Found 553 article(s) in category 'Regulation'

Have big banks gotten safer?

Have big banks gotten safer? Lawrence Summers, September 15, 2016, Paper, “Since the financial crisis, there have been major changes in the regulation of large financial institutions directed at reducing their risk. Measures of regulatory capital have substantially increased; leverage ratios have been reduced; and stress testing has sought to further assure safety by raising levels of capital and reducing risk taking. Standard financial theories would predict that such changes would lead to substantial declines in financial market measures of risk. For major institutions in the United States and around the world and midsized institutions in the United States, we test this proposition using information on stock price volatility, option-based estimates of future volatility, beta, credit default swaps, earnings-price ratios, and preferred stock yields.Link

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Capital versus Output Subsidies: Implications of Alternative Incentives for Wind Energy

Capital versus Output Subsidies: Implications of Alternative Incentives for Wind Energy. Joseph Aldy, September 2016, Paper “We examine the choice between using capital and using output subsidies to promote wind energy in the United States. We exploit a natural experiment in which wind farm developers were unexpectedly given the opportunity to choose between an upfront investment subsidy and an output subsidy in order to estimate the differential impact of these subsidies on project productivity. Using matching and instrumental variables, we find that wind farms choosing the capital subsidy produce 5 to 12 percent less electricity per unit of capacity than wind farms selecting the output subsidy and that this effect is driven by incentives generated by these subsidies rather than selection. We then use these estimates to evaluate the public economics of U.S. wind energy subsidies. Link

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Efficient Warnings, Not “Wolf or Puppy” Warnings

Efficient Warnings, Not “Wolf or Puppy” Warnings. Richard Zeckhauser, September 2016, Paper, “Governments often require that products carry warnings to inform people about risks. The warnings approach, as opposed to the command and control approach to risk regulation, functions as a decentralized regulatory mechanism that empowers individuals to make decisions that take into account their own circumstances and preferences. Thus, individuals will be aware of the risks and the value of taking precautions, and they may avoid a product that others consume if they find the risk unacceptable. Ideally, warnings would allow individuals to assess both their personal level of risk and the benefits they will receive from another unit of consumption. Then those receiving positive expected benefits will consume more; those receiving negative net benefits will curtail their consumption.Link

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Would Reducing the US Corporate Tax Rate Increase Employment in the United States?

Would Reducing the US Corporate Tax Rate Increase Employment in the United States? Martin Feldstein, 2016, Book Chapter. “Reducing the corporate tax rate and changing the rules for taxing the foreign earnings of US corporations would have many favorable effects, including an increase of employment in the United States.  First, a brief description of the current corporate tax arrangements. The federal government now imposes a statutory tax rate on corporate profits of 35 percent, the highest tax rate among all the industrial countries of the world. In addition, the individual states levy corporate tax rates that average 9 percent. Since that state tax is a deductible expense in calculating income subject to the federal corporate tax, the combined tax rate is approximately 40 percent.Link

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Borrowing Requirements, Credit Access, and Adverse Selection: Evidence from Kenya

Borrowing Requirements, Credit Access, and Adverse Selection: Evidence from Kenya. Michael Kremer, July 18, 2016, Paper, “We examine the potential of asset-collateralized loans in low-income country credit markets. When a Kenyan dairy cooperative exogenously replaced high down payments and joint liability requirements with loans collateralized by the asset itself – a large water tank- loan take-up increased from 2.4% to 41.9%. In contrast, substituting joint liability requirements for deposit requirements had no impact on loan take up. There were no repossessions among farmers allowed to collateralize 75% of their loans, and a 0.7% repossession rate among those offered 96% asset collateralization. A Karlan-Zinman test based on waiving borrowing requirements ex post finds evidence of adverse selection with very low deposit requirements, but not of moral hazard.Link

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Attention to Distribution in U.S. Regulatory Analyses

Attention to Distribution in U.S. Regulatory Analyses. Lisa Robinson, James Hammitt, Richard Zeckhauser, Summer 2016, Paper, “Scholars, decision makers, interest groups, and other concerned citizens are often interested in the distribution of regulatory impacts. To what extent does a regulation benefit or harm those who have high or low incomes, are in good or poor health, are more or less vulnerable to disease, or are very young or very old? Does the regulation disproportionately affect members of minority or other disadvantaged groups? Determining whether and how to address these questions raises thorny normative issues about how to weigh the impacts on different groups as well as the choice of policy instruments. Yet to address these normative concerns, we first need data on impacts—data that are rarely readily available.Link

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Bank Stress Tests Won’t Save Us From Financial Crisis

Bank Stress Tests Won’t Save Us From Financial Crisis. Hal Scott, June 23, 2016, Video. “It’s a big week for Wall Street. Minutes before polls close in the U.K. on the Brexit vote Thursday, the Fed is set to release its first round of stress-test results, followed by a second round of results next Wednesday. The tests are used to determine whether or not the largest banks could weather a major crisis, such as Britain leaving the EU, and whether they can boost their dividend payout to shareholders.Link

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No More Dizzying Earnings Adjustments

No More Dizzying Earnings Adjustments. Robert Pozen, June 21, 2016, Opinion. “Whether Microsoft’s $26.2 billion purchase of LinkedIn makes sense might depend on where you look. Glancing at LinkedIn’s press release for the full year 2015, you will see a prominent projection for “adjusted” earnings this year of $950 million. Yet if you closely read the press release and its appendix, you can figure out that the company’s projected 2016 earnings under GAAP, the generally accepted accounting principles required in securities filings, are minus $240 million.Link

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How EU Overreach Pushed Britain Out

How EU Overreach Pushed Britain Out. Martin Feldstein, June 18, 2016, Opinion. “A thoughtful British friend of mine said to me a few days before the United Kingdom’s “Brexit” referendum that he would vote for Remain because of his concern about the economic uncertainty that would follow if the UK left the European Union. But he added that he would not have favored Britain’s decision to join the EU back in 1973 had he known then how the EU would evolve.Link

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Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation

Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation. Rafael Di Tella, June 11, 2016, Paper, “We analyze the role of people’s beliefs about the rich in the determination of public policy. A question we study is the desirability of government-private sector meetings, a variable we argue is connected to State capacity. Survey respondents primed with negative views about business leaders want fewer of these meetings, as well as higher taxes to the top 1% and more regulation. We also study how these effects change when subjects are primed with negative views about government. A model helps interpret these findings.Link

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