Policy takers or policy makers? The lobbying of global banking regulators

Do financial sector groups act as passive policy takers, or do they ‘shape’ the policies to which they are subject? This article responds to this question with three arguments pertaining to the policy shaping power of the financial industry when it comes to international financial standards. First, industry groups confront a number of additional challenges when it comes to lobbying international regulatory bodies, which tend to be more opaque in their decision making and more difficult to hold accountable when they make unpopular decisions. Second, while these groups are sometimes able to shape financial regulatory policy, the extent of this influence is more partial and contingent than most depictions suggest. The third argument advanced is that since the global financial crisis, business groups have had many of their traditional lobbying tools adversely affected, making lobbying a more uphill battle than before. Financial industry groups are able to influence the governance of their own activities and act as ‘policy shapers’ some of the time, but are less strongly positioned in this role than many existing depictions seem to suggest.     

Competitive Pressure in Transition: A Role for Trade and Competition Policies?

This paper investigates the effects of trade reforms and antitrust enforcement on the pricing behavior of firms, shedding light on the respective contributions of these policy instruments to the shaping of competitive markets. To this end, we use a rich panel data set of more than 25,000 manufacturing firms from Bulgaria, the Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia, spanning a 5-year period. We find a positive and statistically significant relationship between domestic firms’ mark-ups and industry protection, as reflected in MFN and trade-weighted import tariffs. The toughness of competition policy enforcement, captured by the number of final instance decisions delivered by national antitrust authorities and an index developed by the EBRD, has a negative impact of greater magnitude than import penetration. We also test for the significance of enacting major legislative amendments with regard to competition policy in the studied countries, as well as for differential effects in export-oriented and import-competing industries.     

Competition or partnership?: CCT and EC public procurement rules in the single market

This study was carried out to investigate the impact of compulsory competitive tendering (CCT) and the EC procurement rules on small and medium enterprises in one region of the UK. A comparison of purchasing systems between private, utility and public sectors revealed two distinct models of purchasing. At one end of the spectrum is the competitive or adversarial model; at the other end is the partnership sourcing model. Public-sector purchaser-supplier relationships tended towards the competition end while private-sector relationships were nearer the partnership end. These differences are related to the commercial pressures exerted on public authorities by CCT and the EC Procurement Rules.     

Gravity equations: Workhorse or Trojan horse in explaining trade and FDI patterns across time and space?

Gravity equations are a widely used tool in the International Business (IB) literature to explain country-level trade and FDI flows. Against the background of its increased popularity and data availability, a range of commonly made econometric mistakes have recently been discussed in the literature, mostly pertaining to the (omitted) characteristics of countries or country pairs in gravity models. In this paper we complement this literature by focusing on the time-series aspects of gravity models, something that has become crucial with the increased use of panel data. Specifically, we concentrate on the possible non-stationarity of both the dependent variable (trade or FDI flows) and of one or more of the explanatory variables. In this paper we (i) show that there is indeed a problem with the non-stationarity of variables commonly used in gravity equations; (ii) show that not correcting for this yields overestimated results; and (iii) propose an effective solution.     

Declining Competition in Food Retailing: An Opportunity for Consumer Food Cooperatives?

Food cooperatives have become more popular among consumers during the past decade. Although consumers can organize cooperatives for several reasons, economic factors may be more important than indicated by previous research. Specifically, the recent growth in consumer food cooperatives may be associated with declining competition in local food markets. This article reports recent research results on market structure and performance by SMSA that address this hypothesis.     

Customer's angry voice: Targeting employees or the organization?

Poor service encounters have the potential to leave customers feeling angry at the frontline service employee who serves them, angry at the organization, or angry at both parties. The 25 in-depth interviews (Study 1) and experimental work (Study 2) demonstrate how distributive (outcome fairness), procedural (response time) and interactional (treatment received) justice dimensions differentially affect where the customer targets her or his anger, either at the frontline employee or at the organization as a whole. Further investigation reveals sins-of-omission (when the service provider failed to act) and interactional justice mediate the effect of response time on anger at the employee. Interactional justice also partially mediates the effect of outcome fairness on anger at the organization whereas sins-of-omission do not.     

Multinational corporations in Eastern Europe: Welcome trade partners or unwelcome change agents?

In the last two decades, trade between Eastern Europe and the West has grown remarkably. The multinational corporations (MNCs) have played a prominent role by offering the welcome trade benefits of technology transfer, financial and credit resources, and marketing expertise. The MNCs, however, also represent a threat as unwelcome change agents in numerous areas of trade, management, cultural change, and economic functions. Evidence is presented supporting the proposition that the traditional hostility and attitudes of restraint among Eastern bloc countries toward MNCs will have to be tempered. If not, these countries may find themselves squeezed out of the new types of trade and competition emerging in the 1980s between the developed world and nontraditional markets.     

Trade barriers or trade facilitators? The heterogeneous impact of food standards in international trade

Recent research shows that the effect of food standards can be heterogeneous across sectors or countries: they sometimes act as barriers to trade, but in other cases may lead to increased trade. I present empirical evidence on Norwegian seafood exports showing that foreign food standards, measured by sanitary and phytosanitary notifications to the WTO, generally have a negative impact on total exports, the number of exporters and their average exports. However, for fresh seafood, there is a positive counteracting effect. I present a theoretical explanation for this, suggesting that food standards reduce consumer uncertainty about quality and safety and therefore increase demand.     

To bribe or to convince? Political stakeholders and political activities in German multinational corporations

In this paper, the relevance of political stakeholders and political activities in German multinational corporations (MNCs) is examined. The focus is on three main questions: First, which political stakeholders influence the behavior of MNCs? Second, which political activities do MNCs develop to cope with stakeholder interests? Third, how are political stakeholders and political activities influenced by situational conditions?A seemingly unrelated regression (SUREG) analysis of data collected from the largest 19 German MNCs in their home country and in their subsidiaries in China, France, India, Russia, and the US demonstrates that the influence of political stakeholders increases with the size of the MNC. Both the relevance of political stakeholders and the intensity of political activities depend on several country- and firm-specific conditions. Moreover, a strong influence due to the impact of political stakeholders on the intensity of political activities can be observed.     

French textile specialisation in long run perspective (1836–1938): trade policy as industrial policy

Abstract

This article concerns textile industry dynamics. Using a new database covering French international trade between 1836 and 1938, it focuses on France’s specialisation in various textiles. It demonstrates, for the first time, the major influence of trade policy on the French textile trade during the first globalisation. Tariffs appear to be key factors in specialisation, measured by the Lafay Index and intra-industry trade in textiles. By analysing changes in tariffs between textile raw materials and finished textiles and decorrelation between tariffs, we show that an effective trade protection approach was applied by successive French governments in order to sustain the industrial competitiveness of textile firms. Such trade policy slowed down textile de-specialisation in silk and wool fabrics until World War One.     

Do trade policy differences induce sorting? Theory and evidence from Bangladeshi apparel exporters

This paper provides a new heterogeneous firm model for trade where firms differ in their productivity and experience different market demand shocks. The model incorporates the variations in trade policy, trade preferences, and the rules of origin needed to obtain them that are faced by Bangladeshi garment exporters to the US and EU. We estimate firm's productivity using an extension of the Olley Pakes procedure that accounts for the biases arising from both demand shocks and productivity being unobserved. Predictions of the model are then tested non-parametrically and are shown to be supported empirically.     

Competition and Environmental Policy in the EU: Old Foes,New Friends?

European competition authorities consider environmental and competition policy to be complementary, as each has the objective of improving social welfare. Naturally, one would imagine that environmental considerations have already been accounted for in competition policy practice, but thus far, only in the case of voluntary environmental agreements. This paper analyzes the extent to which the two types of policy are complementary by examining the legal framework of competition policy, voluntary environmental agreements and three competition cases with equal relevance to the environment and then examines the basic theoretical economic observation that less competition implies lower pollution levels relative to more competition. This trade-off between the benefits of reduced emissions on the one side and increased competition on the other implies that disregarding environmental considerations in the implementation of competition policy entails a negative externality, which can be eliminated if environmental considerations are internalized in competition policy. The impact of the externality is found to depend on the emission level, the emission damage, and market size. Further, this implies that if competition authorities were to adopt a broad definition of the relevant market in competition cases, then environmental considerations would play a limited role in competition policy, whereas a narrow definition implies that environmental considerations should have a much more important place than competitive considerations in competition policy.     

Dove or Hawk? Characterizing monetary policy regime switches in India

The past two decades have witnessed a worldwide move by emerging markets to adopt explicit or implicit inflation targeting regimes. A notable and often discussed exception to this trend, of course, is China which follows a pegged exchange rate regime supported by capital controls. Another major exception is India. It is not clear how to characterize the monetary regime or identify the nominal monetary anchor in India. Is central bank policy in India following a predictable rule that is heavily influenced by a quasi inflation target? And how has the monetary regime been affected by the gradual process of financial liberalization in India? To address these points, we investigate monetary policy regime change in India using a Markov switching model to estimate a time-varying Taylor-type rule for the Reserve Bank of India. We find that the conduct of monetary policy over the last two decades can be characterized by two regimes, which we term ‘Hawk’ and ‘Dove.’ In the first of these two regimes, the central bank reveals a greater relative (though not absolute) weight on controlling inflation vis-à-vis narrowing the output gap. The central bank however was found to be in the “Dove” regime about half of our sample period, focusing more on the output gap and exchange rate targets to stimulate exports, rather than moderating inflation. India thus seems to be following its own direction in the conduct of monetary policy, seemingly not overly influenced by the emphasis on quasi-inflation targeting seen in many emerging markets.     

Do we need deeper trade agreements for GVCs or just a BIT?

The paper investigates two policies geared towards stimulating and shaping global value chains (GVCs), namely deep regional trade agreements (DRTAs) and bilateral investment treaties (BITs). In an augmented gravity model, we test the impact of both policies on a variety of trade in value added indicators. We find that both policies are likely to increase GVC trade, although their transmission channels differ. While backward linkages are stimulated through both BITs and DRTAs, forward linkages respond only to DRTAs. The estimates suggest that negotiating a DRTA with investment provisions has a higher impact on trade in value added than signing a shallow RTA and a separate BIT.     

The effect of domestic and foreign trade coordination on technological innovation: complements or substitutes?

Based on the theory of technology spillover in international trade, this paper discusses the technological innovation effect of trade by taking the influence of domestic trade into account. Under the constraint of the production possibility frontier, there is either complementarity or substitutability between domestic and foreign trade. It must be decided whether resources should be concentrated in one of the sectors (trade specialization) or instead allocated equally (trade equalization) between the two sectors. This paper firstly discusses how domestic trade and foreign trade work together to influence technological innovation, and how trade equalization and specialization affect different types of innovation. Using a provincial-level panel dataset from 2007 to 2015 in China, this paper constructs the indicators of domestic and foreign trade linkage and examines the impact of trade on innovation. The findings show that trade equalization mainly promotes incremental innovation, while trade specialization improves radical innovation. Thus, in the area of incremental innovation, attention should be paid to the equalized development of domestic and foreign trade, while in areas pursuing radical innovation, emphasis should be put on the specialization of the trade sector, avoiding equal allocation of resources to the two sectors.     

Understanding the flow of health policy in the United States: self-interest or ignorance?

Health policy decisions are made in an uneven manner, eluding attempts to explain developments with a coherent theory. Numerous explanations have been suggested to explain individual policy actions, but recently Feldstein has attempted a broader formulation. This Self-Interest Model of Health Policy, however, assumes full knowledge of a policy's benefits and costs. This is an unrealistic assumption, and the model is unable to explain important decisions that have been made in three areas: insurance for long-term care, universal access, and efficiency incentives. This article presents a broader, more powerful formulation of the Feldstein model, specifically incorporating public ignorance as a policy determinant. The vital role of education and health policy research is underscored.     

Bank finance for private firms in China: Does political capital still pay off?

This paper investigates whether political connection can help private firms in China gain access to commercial bank loans. Based on data from the 2012 Nationwide Survey of Private Enterprises in China, it finds that: (i) politically connected firms were more likely to have access to commercial bank loans; (ii) the mechanism for this better access might be that, on the one hand, political connection was used by private firms as a tool to overcome discrimination and/or information asymmetry in the loan market; on the other hand, political connection was seen by banks as a signal of creditworthiness; and (iii) the importance of political connection seems to lie in the connection to the power to govern rather than the mere opportunity to influence policy.     

Start-up incentives: Entrepreneurship policy or active labour market programme?

As several European governments develop new start-up programmes during recessions, the appropriateness of these policies recently has become a hot policy issue. This study suggests that the contribution of these incentives is dubious, if aimed to combat economic and jobs crises as part of the entrepreneurship policy, and can be shaped by various country-specific factors, such as the economic situation and the stringency of labour laws. To provide support for these claims, this paper investigates the underlying determinants of an individual's decision to switch from unemployment to self-employment in Europe and stresses the need to devote special attention to the role of three essential dimensions: (i) the existing heterogeneity within self-employment, by considering self-employed individuals who hire employees (employers) and self-employed individuals without personnel (own-account workers) as separated groups; (ii) the effects of different measures of social capital and network contacts, as forms of micro level institutional factors; and (iii) the explanatory power of cross-country differences in the state of the economy, expenditure on start-up incentives, and the stringency of labour laws, as forms of macro level institutional factors. This study has useful theory and policy implications for entrepreneurship development.