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Does White House Regulatory Review Produce a Chilling Effect and "OIRA Avoidance" in the Agencies?
Alex Acs & Charles Cameron
Presidential Studies Quarterly, September 2013, Pages 443-467
Abstract:
What effect does regulatory auditing by the Office of Information and Regulatory Affairs (OIRA) have on the production of regulations in the agencies? In particular, does targeting an agency for heavy regulatory auditing inhibit its production of regulations, a "chilling" effect? Does heavy auditing encourage it to substitute multiple small regulations in place of single large one, "OIRA avoidance"? We present an early empirical analysis of these questions by estimating regulation production functions for federal agencies, using data from the Unified Agenda from 1995 to 2010. We attempt to distinguish the differential effects of regulatory auditing from appointments into the agencies, leveraging off exogenous variation created by independent regulatory commissions. Our data uncover no evidence of a chilling effect in the production of economically significant regulations due to the Bush administration's regulatory auditing, relative to the Clinton or early Obama administrations. Nor do we find any evidence of OIRA avoidance. We do find some evidence that the Bush administration reduced the production of noneconomically significant regulations overall. However, the effect appears to be due to appointments in the agencies. Overall, the results raise questions about the efficacy of presidential efforts to control the regulatory state and how best to evaluate those efforts.
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An Activity-Generating Theory of Regulation
Joshua Schwartzstein & Andrei Shleifer
Journal of Law and Economics, February 2013, Pages 1-38
Abstract:
We propose an activity-generating theory of regulation. When courts make errors, tort litigation becomes unpredictable and as such imposes risk on firms, thereby discouraging entry, innovation, and other socially desirable activity. When social returns to activity are higher than private returns, it may pay the society to generate some information ex ante about how risky firms are and to impose safety standards based on that information. In some situations, compliance with such standards should entirely preempt tort liability; in others, it should merely reduce penalties. By reducing litigation risk, this type of regulation can raise welfare.
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Stanley Besen & Mark Israel
Information Economics and Policy, forthcoming
Abstract:
The Internet has evolved from a "hierarchy" - in which interconnection was achieved by having Internet Service Providers (ISPs) purchase transit services from top-level backbones and top-level backbone providers engage in direct settlement-free peering - to a "mesh" in which peering occurs among a much larger number of participants and some peering arrangements involve payments from one peer to another. In this new environment, backbone providers, ISPs, and suppliers of content have a far wider array of interconnection alternatives, both technical and financial, than they did only a short time ago. As is often the case, the introduction of new alternatives and contractual arrangements has led to calls to regulate which alternatives and arrangements are acceptable. In this paper, we explain why such regulation would be harmful, as it would (i) reduce the incentives of industry participants to minimize total costs; (ii) lead to higher access prices to end users; (iii) result in prices that do not adequately reflect costs; and (iv) create regulatory inefficiencies. We also explain why the alternative interconnection arrangements to which Content Delivery Networks (CDNs) (and their content provider clients) and ISPs generally have access already impose limits on the exercise of market power, thus obviating any need for regulation.
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Did Age Discrimination Protections Help Older Workers Weather the Great Recession?
David Neumark & Patrick Button
NBER Working Paper, July 2013
Abstract:
We examine whether stronger age discrimination laws at the state level moderated the impact of the Great Recession on older workers. We use a difference-in-difference-in-differences strategy to compare older workers in states with stronger and weaker laws, to their prime-age counterparts, both before, during, and after the Great Recession. We find very little evidence that stronger age discrimination protections helped older workers weather the Great Recession, relative to younger workers. The evidence sometimes points in the opposite direction, with stronger state age discrimination protections associated with more adverse effects of the Great Recession on older workers. We suggest that this may be because stronger age discrimination laws protect older workers in normal times, but during an experience like the Great Recession severe labor market disruptions make it difficult to discern discrimination, weakening the effects of stronger state age discrimination protections.
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Licensing One of the World's Oldest Professions: Massage
Robert Thornton & Edward Timmons
Journal of Law and Economics, May 2013, Pages 371-388
Abstract:
In this paper, we analyze the development of occupational regulation of massage therapists in the United States as well as the effects of state licensing and certification on their earnings and numbers. Our results suggest that massage therapists working in states with licensing receive an earnings premium of as much as 16.2 percent. We also find some evidence that licensing seems to reduce the number of massage therapists. We find less convincing evidence that certification has had similar effects. We argue that, taken together, our results suggest that licensing restricts entry at the expense of consumers and that its effects are less likely to be explained by other competing factors.
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Raphaël Franck, Noel Johnson & John Nye
Explorations in Economic History, forthcoming
Abstract:
The growth of the modern regulatory state is often explained in terms of an unambiguous increase in regulation driven by the actions of central governments. Contrary to this traditional narrative, we argue that as governments increased state capacity, they often strove to weaken the autarkic tendencies of regional laws, thereby promoting greater trade and a more integrated market. To show this, we exploit a quasi-natural experiment generated in the French wine industry by a law implemented on 1 January 1901 which lowered and harmonized various local tax rates. We demonstrate that high internal taxes on wine, set by regional governments, discouraged trade and protected small producers of expensive and low quality wines. We then trace how the political response to this tax decrease led to increases in wine regulation.
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The macroeconomic effects of the 35-h workweek regulation in France
Zaichao Du, Hua Yin & Lin Zhang
B.E. Journal of Macroeconomics, June 2013
Abstract:
The 35-h workweek regulation, fully adopted in France in 2000, has been one of the most significant regulatory shocks imposed on any large economy. Yet the effects of the regulation remain controversial. In this paper, we evaluate the effects of the 35-h workweek regulation on unemployment and real GDP in France using a counterfactual analysis. We exploit the dependence of unemployment and GDP growth among different economic entities and construct the counterfactuals using data from countries other than France. We find that the 35-h workweek regulation reduced France's annual unemployment rate by 1.58% and raised the real GDP by 1.36% from 2000 to 2007.
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Uriel Haran
Management Science, forthcoming
Abstract:
Most legal systems in the world follow the principle of corporate personhood, which grants organizations the same legal status as natural persons. Although debate over the notion of corporate personhood has been fierce, whether and how this principle is applied in people's beliefs and intuitions has yet to be empirically examined. This work addresses the gap in the literature, in the context of formal contracts. While contracts are typically seen as either morally binding promises or morally neutral business instruments, the data presented here show that contracts of individuals are associated more strongly with promises than are contracts of organizations. As a result, breach of contract by an individual is seen as a moral transgression. The same behavior by an organization, however, is viewed more as a legitimate business decision. This paper also finds that contractual obligations should be phrased in "promise" terms to eliminate this person-organization discontinuity.
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New Deal or No Deal in the Cotton South: The Effect of the AAA on the Agricultural Labor Structure
Briggs Depew, Price Fishback & Paul Rhode
Explorations in Economic History, forthcoming
Abstract:
The Agricultural Adjustment Act has often been held responsible for the rapid reduction of share tenants and sharecroppers (laborers paid shares of the crop) during the 1930s. However, this conclusion has come with limited empirical backing. We shed new light on the consequences of this New Deal policy by empirically testing the role that the AAA cotton reduction program had on the displacement of share tenants and sharecroppers in the Cotton South. The results suggest that the AAA played a significant role in the displacement of black and white sharecroppers and black managing tenants even though it was a violation of AAA contracts for landlords to displace these workers.
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Kenneth Corts
Journal of Law and Economics, May 2013, Pages 453-486
Abstract:
This paper explores the differences between policies prohibiting false claims about product quality and policies requiring adequate prior testing to substantiate specific claims of quality. It develops a model in which firms have private information about their type - represented by their probability of having a high-quality product - and can acquire additional private information about their product quality through costly testing and learning. Penalties for false claims and for unsubstantiated claims create an opportunity for firms to credibly reveal their information and for signaling to emerge in equilibrium. I show that the two kinds of penalties affect the possibility of signaling in different ways and that the mandatory substantiation requirement in many circumstances improves buyer information and social welfare beyond what is achieved by a ban on false claims alone.
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Signe-Mary McKernan, Caroline Ratcliffe & Daniel Kuehn
Journal of Economic Behavior & Organization, forthcoming
Abstract:
This study uses new nationally representative data from the 2009 National Financial Capability State-by-State Survey to examine the relationship between state-level alternative financial service (AFS) policies (prohibitions, price caps, disclosures) and consumer use of five AFS products: payday loans, auto title loans, pawn broker loans, refund anticipation loans, and rent-to-own transactions. Looking across products rather than at one product in isolation allows a focus on patterns and relationships across products. The results suggest that more stringent price caps and prohibitions are associated with lower product use and do not support the hypothesis that prohibitions and price caps on one AFS product lead consumers to use other AFS products.
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Cementing the Case for Collusion under the National Recovery Administration
Mark Chicu, Chris Vickers & Nicolas Ziebarth
Explorations in Economic History, forthcoming
Abstract:
Macroeconomists have long debated the aggregate effects of anti-competitive provisions under the "Codes of Fair Conduct" promulgated by the National Industrial Recovery Act (NIRA). Despite the emphasis on these provisions, there is only limited evidence documenting any actual effects at the micro level. We use a combination of narrative evidence and a novel plant-level dataset from 1929, 1931, 1933, and 1935 to study the effects of the NIRA in the cement industry. We develop a test for collusion specific to this particular industry. We find strong evidence that before the NIRA, the costs of a plant's nearest neighbor had a positive effect on a plant's own price, suggesting competition. After the NIRA, this effect is completely eliminated, with no correlation between a plant's own price and its neighbor's cost.