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on Regulation |
| By: | Sumit Agarwal; David Lucca; Amit Seru; Francesco Trebbi |
| Abstract: | US state chartered commercial banks are supervised alternately by state and federal regulators. Each regulator supervises a given bank for a fixed time period according to a predetermined rotation schedule. We examine differences between federal and state regulators for these banks. Federal regulators are significantly less lenient, downgrading supervisory ratings about twice as frequently as state supervisors. Under federal regulators, banks report higher nonperforming loans, more delinquent loans, higher regulatory capital ratios, and lower ROA. There is a higher frequency of bank failures and problem-bank rates in states with more lenient supervision relative to the federal benchmark. Some states are more lenient than others. Regulatory capture by industry constituents and supervisory staff characteristics can explain some of these differences. These findings suggest that inconsistent oversight can hamper the effectiveness of regulation by delaying corrective actions and by inducing costly variability in operations of regulated entities. |
| JEL: | G21 G28 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17736&r=reg |
| By: | Carlos Perez Montes (Banco de España) |
| Abstract: | This article combines a discrete choice model of demand for residential local telephone access and an optimal price regulation model to estimate the welfare weights that state regulators place on consumers with different incomes and locations. I fi nd no evidence of a bias towards rural consumers on average, but the relative weight on low income consumers in a geographic area can vary as a function of the proportions of rural and poor population and the political characteristics of the regulator. I also measure the welfare consequences of deviating from total consumer surplus maximization and disconnecting prices from costs |
| Keywords: | Ramsey prices, regulatory bias, welfare analysis, telecommunications, GMM |
| JEL: | L51 L96 D61 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1201&r=reg |
| By: | Skold, Alida S. |
| Abstract: | The intention of regulation is to protect the vulnerable. However, unintended results of regulation can cause the opposite occur. In its present form, the proposed Volcker Rule prohibits proprietary trading and has the potential of continuing the liquidity crisis that aided in the degradation of the housing market into decreased liquidity in the capital markets. The rule also prohibits the owning, sponsoring, or having certain relationships with hedge funds beyond three percent by the covered banking entities. Risk is transferring to less regulated financial institutions as new hedge funds are opened. The risk can have a profound impact on the retirement community through underfunded pension funds searching for absolute returns. Another unintended result of the proposed Volcker Rule is banks conducting business in the United States or with United States “residents” will be at a competitive disadvantage due to lost revenues and the high cost of compliance. The rule has the potential to cause United States companies to be at a competitive disadvantage in global markets. |
| Keywords: | Volcker Rule; Regulation; Prop Trading; Market Making; Hedge Fund; Risk; Banking Regulation |
| JEL: | E02 D02 L50 G24 G2 G38 E5 D78 |
| Date: | 2011–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35621&r=reg |
| By: | Niclas Meyer |
| Abstract: | In the public policy literature, there is a widespread belief that industry self-regulation would only take place—and lead to satisfactory results—if industry was faced with a credible threat of hierarchical government intervention. At the example of intermodal transport standardization, however, this paper demonstrates that this does not have to be the case. It may even have a counterproductive effect by exposing self-regulatory processes to political contestation. |
| Keywords: | Shadow of hierarchy, self-regulation, private governance, technical standardization |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:46&r=reg |
| By: | Fernando L Delgado; Mynor Meza |
| Abstract: | Improvements in financial regulation and supervision in the Central American region (CAPDR) have strengthened financial stability. Prudential instruments with potential macroeconomic effects have been introduced. Nonetheless, compared with the larger Latin American and selected industrial countries, there is still important scope for CAPDR to enhance financial supervision and regulation. Based on two surveys, and the analysis of the Basel Core Principles, the paper determines that some weaknesses exist in risk-based supervision, and that macroprudential measures have scarcely been deployed. |
| Keywords: | Bank regulations , Bank supervision , Banking sector , Basel Core Principles , Central America , Costa Rica , Dominican Republic , El Salvador , Financial stability , Guatemala , Panama , |
| Date: | 2011–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/299&r=reg |
| By: | T. BECK; O. DE JONGHE; G. SCHEPENS |
| 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 unied 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: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:11/732&r=reg |
| By: | Gerald Eisenkopf; Ansgar Wohlschlegel |
| Abstract: | We analyze educational institutions incentives to set up demanding or lax curricula in duopolistic markets for education with endogenous enrolment of students. We assume that there is a positive externality of student achievement on the local economy. Comparing the case of regulated tuition fees with an unregulated market, we identify the following inefficiencies: Under regulated tuition fees schools will set up inefficiently lax curricula in an attempt to please low-quality students even if schools internalize some of the externality. On the other hand, unregulated schools set up excessively differentiated curricula in order to relax competition in tuition fees. Deregulation gets more attractive if a larger fraction of the externality is internalized. |
| Keywords: | Education, Local Externalities, Produkt Differentiation, Price Competition, Vouchers |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0064&r=reg |
| By: | Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Villegas-Palacio, Clara (Facultad de Minas, Universidad Nacional de Colombia - Sede Medellin); Cárdenas, J.C. (Dept of Economics, Universidad de los Andes, Colombia) |
| Abstract: | We compare of the performance of emission taxes between Colombia and Sweden in an experimental setting where subjects are regulated through environmental taxes and had to decide on emission levels, compliance behavior, and adoption of an environmentally friendly technology. Our design allows us to analyze the role of variations in the stringency of the policy enforcement by regulatory agencies in two different cultural contexts. In line with previous literature that emphasizes the role of social norms and intrinsic motivations explaining compliance behavior, we find that actual emissions and tax underreporting are lower than predicted by traditional models that are solely based on self-interested preferences. However, we find that for an equivalent monitoring stringency, there are no statistically significant differences in emission levels and compliance behavior between Colombian and Swedish subjects. This is to say that despite the positive effect of social norms enhancing compliance, a more stringent enforcement remains as an important mechanism to induce firms to comply with the regulation.<p> |
| Keywords: | laboratory experiments; emission taxes; imperfect monitoring; technology adoption; developing countries; cross-country comparison; Colombia; Sweden. |
| JEL: | C91 L51 Q58 |
| Date: | 2012–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0521&r=reg |
| By: | Ba, Lika (Ecole des Hautes Etudes en Sciences Sociales, Paris); Gasmi, Farid (Toulouse School of Economics (Arqade & Idei)) |
| Abstract: | The main goal of this study is to demonstrate the existence of a significant empirical link between infrastructure and financial sectors reforms the effects of which are reflected in infrastructure sectors performance. This paper reports on the findings of an exploration of this issue for the case of the power sector in developing countries. We estimate the impact of the four main components of the power sector reform in these countries, namely, the creation of an independent regulatory agency, the unbundling of generation, transmission, and distribution, the introduction of competition and the implementation of privatization programs in the generation and distribution segments, on some of this sector’s performance outcomes, and attempt to assess the contribution of the domestic financial systems’ reforms to these outcomes. In a dataset on 42 developing countries covering the 1990-2005 period, we find that private participation in generation and distribution has significantly improved power supply as reflected in higher electricity generation per capita and technical and labor efficiency in the distribution segment. The unbundling of generation, transmission, and distribution has contributed to improving productive efficiency through a better use of the labor factor in the distribution segment. We find that the creation of a separate regulatory agency has boosted the generation segment in terms of both capacity and sales and has generated better incentives for a more efficient use of labor input in the distribution segment. We also find that regulatory experience has significantly contributed to improving access to electricity. The results suggest that while the power sector, in particular, its generation segment, has significantly benefited from the introduction of independent regulation, the beneficial effects of (good) regulatory practices have been exacerbated by the modernization of the financial systems. More specifically, improved financial systems have eased access to capital for operators allowing them to upgrade their networks and decrease power losses in distribution. The overall results obtained in this paper strongly recommend that along with reforming the power sector, policy makers in developing countries should implement the financial reforms that would deepen their domestic financial systems thus allowing them to recover the full benefits of these systems’ positive externalities on the performance of the sector. |
| Keywords: | Developing countries, electricity industry performance, privatization, regulation, unbundling, competition, financial sector development |
| JEL: | L2 L33 L94 L98 O16 C23 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:25333&r=reg |
| By: | M. Sahoo (Indira Gandhi Institute of Development Research); Renuka Sane (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth) |
| Abstract: | Financial distribution, where the distributor is the agent of both the product provider and the customer has been found to inherently work against the interests of customers, in the form of high service fees and perverse incentives in sales practices. This paper proposes segregation of financial advice from financial distribution. It proposes a Financial Advisers Bill, 2012, to promote the development of a market for advice. The Bill suggests that financial advisers be recognised as professionals and be regulated under a new statutory body called the Institute of Financial Advisers of India. The paper suggests that regulation of distributors continue to remain under the purview of product regulators. It outlines alternative models in which the distribution market may be organised. It also points out that the Ministry of Finance and the Financial Stability and Development Council need to play an active role in co-ordinating the setting of common standards for distribution across all product regulators. |
| Keywords: | Consumer Protection; distribution regulation; mutual funds; insurance; pensions; investment advice |
| JEL: | G2 G28 D14 D18 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2011-029&r=reg |
| By: | Shiyi Chen; Wolfgang Karl Härdle |
| Abstract: | Porter Hypothesis states that environmental regulation may lead to win-win opportunities, that is, improve the productivity and reduce the undesirable output simultaneously. Based on directional distance function, this paper proposes a novel dynamic activity analysis model to forecast the possibilities of win-win development in Chinese Industry between 2009 and 2049. The evidence reveals that the appropriate energy-saving and emission-abating regulation will result in both the improvement in net growth of potential output and the steadily increasing growth of total factor productivity. This favors Porter Hypothesis. |
| Keywords: | Dynamic Activity Analysis Model, Energy-Saving and Emission-Abating, Environmental Regulation, Win-Win Development |
| JEL: | D24 O47 Q25 Q32 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2012-002&r=reg |
| By: | Evangelina Dardati; Julio Riutort |
| Abstract: | We exploit the heterogeneity in pollution permits allocation and the variation in the permits price to identify a new channel by which cap-and-trade programs can affect firm decisions: they may affect investment through the impact of free pollution permits on the firms cash flow. A firm with a permit allocation higher than its emissions will have a higher cash inflow if the price of permits increases, whereas a firm whose emissions are higher than its permit allocation will have a higher cash outflow if the price of permits increases. In the margin they are both paying the same for pollution but the cash flow consequences of the change in permit prices differ. Using data from investor-owned utilities participating in the US SO2 program, we find that for smaller firms the permit cash flow is positively related to capital expenditures. Small firms with a high permit cash flow invest more tan small firms with a lower permit cash flow. This effect is consistent with smaller firms in this industry facing financial constraints. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:edj:ceauch:283&r=reg |
| By: | Jan Bena; Peter Ondko; Evangelia Vourvachaki |
| Abstract: | As part of the Single Market Program the European Commission commanded the liberalization and regulatory harmonization of utilities, transport and telecommunication services. This paper investigates whether and how this process affected the productivity of European network firms. Exploiting the variation in the timing and degree of liberalization efforts across countries and industries, we find that liberalization increased firm-level productivity but had no reallocation impact. Based on our estimates, the average firm-level productivity gain from liberalization amounts to 38 percent of the average total within-firm productivity gain in network industries. The results underscore the growth-promoting role of liberalization efforts. |
| Keywords: | productivity; liberalization; allocative efficiency; services; firm-level data; |
| JEL: | D24 K23 L11 L51 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp452&r=reg |
| By: | Petra Luňáčková (Institute of Economic Studies, Charles University, Prague) |
| Abstract: | This paper presents a model which focuses on differences between the competition policy of the EU and antitrust of the U.S. It introduces three versions – Neutral, American, and European. Two-stage game model takes the authority’s perspective and describes options and behavior of antitrust officials when a firm engages in non-price vertical agreement (possibly restraint). Optimal behavior is expressed as expected income of the authority (EIA) which is a function of probability of wrong decision(s) in the course of action. It takes into account specific preferences, different types of errors, fear of those errors, and harm they might cause. Comparison shows some unnoticed features and results slightly in favor of the EU. |
| Keywords: | competition policy, antitrust, non-price vertical restraints, National Competition Authority, game form |
| JEL: | L42 L44 C79 D79 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2011_38&r=reg |
| By: | Cont, Walter; Hancevic, Pedro; Navajas, Fernando H. |
| Abstract: | We study a cycle of subsidized energy prices and estimate its welfare impact on households in the Buenos Aires Metropolitan Region. A simple framework explains its emergence in terms of the preference of a median household (voter) for receiving transfer gains followed by a future flow of transfer losses. We evaluate actual transfers and welfare effects that a departure of prices of natural gas and electricity generation from opportunity costs since 2003 had on households and explore the impact of a way back to opportunity cost pricing. |
| Keywords: | energy prices; distortions; subsidies; welfare effects |
| JEL: | H22 Q48 D78 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35725&r=reg |
| By: | Anurag Priyadarshee; Asad K. Ghalib |
| Abstract: | The microfinance sector in India’s state of Andhra Pradesh was recently marred by a series of mishaps that occurred due to extensive lending, which resulted in over-indebtedness and ultimately, defaults. Lending institutions resorted to coercive measures for loan recovery that led to suicides amongst borrowers. In this paper, we explore the reasons that led to such circumstances. We will consider how the widespread operations and omnipresent Self-Help Groups, together with their linkages with banks, attracted private microfinance providers. This, coupled with the absence of adequate regulatory mechanisms, resulted in over-lending to the poor. The paper discusses policy implications of the various regulatory measures that the Government subsequently took to harness and regulate micro-lending practices in the state. It is argued that the regulatory measures initiated to address the issue do not focus on the social structures, i.e., the unequal distribution of the community institutional infrastructure base for delivery of microfinance among different states, and the singular focus of privatesector MFIs on maximizing profits in an inefficiently regulated environment, that gave rise to the current circumstances. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:bwp:bwppap:15711&r=reg |
| By: | Rolf Lüders |
| Abstract: | Este artículo hará un breve recuento histórico del tema de la protección a la libre competencia a nivel internacional y de la lógica de la acción pública para asegurar la libre competencia, para luego centrarse en la experiencia histórica de Chile, que en estricto rigor data en el mejor de todos los casos sólo desde 1959. La tesis es que en un país pequeño como el nuestro la apertura comercial es la política más efectiva para asegurar la libre competencia, sin perjuicio que acciones legales específicas como aquellas que prevé la actual institucionalidad a favor del libre comercio son un complemento indispensable de la política comercial. |
| Keywords: | Economic history, economic regulation, Chile |
| JEL: | N46 L44 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:410&r=reg |