stake in it. In extreme cases, this would mean a takeover of the bank by the government. The risk to taxpayers from this investment would be acceptable, however, once the banks are freed from toxic assets. A clear emphasis that the government stake is temporary would also be necessary. The government would cover the bad bank's losses, while profits would be distributed to the distressed bank's current shareholders. The plan is viable independent of whether the government decides to have one centralized bad bank or to establish a separate bad bank for each systemically relevant banking institute. Under the terms of the plan, bad banks and nationalization are not alternatives but rather two sides of the same coin. This plan effectively addresses three key challenges. It provides for the transparent removal of toxic assets and gives the banks a fresh start. At the same time, it offers the chance to keep the cost to taxpayers low. In addition, the risk of moral hazard is curtailed. The comparison of the proposed design with the bad bank plan of the German government reveals some shortcomings of the latter plan that may threaten the achievement of these key issues. |
| Keywords: | Financial crisis, financial regulation, toxic assets, Bad Bank |
| JEL: | G20 G24 G28 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp897&r=reg |
| By: | Johannes Paha (Justus-Liebig-University Gießen, Licher Straße 62, D-35394 Gießen) |
| Abstract: | Standard methods for calculating cartel-damages rely on data of prices charged and quantity sold. Such data may not easily be available. In this paper, it is shown that a lower bound for cartel-damages can also be computed from accounting data. In previous literature it is shown that economic profits can hardly be inferred from accounting data. Therefore, it is shown under which econometrically testable assumptions on accounting costs a meaningful lower bound for cartel damages can consistently be estimated from accounting data. An estimation of cartel-damages is performed for four vitamins producers that participated in the vitamins cartel. The results indicate that both the aggregation-level and the publication-frequency of accounting data pose a challenge to the estimation of cartel damages. A further challenge is to appropriately reflect the strength respectively effectiveness of the collusive agreement in the specification of any such estimation. |
| JEL: | C22 L12 L13 L41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200929&r=reg |
| By: | Hernández Ibarzábal, José Alberto (Institute for Futures Studies) |
| Abstract: | <p> Sweden is undergoing a major energy transition in which the present regulatory, competition and energy decisions will determine future involvement in the “oil and gas game” after decades of successful implementation of non-fossil fuel dependence policies. Contrary to major energy policies implemented since the oil crisis of the 70’s, higher natural gas investment in infrastructure – in particular regarding offshore pipelines – is not an outcome of a consented agreement between the government and private firms. The lack of clear governmental definition towards the time to phase out nuclear terminals, and how this source of energy would be replaced, is leading the country towards an energy bottleneck that could condition future energy supply, thus governance. Under these conditions, crucial decisions shall be taken in the near future regarding granting permissions to pipelines that connect to the Russian natural gas fields following an EU trend, to the Norwegian natural gas reserves on the trail of a Nordic energy path-dependence, or to both, sharing potential benefits and risks. <p> |
| Keywords: | Energy policy; Future energy supply; Natural gas infrastructure; Energy transition; Sweden; Russian natural gas fields; Norwegian natural gas reserves; Swedish energy transition. |
| JEL: | Q41 Q43 Q48 |
| Date: | 2009–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2009_009&r=reg |