market power versus regulatory power in the spanish electricity system 1973 1996 this study not only establishes that the institutional changes the change of political regime and economic changes the energy crisis that occurred during the 70s and 80s had an important effect on business strategies within the spanish electricity sector but above all it shows how the resulting regulatory model was not the product of any clearly defined plan on the part of the spanish authorities as the majority of authors seem to implicitly or explicitly maintain but rather it arose from the dialectical interaction between companies which resisted losing the power of the market and institutions which in order to define any medium term energy policy in the future european domestic electricity market required an increase in their regulatory power

the new electricity market of singapore regulatory framework market power and competition abstract this study examines whether the new electricity market of singapore nems is functioning at a workable level of competition the generation market of the nems appears highly concentrated by a four firm concentration ratio or the herfindahl hirschman index however other measures of market power present that the nems is working at close to a competitive market first there seems to be a number of effective competitors in the market second supply margin assessment and residual supply index support that the market is competitive though there are some possibilities in which the largest generator or a few large generators jointly could still have market power third the lerner index of the nems shows that the generation market is fairly competitive and the lerner index adjusted with an industry level price elasticity of demand implies that there has not been much exercise of market power finally vesting contracts a contractual obligation of a specified quantity of electricity supply to the market have appeared to be a strong and effective tool to mitigate market power in the nems the vesting contracts are considered the force behind the lowering in the average uniform singapore electricity price and the lerner index in 2004

asymmetric benchmarking in compensation executives are rewarded for good luck but not penalized for bad abstract principal agent theory suggests that a manager should be paid relative to a benchmark that removes the effect of market or sector performance on the firm s own performance recently it has been argued that such indexation is not observed in the data because executives can set pay in their own interests that is they can enjoy pay for luck as well as pay for performance we first show that this argument is incomplete the positive expected return on stock markets reflects compensation for bearing systematic risk if executives pay is tied to market movements they can only expect to receive the market determined return for risk bearing this argument however assumes that executive pay is tied to bad luck as well as to good luck if executives can truly influence the setting of their pay they will seek to have their performance benchmarked only when it is in their interest namely when the benchmark has fallen using industry benchmarks we find significantly less pay for luck when luck is down in which case pay for luck would reduce compensation than when it is up these empirical results are robust to a variety of alternative hypotheses and robustness checks and they suggest that the average executive loses 25 45 less pay from bad luck than is gained from good luck

the motivation and bias of bureaucrats many individuals are motivated to exert effort because they care about their jobs rather than because there are monetary consequences to their actions the intrinsic motivation of bureaucrats is the focus of this paper and three primary results are shown first bureaucrats should be biased second sometimes this bias takes the form of advocating for their clients more than would their principal while in other cases they are more hostile to their interests for a range of bureaucracies those who are biased against clients lead to more efficient outcomes third self selection need not produce the desired bias instead selection to bureaucracies is likely to be bifurcated in the sense that it becomes composed of those who are most preferred by the principal and those who are least preferred

efficiency and deregulation of the electricity market in singapore this study examines production efficiency of electricity generation in the new electricity market of singapore nems where deregulation is currently proceeding singapore is reliant on foreign direct investments and exports so competition from countries with lower costs such as china and india is exerting pressure on the government to reduce the costs of doing business here electricity cost is one of these deregulation is believed to be able to bring about lower electricity costs due to the various efficiency gains possible this study concerns itself mainly with production efficiency and attempts to calculate possible production efficiency gains by using linear programming model production efficiency gains are quantified by the base case scenario of continued regulation versus four counterfactual deregulation scenarios the results indicate that cost gains could be about eight per cent of current production cost and this is possibly a lower bound estimate however whether the purported efficiency gains are realized is to be seen as the deregulation proceeds

management of bureaucrats and public service delivery evidence from the nigerian civil service we study how the management practices bureaucrats operate under relate to the quantity and quality of public services delivered we do so exploiting data from the nigerian civil service for 4700 public sector projects we have hand coded independent engineering assessments of project completion rates and delivered quality we supplement this with a survey eliciting management practices for bureaucrats in the 63 civil service organizations responsible for these projects building on bloom and van reenen 2007 management practices matter a one standard deviation increase in bureaucrat s autonomy signi cantly increases project completion rates by 18 a one standard deviation increase in practices related to incentives monitoring of bureaucrats signi cantly lowers project completion rates by 14 we show the negative impacts of incentive provision monitoring arise because bureaucrats multi task and incentives are poorly targeted and because these management practices capture elements of subjective performance evaluation that leave scope for dysfunctional responses from bureaucrats to support a causal interpretation of our ndings we document the determinants of management practices and examine channels through which organizations might endogenously adjust management practices our results provide novel insights into how changes in how bureaucrats are managed can have potentially large impacts on public service delivery in a developing country context jel classi cation j33 j38 o20

regulatory attitudes and environmental innovation in a model combining internal and external r d the extent to which environmental regulatory institutions are either green or brown impacts not just the intensity of regulation at any moment but also the incentives for the development of new pollution control technologies we set up a strategic model of r d in which a polluter can deploy technologies developed in house or license technologies developed by specialist outsiders an eco industry polluters exert r d effort and may even develop redundant technologies to improve the terms on which they procure technology from outside we find that while regulatory bias has an ambiguous impact on the best available technology strategic delegation to systematically biased regulators can improve social welfare

a market microstructure explanation for predictable variations in stock returns following large price changes prior empirical evidence of predictable variations in stock returns following large price changes is found to be at least in part driven by the sample selection bias arising from the systematic movement of closing transaction prices within the bid ask spread by using the average of the bid ask prices in the sample selection process the price reversal on the day following the events day 1 disappears for a short run period after day 1 however systematic abnormal return patterns are still observed these short run price reversals persist even after controlling for the influence of systematic trading patterns around the events however investigation of contrarian investment profits from these short run price reversals shows that the average abnormal returns are not large enough to cover the transaction price movement between the bid and ask prices

generating efficiency economic and environmental regulation of public and private electricity generators in spain abstract economic regulation of firms with market power has placed increasing emphasis on incentive based regulation such as price caps we focus on the effect of regulation as distinct from ownership and identify the effect of two different regulatory schemes on both publicly and privately owned spanish electricity generators publicly owned generators were more efficient under cost of service regulation private but not public firms responded to incentive regulation by increasing efficiency bringing their productivity to similar levels we introduce some novelty in modelling efficiency including three pollutants and declared plant availability as outputs and we test for the effect of environmental regulation in reducing pollutants

benchmarking across borders electoral accountability and the necessity of comparison when the economy in a single country contracts voters often punish the government when many economies contract voters turn against their governments much less frequently this suggests that the international context matters for the domestic vote yet most research on electoral accountability assumes that voters treat their national economies as autarkic we decompose two key economic aggregates growth in real gross domestic product and unemployment into their international and domestic components and demonstrate that voters hold incumbents more electorally accountable for the domestic than for the international component of growth voters in a wide variety of democracies benchmark national economic growth against that abroad punishing rewarding incumbents for national outcomes that underperform outperform an international comparison tests suggest that this effect arises not from highly informed voters making direct comparisons but from pre benchmarking by the media when reporting on the economy the effect of benchmarked growth exceeds that of aggregate national growth by up to a factor of two and outstrips the international component of growth by an even larger margin implying that previous research may have underestimated the strength of the economy on the vote

evaluating the regulator winners and losers in the regulation of spanish electricity distribution abstract the principal aim of this study is to evaluate the regulation of electricity distribution in spain to this end we begin by analyzing whether the changes introduced by the regulator led distribution companies to improve their efficiency we then address whether the reimbursements paid to the distribution companies are linked to efficiency lastly we examine whether consumers benefited from the efficiency improvements we focus on spain because the electricity regulator in that country is a longstanding pioneer in the implementation of incentive based regulatory models our analysis was implemented using the regulatory model proposed by bogetoft 1997 as a benchmark the results show that the spanish electricity regulator did not establish a link between efficiency and the reimbursements paid to electricity companies in addition the electricity companies benefited to the detriment of consumers

moral hazard in high office and the dynamics of aristocracy both aristocratic privileges and constitutional constraints in traditional monarchies can be derived from a ruler s incentive to minimize expected costs of moral hazard rents for high officials we consider a dynamic moral hazard model of governors serving a sovereign prince who must deter them from rebellion and hidden corruption which could cause costly crises to minimize costs a governor s rewards for good performance should be deferred up to the maximal credit that the prince can be trusted to pay in the long run we find that high officials can become an entrenched aristocracy with low turnover and large claims on the ruler dismissals for bad performance should be randomized to avoid inciting rebellions but the prince can profit from reselling vacant offices and so his decisions to dismiss high officials require institutionalized monitoring a soft budget constraint that forgives losses for low credit governors can become efficient when costs of corruption are low

regulation and market power in the spanish liquefied petroleum gas industry progress or failure this paper presents a detailed study of the structure market power and competition in the distribution sector for liquefied petroleum gas lpg within spain it is a segment of energy consumption and supply that is not often given serious attention despite the fact that lpg is a crucial source of energy to many households in many countries in europe and in the rest of the world despite formally being an open and liberalized sector the spanish lpg market is characterized by high concentration within the industry repsol butano the dominant operator practically controls the entire value chain these structural characteristics probably justify state intervention in the form of price fixing in order to guarantee accessible prices for final consumers nevertheless applying this tool has had negative effects on the opening and liberalization process on the one hand it fails to encourage entry or an increase in the participation of new operators on the other it has considerably deteriorated the economic and financial performance of the distribution agents that are subjected to two strong forces first the dominant operator looks after its own interests and its income and second the government tries to defend the interests of final consumers by fixing prices that inadequately remunerate the activity this shows the contradictory regulatory actions that try to promote competition and then establish mechanisms to regulate activity by fixing prices that act as price limits these government set prices discourage new competitors from entering

the spanish retail petroleum market new patterns of competition since the liberalization of the industry in this paper we study the recent development of the spanish automotive fuels market in the context of a long process of liberalization and competition our aims are twofold first to overview the market s current patterns of competition while taking into account the political structural and strategic aspects that have marked the industry s recent evolution second to study in depth one competitive strategy that nowadays significantly influences competition and final prices the vertical relationships between operators and service stations our analysis draws attention to several indicators that may demonstrate the success of the opening and liberalization process increased levels of competition have stimulated the sector s growth development and modernization and given national firms an excellent platform for competing with newcomers furthermore studying the vertical agreements has produced interesting results we have found that relative price differences among brands increase in line with perceived quality differences and that the vertical separation of refineries and retailers eases price competition in the final market the empirical evidence was backed up with a database of 4164 spanish service stations

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

constructing accountability party position taking and economic voting a positive relationship between economic performance and support for incumbents is routinely taken as evidence that elections work for accountability recent investigations into this relationship h

are bureaucrats paid like ceos performance compensation and turnover of top civil servants abstract recent research explores the effect of financial and career incentives on public sector hiring processes and subsequent performance the reverse relation between performance and bureaucrats compensation and turnover has received only limited attention due to the distinct features of public sector organizations bureaucrats are traditionally argued to require either permanent positions and fixed wages or low powered performance incentives this article studies how the performance of top civil servants in norwegian local governments affects their compensation and turnover we thereby build on a unique new dataset over the period 1991 2014 our results indicate that better performing top civil servants obtain a higher compensation and are less likely to be replaced nonetheless these incentives remain low powered in line with agency theory prescriptions

bureaucrats or politicians part i a single policy task this paper investigates the normative criteria that guide the allocation of a policy task to an elected politician versus an independent bureaucrat the bureaucrat is preferable for technical tasks for which ability is more important than effort or if there is great uncertainty about whether the policymaker has the required abilities the optimal allocation of redistributive tasks is ambiguous and depends on how the bureaucrat can be instructed but irrespective of the normative conclusion the politician prefers not to delegate redistributive policies

tax farming redux experimental evidence on performance pay for tax collectors performance pay for tax collectors has the potential to raise revenues but might come at a cost if it increases the bargaining power of tax collectors vis a vis taxpayers we report the first large scale field experiment on these issues where we experimentally allocated 482 property tax units in punjab pakistan into one of three performance pay schemes or a control after two years incentivized units had 9 4 log points higher revenue than controls which translates to a 46 higher growth rate the scheme that rewarded purely on revenue did best increasing revenue by 12 9 log points 64 higher growth rate with little penalty for customer satisfaction and assessment accuracy compared to the two other schemes that explicitly also rewarded these dimensions the revenue gains accrue from a small number of properties becoming taxed at their true value which is substantially more than they had been taxed at previously the majority of properties in incentivized areas in fact pay no more taxes but instead report higher bribes the results are consistent with a collusive setting in which performance pay increases collectors bargaining power over taxpayers who have to either pay higher bribes to avoid being reassessed or pay substantially higher taxes if collusion breaks down

strengthening state capabilities the role of financial incentives in the call to public service we study a recent recruitment drive for public sector positions in mexico different salaries were announced randomly across recruitment sites and job offers were subsequently randomized screening relied on exams designed to measure applicants intellectual ability personality and motivation this allows the first experimental estimates of i the role of financial incentives in attracting a larger and more qualified pool of applicants ii the elasticity of the labor supply facing the employer and iii the role of job attributes distance attractiveness of the municipal environment in helping fill vacancies as well as the role of wages in helping fill positions in less attractive municipalities a theoretical model guides each stage of the empirical inquiry we find that higher wages attract more able applicants as measured by their iq personality and proclivity towards public sector work i e we find no evidence of adverse selection effects on motivation higher wage offers also increased acceptance rates implying a labor supply elasticity of around 2 and some degree of monopsony power distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities

teacher pay and school productivity exploiting wage regulation abstract the impact of teacher pay on school productivity is a central concern for governments worldwide yet evidence is mixed in this paper we exploit a feature of teacher labour markets to determine the impact of teacher wages teacher wages are commonly set in a manner that results in flat wages across heterogeneous labour markets this creates an exogenous gap between the outside labour market and inside regulated wage for teachers we use the centralised wage regulation of teachers in england to examine the effect of pay on school performance we use data on over 3000 schools containing around 200 000 teachers who educate around half a million children per year we find that teachers respond to pay a ten percent shock to the wage gap between local labour market and teacher wages results in an average loss of around 2 in average school performance in the key exams taken at the end of compulsory schooling in england

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

price regulation in the spanish energy sectors who benefits abstract this paper analyses the distribution of benefits between firms and consumers due to the price regulation of the spanish energy sectors electricity oil fuels and gas during the decade 1987 1997 to that effect we compare the actual evolution of energy prices with alternate benchmarks in order to assess the potential existence of a pro industry or a pro consumer bias in the pricing policies followed by the regulator our results show a pro industry biased regulatory context where consumers benefitted very little from price control the successive price adjustments over time allowed the companies to keep all the productivity gains and cost reductions and to increase their profitability rates relative to those achieved in the manufacturing sector

the political economy of indirect control this paper characterizes the efficient sequential equilibrium when a government uses indirect control to exert its authority we develop a dynamic principal agent model in which a principal a government delegates the prevention of a disturbance such as riots protests terrorism crime or tax evasion to an agent who has an advantage in accomplishing this task our setting is a standard dynamic principal agent model with two additional features first the principal is allowed to exert direct control by intervening with an endogenously determined intensity of force which is costly to both players second the principal suffers from limited commitment using recursive methods we derive a fully analytical characterization of the likelihood intensity and duration of intervention the first main insight from our model is that repeated and costly interventions are a feature of the efficient equilibrium this is because they serve as a punishment to induce the agent into desired behavior the second main insight is a detailed analysis of a fundamental tradeoff between the intensity and duration of intervention which is driven by the principal s inability to commit finally we derive sharp predictions regarding the impact of various factors on likelihood intensity and duration of intervention we discuss these results in the context of some historical episodes

productivity growth and incentive regulation in austria s gas distribution abstract the projected rate of productivity growth is the critical determinant of the price cap in incentive regulation however the regulatory authorities generally lack sophisticated industry tfp studies to set an optimal cap we thus estimate productivity growth in the austrian gas distribution sector in a translog cost function framework a key feature is our unique panel database on costs and outputs of regulated utilities for the period 2002 2013 covering six years prior and during incentive regulation as introduced in 2008 we find a modest tfp growth rate in the early sample years followed by a decline to zero or even slightly negative rates in recent years we also find a significant potential for returns to scale which is left unexploited indicating that utilities could significantly save on costs by merging as essential investments have already been undertaken in the past opportunities for technological progress seem to be limited in recent years