Competition Policy: What are the Costs and Benefits of Measuring its Costs and Benefits?

Summary  Competition authorities are increasingly measuring the effects of their enforcement actions, seeking a robust justification for the proliferation of competition policy. We highlight the importance of identifying the right counterfactual against which to measure effects, and set out the relevant categories of costs and benefits. We then explore how a balance can be struck between the benefits and inherent limitations of these measurement exercises. Relatively crude analyses of cartel action benefits can be sufficient to achieve public legitimacy for competition policy. Assessing the effects of merger and conduct inquiries is often ambiguous, but could be used to improve decision-making processes. Director and Managing Consultant, respectively, at Oxera, Oxford and London. The valuable comments of Fod Barnes, Kerry Hughes and an anonymous referee are gratefully acknowledged. The opinions expressed in this article are those of the authors alone.     

A note on measuring political participation in comparative research

This article presents an application of Prezeworski and Teune's so-called “identity-equivalence method” to a large set of indicators of political participation. By relaxing commonly held assumptions about necessary distinctions among types of participation, it is found that the distinction between “conventional” and “unconventional” modes of participation is unnecessary, while the distinction between “government” and “nongovernment” has some merit. The findings also lend further support to the claims of Prezeworski and Teune that the identity-equivalence method is preferable to the identical indicator method.     

Socially Responsible Investing and Climate Change: Contradictions and Challenges

This article explores the contradiction between the articulated investment policies, screening criteria or ethical charters of socially responsible investment funds and their actions demonstrated by their portfolio selection practice. The paper provides a background to socially responsible investment and Australia's contribution to greenhouse gas emissions. A discussion of renewable energy options lays the foundation for our main assertion: that this set of possible alternatives provides some new and more environmentally robust options that will better complement the underlying philosophy of funds in the socially responsible investment sector.     

The Cost of Capital of Cross‐listed Firms

This paper analyses the cost of capital of firms with foreign equity listings. Our purpose is to shed light on the question whether international and domestic asset pricing models yield a different estimate of the cost of capital for cross‐listed stocks. We distinguish between (i) the multifactor ICAPM of Solnik (1979) and Sercu (1980) including both the global market portfolio and exchange rate risk premia and (ii) the single factor domestic CAPM. We test for the significance of the cost of capital differential in a sample of 336 cross‐listed stocks from nine countries in the period 1980–99. Our hypothesis is that the cost of capital differential is substantial for firms with international listings, as these are often large multinationals with a strong international orientation. We find that the asset pricing models yield a significantly different estimate of the cost of capital for only 12% of the cross‐listed companies. The size of the cost of capital differential is around 50 basis points for the US, 80 basis points for the UK and 100 basis points for France.     

Explaining Firm Employment Growth: Does Location Matter?

This paper addresses the question to what extent the location of a firm can be regarded as having an influence on the performance of a firm as measured by employment growth. While in theory it is widely acknowledged that `location' should be considered as a relevant growth determinant, empirical research has so far mainly focused on firm-internal factors. The question raised in this paper is empirically verified by means of an econometric model based on a data set of circa 35,000 establishments located in the northern part of the Netherlands during the period 1994–1999. The model includes several measurements of location characteristics like the population level and growth, employment growth, spatial specialisation and cluster indicators, type of enterprise zone, and accessibility while controlling for firm-associated factors such as size, age, and business activity. Based on the fact that we find several significant coefficients we conclude that `location matters' but that the effect differs by type of economic activity.     

On Labour Market Policies and Aggregate Unemployment Outflows

This paper is interested in the modelling of the relationship between active and passive labour market policies and the aggregate unemployment outflow rate. Our model is based on a matching function and includes a simple representation of the competition between various groups of job searchers. The empirical analysis uses Belgian data. Faced with variables that are often integrated of order 1 according to the usual tests but which cannot strictly speaking be integrated, we contribute to an important methodological debate by comparing the conclusions of a classical econometric analysis and a cointegration approach.     

Principles for a European Union''s Public Debt

The EU has neither the power to tax nor the right to run a public debt. We analyze if the EU should receive the right for public indebtedness. We make use of the normative theory of public indebtedness and of positive political economy analysis. Our normative analysis identified specific cases for an appropriate use of public indebtedness. According to the political economy analysis, a misuse of public debt may be possible. As the implementation of strict constitutional constraints can limit this misuse, we propose the assignment of a right to public borrowing to the EU within tight constitutional restrictions.     

Protection for sale with imperfect rent capturing

Abstract .  Grossman and Helpman (1994) explain tariffs as the outcome of a lobbying process. In most empirical implementations of this framework protection is instead measured using non-tariff barriers. Since tariffs allow the government to fully capture the rents from protection, while non-tariff barriers do not, the existing parameter estimates of the protection for sale model are likely to be biased. To address this problem, we augment the framework by considering instruments that allow partial capturing. Our specification is supported by the data, where we find that only 72–75% of the rent from protection is appropriated by the government.     

The Recognition and Timing of Deferred Tax Liabilities

Abstract:   This paper examines the characteristics of firms that account for deferred tax liabilities related to government investment grants under an extended adoption timing period. Not only the recognition but also the timing decision is associated with changes in future performance and changes in the debt structure. Recognisers outperform non‐recognisers in the future, while early recognition is related to post recognition performance but only for those firms that currently perform well. Changes in the balance sheet structure are also related to both decisions. Firms with recent increases in the debt level tend to postpone recognition, while currently well‐performing firms that increase their future debt level are less likely to recognise deferred taxes.