Regulator Design Research Articles

Cost efficiency and endogenous regulatory choices: evidence from the transport industry in France

We study the impact of different regulatory designs on the cost efficiency of operators providing a public service, exploiting data from the French transport industry. The distinctive feature of the study is that it considers regulatory regimes as endogenously determined choices, explained by economic, political, and institutional variables. Our approach leans on a positive analysis to study the determinants of regulatory contract choices, which, in turn, affect the costs of operating urban public transport. Our results show that given similar network characteristics, networks operated under fixed-price contracts exert lower costs than those regulated under cost-plus contracts. This finding is in line with the theoretical prediction of new regulatory economics that fixed-price contracts provide more incentives for efficiency. Importantly, ignoring the endogeneity of contractual choices would lead to significantly underestimating the impact of contract type on cost efficiency. Our findings provide useful policy implications suggesting that the move toward more high-powered incentive schemes is indeed associated with significant cost efficiencies. Moreover, they highlight the importance of accounting for the endogeneity of regulatory contract choices.

Comparing Regulatory Designs for the Transmission of Offshore Wind Energy

Offshore wind plays an ever-increasing role for the global transition to renewable energy. For offshore wind energy to be successful, cost-effective transport of the produced electricity to shore is necessary. The development and operation of the offshore transmission asset is costly and regulated differently across the globe. In most countries, the TSO is responsible for the transmission and develops and operates the asset separately from the offshore wind farm. Other countries have established a competitive tender with integrated development of the offshore wind farm and the transmission asset. However, there is so far no empirical analysis of the economic benefits of different regulatory designs regarding the offshore transmission assets. In this paper, we collect a unique data set on offshore transmission assets that compares empirical cost and quality of offshore transmission assets in two countries with different regulatory regimes for the first time. With project level data we can control for geographical as well as technical difference to assess which regulatory design might lead to lower economic costs for the offshore transmission asset. Comparing the cost in the two leading countries for offshore wind energy, we find that a competitive regime leads to lower transmission cost and similar transmission availability.

Biosimilar Bias: A Barrier to Addressing American Drug Costs

Forty percent of spiraling US drug costs are based on a mere two percent of all drugs –biologic drugs (biologics) made from living cells that are administered by injection or infusion. These costs will continue to balloon as new biologics are approved; the recently approved Alzheimer’s drug is expected to result in a 50% increase in Medicare spending and cost individuals 40% of their annual income. These drugs are expensive because they cannot be mass-produced, and their cost places important treatments for conditions such as arthritis (Humira) and cancer (Herceptin) out of reach for many Americans. Fortunately, just as there are generic versions of brand name pills, there are lower cost biosimilars of original biologics allowed by an expedited regulatory approval process that lowers the costs of obtaining regulatory approval. However, US adoption of biosimilars is minimal, in stark contrast to widespread use of generic drugs, and despite a decade of safe biosimilar use in other countries. This Article provides the first comprehensive explanation of how US laws, industry actions, and cognitive biases work together to impede US biosimilar use. This Article argues that doctors and patients currently have unfounded misperceptions concerning the safety and efficacy of biosimilars based on misinformation propagated by companies that builds upon an existing cognitive bias against cheaper drugs. Not only does this keep drug costs high, but it also creates worse health outcomes for patients since studies show unfounded misperceptions have negative physical manifestations. Although there is a similar misperception against generic drugs, structural differences in terms of regulatory laws and insurance coverage exacerbate biases against biosimilars. For example, US regulatory laws have created an additional regulatory designation for biosimilars to be substituted without doctor intervention; this is contrary to the process for generics where there is no additional federal designation required for substitution. After revealing the existence and extent of bias against biosimilars, this Article proposes solutions to effectively promote biosimilar use. It suggests a multi-pronged approach to encourage biosimilar use that includes legal changes to support biosimilar substitution, education to specifically tackle biases, and financial incentives to encourage biosimilar use. These proposals are especially timely since the FDA just approved the first biosimilar that can be substituted for the comparable brand at pharmacies, more than a decade after the biosimilar pathway was created, suggesting that the time is ripe to address systemic issues. Moreover, addressing these barriers to biosimilar use would not only expand access to treatment, but also save the US an estimated $50 billion in the next decade.

Artificial Intelligence and International Economic Law: A Research and Policy Agenda

As the framing chapter of a forthcoming volume on Artificial Intelligence and International Economic Law, this paper introduces three cross-cutting themes that illustrate the relationship between artificial intelligence (AI) and international economic law (IEL): disruption, regulation, and reconfiguration. We explore the theme of disruption along the trifecta of AI-related technological, economic, and legal change. We observe that the increasing adoption of AI leads to political, economic, and social pressures across jurisdictions and levels of governance. Policy makers and stakeholders engage in different governance venues to debate regulatory design choices: whether to regulate, why to regulate, when to regulate, whom or what to regulate, how to regulate, and who should regulate? We argue that IEL is increasingly shaping and influencing the regulatory discourse around AI and vice versa. In this context, we explore the extent to which IEL is being reconfigured and examine the need for further reconfiguration. We conclude by bringing the contributions we assembled in this volume into conversation with one another and identify topics that warrant further research.

Legal Obstacles to Biosimilar Market Entry

Improving the market availability and penetration of biosimilars, “follow-on” versions of biologic products, will require attention to key legal obstacles. Because biosimilars offer the potential for sizeable cost savings to payors and improved access to biologic drugs for patients, obstacles to the timely licensure and market availability of biosimilars are of major public health significance. Issues around intellectual property, potentially anticompetitive contractual arrangements with purchasers and insurers, and laws governing automatic substitution of biosimilars for biologics merit particular attention. This Article examines several key legal obstacles to biosimilar market entry in the United States, including (1) the complexity and imprecise boundaries of the exchange of patent information codified in the BPCIA; (2) patent thickets that protect biologic reference products; (3) unsettled antitrust law surrounding reverse payment patent settlements (i.e., “pay-for-delay” agreements); (4) contractual arrangements such as bundled purchase agreements and formulary exclusivity provisions; and (5) state laws that regulate substitution of biosimilars for biologics at the pharmacy level. Strategies to address these obstacles include reforms to the patent system to curb issuance of ancillary secondary patents intended to delay competition, greater transparency around biologic patents, reconsideration of the need for a regulatory designation of interchangeability, and better detection and enforcement of deliberately anticompetitive practices.

Addressing competitiveness of emissions-intensive and trade-exposed sectors: a review of Alberta's carbon pricing system

In 2018, the Canadian province of Alberta introduced a revamped carbon pricing regime – the Carbon Competitiveness Incentives Regulation (CCIR) – for large industrial emitters. This regulation set product benchmark emissions intensities and required that facilities purchase emissions credits for the portion of emissions that fell above that product benchmark. With a focus on Alberta's oil and gas industry, this paper assesses mechanisms used under the CCIR to address competitiveness-driven carbon leakage for emissions-intensive and trade-exposed sectors. These mechanisms include exclusions, output-based allocations and financial compensation in the form of market-based compliance flexibility and access to innovation funding. The CCIR also provided additional cost containment for facilities that demonstrated significant economic risk resulting from carbon compliance costs. The output-based allocation, which is the primary policy mechanism for addressing competitiveness, is compared with the carbon pricing system in California. This review suggests that the CCIR failed to provide evidence that emission allocation levels were sufficient to mitigate carbon leakage. Further, the system's definition of competitiveness failed to incorporate the ability to attract new investment, which is particularly important for the oil and gas sector due to its capital-intensive nature. Understanding policy options for protecting industry competitiveness from carbon pricing may help to inform future regulatory design that mitigates the likelihood of carbon leakage.

Anonymous Dynamic Spectrum Access and Sharing Mechanisms for the CBRS Band

The Federal Communications Commission (FCC) has released the 3.5 GHz (3550-3700 MHz) band, termed Citizens Broadband Radio Service (CBRS), for shared broadband use between incumbent federal and secondary users through dynamic and opportunistic spectrum access. FCC requires that this band be operated and managed through the use of spectrum access systems ( $\mathit {SAS}$ s), which are to be deployed specifically for this purpose. The challenge is that $\mathit {SAS}$ requires that secondary users provide some of their private operational data, such as their physical location, identity and spectrum usage, in order for them to acquire spectrum availability information. In this paper, we propose a privacy-preserving $\mathit {SAS}$ framework, $\mathit {TrustSAS}$ , that synergizes state-of-the-art cryptographic mechanisms with blockchain technology to enable anonymous access to $\mathit {SAS}$ by protecting users’ privacy while still complying with FCC’s regulatory design requirements and rules. We evaluate the performance of $\mathit {TrustSAS}$ through theoretic analysis, computer simulation and testbed experimentation, and show that it can offer high security guarantees, making it suitable for $\mathit {SAS}$ environments without needing to compromise private information of its secondary users.

Designing Fuel-Economy Standards in Light of Electric Vehicles

Electric vehicles are declining in cost so rapidly that they may claim a large share of the vehicle market by 2030. This paper examines a set of practical regulatory design considerations for fuel-economy standards or greenhouse gas standards in the context of highly uncertain electric vehicle costs in the next decade. The analysis takes a cost-effectiveness approach and uses analytical modeling and simulation to develop insight. I show that counting electric vehicles under a standard with a multiplier or assuming zero upstream emissions can reduce electric vehicle market share by weakening the standards. Further, there are tradeoffs from implementing a backstop conventional vehicle standard along with a second standard that also includes electric vehicles, but such a backstop offers the possibility of ensuring that low-cost conventional vehicle technologies are exploited. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Selecting the right regulatory design for pro-competitive digital regulation: An analysis of the EU, UK, and US approaches

Selecting the right regulatory design for pro-competitive digital regulation: An analysis of the EU, UK, and US approaches

Scammed and scarred: Effects of investment fraud on its victims

We study the effects of investment-fraud victimization using information on thousands of Ponzi scheme participants combined with register data on the Finnish population. A difference-in-differences analysis reveals the victims earn 5% less income after the scheme collapses. This persistent loss arises from a combination of unemployment, absenteeism, mobility, and labor force exit, and its long-run value exceeds the direct investment loss. Victims also experience higher indebtedness and more divorces and shy away from investments delegated to asset managers. These scars from fraud victimization add to the social cost of fraud and are relevant for optimal regulatory design.

Monitoring shoreline changes and aeolian sand encroachment, Nasser Lake, Egypt, using remote sensing and GIS techniques

Sand encroachment takes place when sand grains are transported by winds and collect on the glide, along watercourses. The drifts of dunes are the most important events leading to future disasters. Monitoring shoreline changes and mapping these changes at Nasser Lake using GIS and remote sensing techniques at regular periods represents the first significant step in accurately characterizing the problem. The data show a relationship between shoreline morphology, dune morphology and erosion/accretion. The analysis results show that the sands encroaching on the lake are in the shape of sand sheets, not dunes. Change detection was observed on images, and at the same time it was not possible to find rates of sand drift through remote sensing only. Nevertheless, it was found that the origin of sand is further north and that the wind, which is oriented south to southeastward, deposits its load near the lake or in it. Mitigation of dynamic sand should involve consideration of its source, corridors of movement and the site or sites of deposition. Zoning of the fluvial zone for regulatory design and assessing the potential impact of rising water levels indicates severe erosion in many locations, due to reduction in sediment supply by recharge dams and roads and the long-term process of rising water levels.

Labour Law Under Stress: Some Thoughts on Covid-19 and the Future of the Labour Law

Even before the Covid-19 crisis, academics and policy analysts were becoming aware of the cumulative impact that are increasingly placing strains on the existing regulatory design of New Zealand’s labour market. These forces include decades of globlisation, increasing international migration flows, various manifestations of the digital and technological revolution, rapid growth of digital-Taylorism as a form of labour control, and perhaps the most devastating in the longer term, the potential impacts of climate change.
 It is increasingly recognised that these forces will have a significant long-term impact on labour markets, however, the Covid-19 crisis has shown how rapidly the world can change. This article outlines the (maybe) good, the (sometimes) bad, and then ugly of the Covid-19 pandemic and its economic consequences on New Zealand’s labour relations, labour architecture, and the future of labour law.

Regulatory governance in emerging technologies: The case of autonomous vehicles in Sweden and Norway

Vehicle producers, universities, and technology companies, among others, are today involved in the development of autonomous vehicles (AVs). Ongoing in several countries are experimental activities in actual traffic situations. The legal conditions for autonomous vehicles, however, vary by country. A number of countries have introduced, or are considering introducing, rules for such activities. Some countries see autonomous vehicles as prohibited unless otherwise stated in the regulations, while other countries take exactly the opposite view, i.e., anything not explicitly prohibited is allowed. This paper introduces a regulatory governance perspective on autonomous vehicles. It describes how new regulatory standards are being shaped for emerging technologies in the transport sector using the case of autonomous vehicles in Sweden and Norway. The findings show how regulations are shaped by external pressures and that international conventions are influencing regulatory design. It also concludes that the final regulations hold some degree of flexibility but also that specific restrictions may be hindering advanced experiments. By introducing a theoretical perspective on regulatory governance of AVs, the paper contributes to a further understanding of how to analyse the shape of new regulation in the transport sector generally.

From (Horizontal and Sectoral) Data Access Solutions Towards Data Governance Systems

Starting with the assumption that under certain conditions also mandatory solutions for access to privately held data can be necessary, this paper analyses the legal and regulatory instruments for the implementation of such data access solutions. After an analysis of advantages and problems of horizontal versus sectoral access solutions, the main thesis of this paper is that focusing only on data access solutions is often not enough for achieving the desired positive effects on competition and innovation. An analysis of the two examples access to bank account data (PSD2: Second Payment Service Directive) and access to data of the connected car shows that successful data access solutions might require an entire package of additional complementary regulatory solutions (e.g. regarding interoperability, standardisation, and safety and security), and therefore the analysis and regulatory design of entire data governance systems (based upon an economic market failure analysis). In the last part important instruments that can be used within data governance systems are discussed, like, e.g. data trustee solutions.

Strength analysis in regulatory design documents and computational software

Modern building design standards have a long history. During this time, they have undergone a number of changes, but some of their provisions and recommendations, once proclaimed, remain unchanged. And although they do not meet the modern possibilities of computational analysis, but continue to exist due to the established tradition. In this paper, attention is paid to only some of the mentioned conflicts, which are related to the software implementation of regulatory requirements. The first of them is connected with two different parts in the process of design justification: calculation of the stress-strain state and verification of the accepted cross sections. It is noted that when the calculation model adopted for computer analysis of the structure does not correspond to the model that was meant when compiling the regulatory document, there may be contradictions or inaccuracies that cannot be resolved without decoding the approach adopted in the standards. Unfortunately, such a decoding is not provided in our rationing system. Another group of conflicts is connected with conducting the structural analysis taking into account geometrical and physical nonlinearity declared by standards. The matter is there are some problems that cannot be solved when using nonlinear calculation, for instance, dynamic analysis using eigenmode decomposition with the subsequent summation of modal reactions. The problem of choosing an unfavorable combination of loads is also in this list. In the final part of the article some proposals are formulated. This proposals aimed at eliminating contradictions between the desire to develop simple and understandable design rules and the ability of modern computer to solve problems without the use of dubious simplifications.

Varieties of Regulatory Welfare Regimes in Middle-Income Countries: A Comparative Analysis of Brazil, Mexico, and Turkey

The expansion of social welfare regimes in middle-income countries (MICs) has become a global trend that has involved the adaption of robust social assistance programs aiming to alleviate poverty and diminish inequalities. We analyze conditional cash transfers in Brazil, Mexico, and Turkey, identifying the types of regulatory regimes that exist in each, namely “loose decentralism” in Brazil, “strict centralism” in Mexico, and “subcontracted dirigisme” in Turkey. We argue that regulatory design is key to understanding how the newly flourishing welfare regimes can control political manipulation, and that where manipulation occurs, social assistance programs can deviate from their initial objectives and endanger the welfare of the poor and hazard trust in the government and political institutions. However, when social welfare regimes work in line with their objectives and eschew political discretion, regulatory welfare states can enhance trust in and legitimacy of political institutions. Our analysis indicates that a centrally regulated social assistance governance nurtured by local knowledge is key to avoiding political manipulation and to alleviating poverty, major issues in MICs.

A Regulatory Roadmap for Financial Innovation

Private sector innovation – whether it is fintech, biotechnology, the platformisation of the economy, or other developments – is the single most profound challenge that regulators confront today. Financial innovations, which are intangible and fast-moving, are especially challenging. Financial regulators are at the operational front line of making sense of the promise and the risks associated with fintech, and helping to ensure it operates for public benefit. Faced with such a changeable and fast-moving problem, how can regulators “future proof” themselves? This chapter outlines a road-map for financial regulators who confront fast-moving and profound change in their sectors. It argues that regulators’ first question in any decision-making context should be, “how is private sector innovation, in this case fintech, undermining my assumptions, changing relationships, denaturing products and markets, and seeping around regulatory definitions and boundaries, right now?” The chapter sets out the four basic questions that regulators should consider. It proposes regulatory responses based on better data collection and analysis, innovation research, network theory, and regulatory design. It considers how to make regulation more adaptable and more resilient, and examines the strategic choices regulators can make in framing fintech innovations.

Addressing Instability in Thailand’s Deep South with Law and Development

Abstract This article approaches the long-standing instability in the southernmost part of Thailand, where a vast majority of the population is Muslim, from a law and development perspective. The instability has resulted from a highly complicated conflict, of which religious and ethnic differences, political conflict, and even organized crime are generally claimed as the main causes. The article directs its attention to a sense of resentment among the Muslim population, which has arisen from enduring economic disparities and injustice they have suffered at the hands of the authorities. Addressing these two closely related issues certainly does not lead to a resolution of the conflict, but tackling them in an interrelated manner at least clarifies one of its significant aspects and contributes in a meaningful way to the ongoing search for a sustainable peace in Thailand’s southernmost region. The law and development approach we have adopted for this study attempts to show how the existing regulatory design (laws, legal frameworks, institutions) has been implemented – that is, how it has been complied with in terms of generation of action programs and strategies (in the form of security operations and development initiatives) and to what effect. Based on our findings, the quality of the implementation represents a major condition for the failure of the law and development implementation in Thailand’s Deep South. We therefore highlight the necessity of genuine political will and the enhancement of the state capacity for law enforcement through eradication of corruption and opportunistic crime as a feasible solution in this context.

Inhabiting Different Realities: Incrementalism, Paradigms and the New Prospect

The emergence of cryptographic consensus technology has enabled new prospects for the formation of commercial relationships, institutional arrangements and interactions (the New Prospect). This paper queries whether the current vector of regulatory thinking about crypto-assets is capable of achieving the public policy objectives of regulation while not obstructing the exploration of the New Prospect and the possible benefits it might bring to society. Key precursors to ecosystem development are discussed, and their dependence on the nature and quality of regulatory oversight structures considered. It is argued that an incrementalist approach to regulatory development has supported a “fit-to-existing-regulation” (FER) taxonomy of crypto-assets ill-suited to fostering the ecosystem, despite changed fact patterns that challenge the underlying assumptions of incrementalism. The analysis suggests applying financial regulation to crypto-assets may be inhibiting rather than facilitating innovation along possible new pathways. How society’s past experiences of responding to change in the formation of commercial relationships is considered. Shortcomings in current policy approaches suggest a need for fundamental regulatory reform to be placed more firmly on the global discussion agenda. As a more complex ecosystem begins to emerge, its ability to evolve and flourish will depend on whether the design of a more fit-for-purpose regulation is ready. A “Determined-By-Architecture” (DBA) taxonomy is presented that has the potential to bring new perspectives on the internal and external operations of the technology and hence regulatory design considerations such as technology neutrality. Five proposals for policy development are made.

Exploring links between resilience and the macro-level development of healthcare regulation- a Norwegian case study

BackgroundThe relationship between quality and safety regulation and resilience in healthcare has received little systematic scrutiny. Accordingly, this study examines the introduction of a new regulatory framework (the Quality Improvement Regulation) in Norway that aimed to focus on developing the capacity of hospitals to continually improve quality and safety. The overall aim of the study was to explore the governmental rationale and expectations in relation to the Quality Improvement Regulation, and how it could potentially influence the management of resilience in hospitals. The study applies resilience in healthcare and risk regulation as theoretical perspectives.MethodsThe design is a single embedded case study, investigating the Norwegian regulatory healthcare regime. Data was collected by approaching three regulatory bodies through formal letters, asking them to provide internal and public documents, and by searching through open Internet-sources. Based on this, we conducted a document analysis, supplemented by interviews with seven strategic informants in the regulatory bodies.ResultsThe rationale for introducing the Quality Improvement Regulation focused on challenges associated with implementation, lack of management competencies; need to promote quality improvement as a managerial responsibility. Some informants worried that the generic regulatory design made it less helpful for managers and clinicians, others claimed a non-detailed regulation was key to make it fit all hospital-contexts. The Government expected hospital managers to obtain an overview of risks and to adapt risk management and quality improvement measures to their specific context and activities.ConclusionsBased on the rationale of making the Quality Improvement Regulation flexible to hospital context, encouraging the ability to anticipate local risks, along with expectations about the generic design as challenging for managers and clinicians, we found that the regulators did consider work as done as important when designing the Quality Improvement Regulation. These perspectives are in line with ideas of resilience. However, the Quality Improvement Regulation might be open for adaptation by the regulatees, but this may not necessarily mean that it promotes or encourages adaptive behavior in actual practice. Limited involvement of clinicians in the regulatory development process and a lack of reflexive spaces might hamper quality improvement efforts.