In an industry where naturally monopolistic and competitive activities are vertically related, should the natural monopolist be allowed also to operate in the deregulated competitive sector? This paper assumes that monopoly pricing behavior is regulated and, therefore, the effect of vertical integration on the task of regulation is central to the analysis. When vertical integration by the monopolist is allowed, the regulator's task is made harder as the monopolist has anticompetitive incentives to raise rivals' costs. On the other hand, integration may lead to less duplication of fixed costs. The overall welfare comparison between separation and integration is ambiguous

The effects of various regulations on hospital costs are estimated using a two decade long panel data set which spans the initiation, and in some instances the repeal, of various forms of hospital regulation. The long panel fosters two improvements over previous research. First, as state hospital cost levels may affect states' incentive to regulate, fixed effect estimators alleviate omitted variable bias derived from the states' regulatory discretion. Second, the long panel permits the estimation of many different regulatory program effects, but also facilitates the analysis of potential regulatory program interaction. The empirical results suggest that previous studies have exaggerated regulatory cost savings: although some interaction effects are indicated, hospital costs appear unresponsive to most regulatory programs

This survey assesses evidence on the linkage between environmental regulation and competitiveness, and finds little support for the conventional wisdom that environmental regulations have large adverse effects on competitiveness. Studies examining the effects of environmental regulations on net exports, overall trade flows, and plant-location decisions have produced estimates that are small, statistically insignificant, or not robust. We also find no systematic evidence supporting the revisionist hypothesis that environmental regulations stimulate innovation and improved competitiveness. Overall, the evidence suggests that the truth regarding the relationship between environmental protection and international competitiveness lies in between the extremes of the current debate

This study investigates the effects of state taxes and regulation on an organizational structure decision for expanding property-casualty insurers (subsidiary versus license). Tests are conducted of the relation between the organizational structure of 2,335 property-casualty insurers and state tax and regulatory conditions in 1991. Evidence is provided that property-casualty insurers structure their cross-state expansion to mitigate both state tax and regulatory costs

This article hypothesizes that the level of managerial ownership affects both the informativeness of earnings and the magnitude of discretionary accounting accrual adjustments. The hypothesis draws on the theory of the firm, and exploits: (1) separation of ownership from control of economic decisions, (2) the extent and consequences of accounting-based contractual constraints, and (3) managers' incentives in selecting and applying accounting techniques. Results show managerial ownership is positively associated with earnings' explanatory power for returns and inversely related to the magnitude of accounting accrual adjustments. Moreover, ownership is less important for regulated corporations, suggesting regulation monitors managers' accounting choices

When sustained growth depends on establishing an indivisible infrastructure for directly productive activities (DPAs) both discrete and marginal departures from optimal growth can undermine the dynamic efficiency of the market. Producers' anticipations of paying monopoly fees for infrastructure services dampen their incentive to invest in DPAs and may prevent the economy from reaching a minimal level of activity that would justify investment in a large indivisible infrastructure; and potential investors in infrastructure may be intimidated by the prospect of expropriatory regulation. Thus a credible prior commitment to effective but fair regulation is necessary for achieving optimal growth. But it may not be sufficient. Low-level expectations before the infrastructure is established can be self-fulfilling, indicating a role for coordinative industrial policy. Investment subsidies, even in conjunction with regulation, cannot induce an efficient equilibrium

This study investigates the direct link between regulatory enforcement actions and the shrinkage of bank loans to sectors likely to be bank dependent. We focus on New England because that region has experienced both the widespread application of formal regulatory actions and substantial reductions in new lending by banks. Controlling for weakness in loan demand, previous studies have been able to attribute part of this bank shrinkage to loan supply, with the degree of a bank’s shrinkage related to its capital-to-asset ratio. In this study, we further partition the shrinkage due to loan supply into the component due to explicit regulatory enforcement actions and that due to a voluntary response by bank management to low capital-to-asset ratios. We find that banks with formal actions shrink at a significantly faster rate than those without, even after controlling for differences in capital-to-asset ratios. Furthermore, much of the reduced lending has been in loan categories containing primarily bank-dependent borrowers, indicating that the capital crunch has resulted in a credit crunch.

This paper extends the standard single-period model of deposit insurance to a mutliperiod setting. It incorporates a variety of features describing bank and regulator behavior, such as endogenous capital adjustments and regulatory forbearance. Budgetary costs of deposit insurance are found using contingent claims techniques. We show how the market value of a bank′s net worth, a critical input of the model, can be estimated using accounting cash flow data and information from aggregate bank stock prices. Using Call Report data on U.S. commercial banks, we provide empirical estimates of the aggregate cost of deposit insurance under alternative regulatory policies. Journal of Economic Literature Classification Numbers: G13, G21, G28, H61