An assessment of the competitiveness of a nation is in most cases based on the survey results of such international institutions as the IDM and the WEF. Yet this assessment does not accurately indicate the causality between regulation and the national competitiveness because it simply compares a regulation index with other survey indices within a country or between countries. Utilizing a cross-sectional regression analysis, this article aims at identifying the impacts of regulation on national competitiveness in OECD countries. Results show that national competitiveness measured by the IMD's WCI is affected by a composite index of regulation together with GDP per capita and R&D investment. Further analyses that decompose the regulation index into specific regulatory areas and policies show that regulation of the capital market, price controls, and restrictions on starting a new business have significant impacts on national competitiveness. These results imply that reforming anti-competition policies and utilizing more market-friendly policies are critical to improve national competitiveness in OECD countries.
In Korea, newspaper companies are prohibited to offer premiums more than 20% of annual subscribing price by regulations. Since offering premiums is one of price discrimination strategies in newspaper industry, it is known that offering premiums - gift coupon, rebates, etc. - raises consumer welfare. I theoretically show that if the government keeps the regulation without knowing consumer preference on newspaper and the rate of informed consumer, it might reduces consumer welfare in the newspaper market. On the other hand, Korea's Newspaper Law prescribes that the newspaper companies are presumed as market dominating enterprisers which are prohibited to abuse own market-dominant positions, if one company shares 30% of newspaper market or three companies hold 60% of market share. The regulation of the Newspaper Law is taken the criticism that the law reduces the market effectiveness, because even Korea's general competition law, Monopoly Regulation and Fair Trade Act, stipulates that companies which shares 50% of newspaper market or three of which companies hold 75% of market share are presumed as market dominating enterprisers. I point out the problem of the Newspaper Law's regulation on presumption of market-dominant positions.
Two years ago Korean Government scraped the plan to break up state-run Korea Electric Power Corp's distribution business. The government officials said that the introduction of retail competition would entail risk to hamper realization of public interest to provide residential customers universal access to electric utility service. But the recent evolution of the doctrine of customer service obligations in the U.K and U.S.A demonstrate that vigorous retail competition in the electricity business can coexist with the extraordinary obligations to serve vulnerable residential customers. At the time of regulatory reform the political compromises between economic efficiency and the protection of vulnerable consumers had to be made.
Prompt Corrective Action(PCA) in Korea is introduced as a way of prudent regulatory measure. For the effective implementation of PCA, current three step wise corrective action system could be modified into four step wise system where the preventive corrective measures are more emphasized in the early stage of insolvency. Implementation of regulatory forbearance in the last stages of insolvency should be limited under the restricted condition. Measures which minimize the resolution costs also help to reduce the incentive of forbearance by regulatory body. Due diligence conducted by Korea Deposit Insurance Cooperation before the closure of the financial institution could facilitate the resolution process in more cost efficient way and enable the prompt reimbursement, which contribute to the minimization of resolution costs. Considering the limitation of BIS capital ratio in manifesting the true risk condition of financial institutions, other measures of capital ratios and market index could be utilized.
We evaluate the current rate system of Korean wireline telephony, and propose relevant remedies for more efficient and competitive market. Despite its importance in telecommunications market, wireline telephony and especially its rate system have been largely neglected by policy makers. Price-cost disparity in local telephony distorts investment incentives, spreads inefficiencies to other market segments through undesirable cross subsidy and weakens competition. We propose as specific policy goals rate rabalancing in local and long-distance telephony, separation of business and residential rates, lower rate sensitivity to distance, intensified measures to encourage local competition.
The effects of regulation on equity investment and several related hypothesis are examined. The hypothesis that frequent policy changes on equity investment might hinder the firm investment and other related hypotheses are examined. At the same time whether the regulation on equity investment had dampen the firm investment when that regulation is actually binding is tested. In addition, the effects of regulation on equity investment on other firms’ investment are also examined. The empirical test failed to find the specific relations between the firm investment and regulation on equity investment in Korean conglomerates. In spite of these empirical results this study argues that the Korean Fair Trade Commission should abolish the regulation on equity investment since it is hard to find solid rationale to maintain the ex ante regulation. This study suggests that the problems related with the cross share holding among subsidiaries including interest conflicts between shareholders should be solved by reinforcing the market forces in financial market as well as M&A market, and by taking additional measures to strengthen the transparency of the firm as well as the corporate governance structure.
There are similarities in light of mechanism and behavior between tying and bundling. They have common character, that in supplying one's commodities or services to a transaction partner, one forces the partner unreasonably, to purchase another commodity or service from oneself or an enterprise whom one designates. But in spite of a systematic similarity, there are differences in light of competition policy between tying and bundling.
The regulation of tying is to maintain a competition, but the regulation of bundling operates to form a competition on the field of regulated industry, as telecommunication industry.
Therefore it is essential that the regulation of tying on antitrust law and the regulation of bundling on telecommunications law are in existence for an operation of competition mechanism on telecommunications field. And on the basis of the understanding of difference in light of competition policy, we try to accomplish a systemization and harmony of regulations of tying and bundling.
This paper investigates causes and types of inefficiency problems of the rate-of-return regulation currently instituted in Korean electricity industry. The inefficiency problems inherent in profit-level R-o-R regulation are numerous such as the Averch-Johnson effect and X-inefficiency and agency problems.
This paper suggest a shift from profit-level rate-of return regulation to price-level regulation since the latter is theoretically more efficient regulatory mechanism than the former. Under rate-or-return regulation, the regulated firm is largely indifferent to cost increase and lacks incentives to strive for cost efficiency. By breaking the equations between the firm's actual internal costs and allowed revenues, price level regulation regenerates the managerial incentives for profit maximization. Once the maximum price level constraints or ceiling is set as in price cap regulation, the regulated firm loses cost enhancing moral hazard incentives and loses control over revenue enhancing efforts as Hillman and Braeutigam mentioned. The regulated firm's profit maximization becomes mainly a matter of cost minimization. In this respect the goals of productive efficiency, profit maximization and social welfare can be well achieved. This paper investigates also various types of incentive-oriented electricity pricing methods and suggests price-cap regulation.