|
on Regulation |
| By: | Anne Neumann; Juan Rosellón; Hannes Weigt |
| Abstract: | We propose a merchant-regulatory framework to promote investment in the European natural gas network infrastructure based on a price cap over two-part tariffs. As suggested by Vogelsang (2001) and Hogan et al. (2010), a profit maximizing network operator facing this regulatory constraint will intertemporally rebalance the variable and fixed part of its two-part tariff so as to expand the congested pipelines, and converge to the Ramsey-Boiteaux equilibrium. We confirm this with actual data from the European natural gas market by comparing the bi-level price-cap model with a base case, a no-regulation case, and a welfare benchmark case, and by performing sensitivity analyses. In all cases, the incentive model is the best decentralized regulatory alternative that efficiently develops the European pipeline system. |
| Keywords: | regulation, transportation network, investment |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1145&r=reg |
| By: | Cornelia Woll |
| Abstract: | The highly politicized debate about the recent Alternative Investment Fund Manager (AIFM) Directive of the European Union led many observers to suspect an ideological battle between countries seeking to impose transnational regulation on financial service industries such as hedge funds and liberal market economies insisting on the benefits of market discipline in order to protect their financial centers. The battle that appeared to particularly pit France against the United Kingdom can thus be interpreted as an example of a regulatory paradigm shift in the aftermath of the crisis. This article cautions against such an ideas-centered account of financial regulation and points to the economic interests that drove the French and German agendas. However, contrary to the assumptions of traditional political economy approaches, national preferences were not simply defined by the aggregate of a country’s economic interests. Rather, industry success in shaping government positions on alternative investment regulation crucially depended on how a given industry fit into the government’s overarching geo-political agenda. By highlighting this feedback loop between government strategy and industry lobbying, the paper proposes a strategic analysis of financial regulation, as opposed to accounts that consider positions to be pre-determined by ideas or socio-economic structures. |
| Keywords: | economic policy; financial markets; ideas; liberalization; regulation |
| Date: | 2011–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:erp:scpoxx:p0047&r=reg |
| By: | Beck, T.H.L.; De Jonghe, O.G.; Schepens, G. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper documents a large cross-country variation in the relationship between bank competition and stability and explores market, regulatory and institutional features that can explain this heterogeneity. Combining insights from the competition-stability and regulation-stability literatures, we develop a unified framework to assess how regulation, supervision and other institutional factors may make it more likely that the data favor the charter-value paradigm or the risk-shifting paradigm. We show that an increase in competition will have a larger impact on banks’ risk taking incentives in countries with stricter activity restrictions, more homogenous market structures, more generous deposit insurance and more effective systems of credit information sharing. |
| Keywords: | Competition;Stability;Banking;Herding;Deposit Insurance;Information Sharing;Risk Shifting. |
| JEL: | G21 G28 L51 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011080&r=reg |
| By: | Stühmeier, Torben |
| Abstract: | In many telecommunications markets incumbent providers enjoy a demand-side advantage over any entrant. However, market entrants may enjoy a supply-side advantage over the incumbent, since they are more efficient or operate on innovative technologies. Considering both a supply-side and a demand-side asymmetry, the present model analyzes the effect of two regulatory regimes: An access markup for a low cost network and reciprocal charges below the costs of a high cost network. Both regimes may have adverse effects on subscribers, market shares, and profits. It can be shown that an access markup is not generally beneficial and an access deficit not generally detrimental for the respective networks. However, if providers discriminate between on-net and off-net prices a markup on the entrant's termination cost is generally to its benefit and to the incumbent's detriment. -- |
| Keywords: | Termination charges,Interconnection,Asymmetric Regulation,Price Discrimination |
| JEL: | L13 L51 L96 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:29&r=reg |
| By: | Ojo, Marianne |
| Abstract: | The need for continuous monitoring and regulation is particularly attributed to, and justified by, the inevitable presence of risks and uncertainty – both in terms of certain externalities and indeterminacies which are capable of being reasonably quantified and those which are not. Amongst other goals, 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. “Socio cultural” explanations which relate to how risk is increasingly becoming embedded in organisations and institutions will also be considered as part of those factors attributable to why the financial environment has become transformed to the state in which it currently exists. A consideration of regulatory developments which have contributed to a change in the way financial regulation is carried out, as well as developments which have contributed to the de formalisation of rules and a corresponding “loss of certainty”, will also constitute focal points of the paper. To what extent are risks capable of being quantified? Who is able to assist with such quantification –and why has it become necessary to introduce other regulatory actors and greater measures aimed at fostering corporate governance and accountability into the regulatory process? These questions constitute some of the issues which this paper aims to address. |
| Keywords: | risk; financial; regulation; audit; governmentality theory; risk society; cultural theory; hedge funds; uncertainty; legal theory; accountability |
| JEL: | K2 D8 G3 |
| Date: | 2011–07–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32396&r=reg |
| By: | Lopes, Margarida |
| Abstract: | Abstract Labor market regulation and its relations with education and training have been performing an historical trajectory which closely intertwined with developments in economic thought. Under the form of human capital theories, neo-classical economics set the bridge between labor market equilibrium and education outputs for decades. The functionalist approach behind that lasting relationship was to be challenged by economic crises and globalization, which imposed the unquestionable supremacy of the demand for skilled work. Likewise, even if only that more strict perspective of education would prevail, which fortunately is not the case, time and hazard came to undertake its denigration on the grounds of a severe loss of regulatory efficiency as globalization was setting up. In this paper we shed light on the increasing role which innovation is called to perform in labor market hetero regulation in the present phase of globalization. Depending on the institutional design throughout which R&D become embedded in nowadays societies, evidence clearly reveals how innovation strategies are to be found so asymmetrically implemented between developed and developing countries, thereby leading to the enlarging divide between the “new North” and “new South” globalization off springs. |
| Keywords: | Key Words: labor market regulation; education and training; innovation; knowledge. |
| JEL: | J08 D84 A23 I21 |
| Date: | 2011–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32412&r=reg |
| By: | Bert WILLEMS; Joris MORBEE |
| Abstract: | In this paper we show that free entry decisions may be socially inefficient, even in a perfectly competitive homogeneous goods market with non-lumpy investments. In our model, inefficient entry decisions are the result of risk-aversion of incumbent producers and consumers, combined with incomplete financial markets which limit risk-sharing between market actors. Investments in productive assets affect the distribution of equilibrium prices and quantities, and create risk spillovers. From a societal perspective, entrants underinvest in technologies that would reduce systemic sector risk, and may overinvest in risk-increasing technologies. The inefficiency is shown to disappear when a complete financial market of tradable risk-sharing instruments is available, although the introduction of any individual tradable instrument may actually decrease efficiency. We therefore believe that sectors without well-developed financial markets will benefit from sector-specific regulation of investment decisions. |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces11.17&r=reg |
| By: | Popov, Vladimir |
| Abstract: | According to a narrow definition, institutional capacity of the state is the ability of the government to enforce laws and regulations. There are a lot of subjective indices (control over corruption, rule of law, government effectiveness, etc.) that are designed to measure the state institutional capacity and are based on experts’ estimates. The logical objective measures of the state institutional capacity are the murder rate – non-compliance with the state’s monopoly on violence, and the shadow economy – non compliance with the economic regulations. It appears that political regime (democratic or authoritarian) matters for the subjective ranking. It could be shown, for instance, that out of two countries with the same murder rate, government effectiveness is higher in countries that were more democratic in the past (1970s-1990s on average) and in the year (2002) when government effectiveness was measured. This result holds for all other five World Bank subjective indices of institutional capacity – rule of law, control over corruption, voice and accountability, political stability and regulation quality. And they hold also for the share of shadow economy: out of two countries with the same share of shadow economy, government effectiveness is higher in a more democratic one. |
| Keywords: | Institutional capacity; murder rate; shadow economy; democratization |
| JEL: | O17 K42 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32389&r=reg |
| By: | Daniel Montolio (Universitat de Barcelona & IEB); Francesc Trillas (Universitat Autònoma de Barcelona, SP-SP Center (IESE) & IEB) |
| Abstract: | We analyse the impact of regulation, industrial policy and jurisdictional allocation on broadband deployment using a theoretical model and an empirical estimation. Although central powers may be more focused and internalize interjurisdictional externalities, decentralized powers may internalize local horizontal policy spillovers and use a diversity of objectives as a commitment device in the presence of sunk investments. The latter may, for instance, alleviate the collective action problem of the joint use of rights of way and other physical infrastructures. In the empirical exercise, using data for OECD and EU countries for the period 1999-2006, we examine whether centralization promotes new telecommunications markets, in particular the broadband access market. The existing literature, in the main, claims it does, but we find no support for this claim in our data. Our results show that indicators of national industrial policy are a weakly positive determinant of broadband deployment and that different measures of centralization are either irrelevant or have a negative impact on broadband penetration. |
| Keywords: | Regulation, industrial policy, decentralization, broadband |
| JEL: | L50 L96 K23 H77 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2011/7/doc2011-15&r=reg |
| By: | Anthoff, David; Rose, Steven; Tol, Richard S. J.; Waldhoff, Stephanie |
| Abstract: | The social cost of carbon is an estimate of the benefit of reducing CO2 emissions by one ton today. As such it is a key input into cost-benefit analysis of climate policy and regulation. We provide a set of new estimates of the social cost of carbon from the integrated assessment model FUND 3.5 and present a regional and sectoral decomposition of our new estimate. China, Western Europe and the United States have the highest share of harmful impacts, with the precise order depending on the discount rate. The most important sectors in terms of impacts are agriculture and increased energy use for cooling. We present an extensive sensitivity analysis with respect to the discount rate, equity weights, different socio economic scenarios and values for the climate sensitivity parameter. -- |
| Keywords: | Climate change,social cost of carbon |
| JEL: | Q54 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201118&r=reg |
| By: | George M. von Furstenberg (Indiana University and Hong Kong Institute for Monetary Research) |
| Abstract: | Adding contingently convertible debt securities, cocos, in an amount equal to about 3% of tangible assets to the financing mix of financial institutions is a promising reform idea. It would also be inexpensive for these institutions to issue cocos and thus to be prepared to recapitalize and to avert failure by rebuilding common equity and reducing leverage and debt overhang in a crisis. For cocos to become readily marketable, much work is needed on their standardization and optimal design. That basic design should include a trigger couched in a regulatory capital ratio referenced in Basel III. It should also include conversion terms setting the rate of increase in the number of shares equal to the rate of growth of the book value of common equity through conversion. This would prevent redistribution from existing to new shareholders, guarantee their equality of treatment, and protect the subordination hierarchy with non-cocos debt. |
| Keywords: | Contingent Convertibles, Cocos Design, Capital Ratios, Financial Reform, Basel III |
| JEL: | G13 G18 G21 G33 G38 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:222011&r=reg |
| By: | Matthias Kalkuhl (Potsdam Institute for Climate Impact Research (PIK)); Ottmar Edenhofer (Potsdam Institute for Climate Impact Research (PIK) and Technical University Berlin); Kai Lessmann (Potsdam Institute for Climate Impact Research (PIK)) |
| Abstract: | This paper evaluates the consequences of renewable energy policies on welfare, resource rents and energy costs in a world where carbon pricing is imperfect and the regulator seeks to limit emissions to a (cumulative) target. We use a global general equilibrium model with an intertemporal fossil resource sector. We calculate the optimal second-best renewable energy subsidy and compare the resulting welfare level with an efficient first-best carbon pricing policy. If carbon pricing is permanently missing, mitigation costs increase by a multiple (compared to the optimal carbon pricing policy) for a wide range of parameters describing extraction costs, renewable energy costs, substitution possibilities and normative attitudes. Furthermore, we show that small deviations from the second-best subsidy can lead to strong increases in emissions and consumption losses. This confirms the rising concerns about the occurrence of unintended side effects of climate policy { a new version of the green paradox. We extend our second-best analysis by considering two further types of policy instruments: (1) temporary subsidies that are displaced by carbon pricing in the long run and (2) revenue-neutral instruments like a carbon trust and a feed-in-tariff scheme. Although these instruments cause small welfare losses, they have the potential to ease distributional conflicts as they lead to lower energy prices and higher fossil resource rents than the optimal carbon pricing policy. |
| Keywords: | Feed-in-Tariff, Carbon Trust, Carbon Pricing, Supply-Side Dynamics, Green Paradox, Climate Policy |
| JEL: | Q4 Q52 Q54 Q58 D58 H21 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.48&r=reg |
| By: | Basu, Arnab K. (College of William and Mary); Chau, Nancy (Cornell University); Kanbur, Ravi (Cornell University) |
| Abstract: | Two stylized representations are often found in the academic and policy literature on informality and formality in developing countries. The first is that the informal (or unregulated) sector is more competitive than the formal (or regulated) sector. The second is that contract enforcement is easier in the formal sector than in the informal sector, precisely because the formal sector comes under the purview of state regulation. The basic contention of this paper is that these two representations are not compatible with each other. We develop a search-theoretic model of contractual dualism in the labor market where the inability to commit to contracts in the informal sector leads to employer market power in equilibrium, while an enforced minimum wage in the formal sector provides employers with a commitment technology but which reduces their market power in equilibrium. The contributions of this paper are three-fold. It (i) provides the micro-underpinnings for endogenous determination of employer market power in the formal and informal sectors due to contractual dualism in the two sectors, (ii) offers a unified and coherent setup whereby a host of salient features of developing country labor markets can be explained together, and (iii) places the original Stiglerian prescription of the optimal (unemployment minimizing) minimum wage in the broader context of labor markets where formal job creation is costly, and where formal employment, informal employment, and unemployment co-exist. |
| Keywords: | contractual dualism, wage dualism, employer market power, informality |
| JEL: | J3 J6 O17 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5845&r=reg |
| By: | Boettke, Peter |
| Abstract: | James Scott has written a detailed ethnography on the lives of the peoples of upland Southeast Asia who choose to escape oppressive government by living at the edge of their civilization. To the political economist the fascinating story told by Scott provides useful narratives in need of analytical exposition. There remains in this work a “plea for mechanism”; the mechanisms that enable social cooperation to emerge among individuals living outside the realm of state control. Social cooperation outside the formal rules of governance, nevertheless require “rules” of social intercourse, and techniques of “enforcement” to ensure the disciplining of opportunistic behavior. |
| Keywords: | economic development; self-regulation; political economy; peasant economy |
| JEL: | O17 P48 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32374&r=reg |
| By: | Buccirossi, Paolo; Ciari, Lorenzo; Duso, Tomaso; Spagnolo, Giancarlo; Vitale, Cristiana |
| Abstract: | This paper empirically investigates the effectiveness of competition policy by estimating its impact on Total Factor Productivity (TFP) growth for 22 industries in 12 OECD countries over the period 1995-2005. We find a robust positive and significant effect of competition policy as measured by newly created indexes. We provide several arguments and results based on instrumental variables estimators and non-linearities to support the claim that the established link can be interpreted in a causal way. At a disaggregated level, the effect on TFP growth is particularly strong for specific aspects of competition policy related to its institutional set up and antitrust activities (rather than merger control). The effect is strengthened by good legal systems, suggesting complementarities between competition policy and the efficiency of law enforcement institutions. -- |
| Keywords: | Competition Policy,Productivity Growth,TFP,Institutions,Deterrence,OECD |
| JEL: | L4 K21 O4 C23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:22&r=reg |
| By: | Nepal, R.; Jamasb, T. |
| Abstract: | Interconnections can be an effective way to increase competition in wholesale electricity markets in particular for smaller markets with few actors. This paper quantitatively examines the potentials for interconnections in the Irish Single Electricity Market (SEM). We use a time-varying Kalman filter technique to assess the degree of market integration between SEM and other large, mature and interconnected wholesale electricity markets in Europe. The results indicate a low degree of market integration between SEM and other European markets and thereby raising the possibility to benefit from increased electricity trade. As wholesale prices in SEM remain relatively high and volatile; a larger interconnector capacity can promote competition, close the gap with the European wholesale prices, improve security of supply, and mitigate price volatility. The results indicate that wholesale spot trading of renewable may not increase market integration. The results suggest that an interconnector capacity amounting to about 21% of generation capacity in SEM is likely to achieve an integration coefficient of 0.86 similar to what currently exists between the markets in Austria and the Netherlands. |
| JEL: | L94 C22 D02 G1 |
| Date: | 2011–07–21 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1144&r=reg |