Work-In-Progress Meetings are events where TILEC members present their own work at an early stage, for comments and discussion.
For our current events see our Events Calendar.
Optimal Discounts in Green Public Procurement
We consider a Green Public Procurement setting where the procurer provides a bid discount to environmentally friendly technologies to foster their use. We assume that prior to the auction firms may switch to green technology by a publicly observable costly investment. We show that investment acts as a signaling device.
This mitigates the effect of incomplete information on cost-efficiency by reducing bid shading, which results in lower prices for the procurer. Therefore, even a procurer with no preference towards green technology can find it optimal to use a discount. Our results challenge the common perception that Green Public Procurement always implies a trade-off between environmental performance and purchasing price.
Financial Standard-Setting as a Form of Economic Activism and the Role of Crises
Advances in financial instruments and financial innovation have been key in increasing the pervasive character of finance. However, they have also led to some of the most severe economic crises, as more recently exemplified by the Great Recession. In the aftermath of such crises, it becomes apparent that private bodies active in regulating various aspects of financial instruments, including securities, derivatives, or interbank loan rates, remain hale and hearty, resilient as never before. Thus, instead of a reassessment of the foundational principles of the neoliberal model in financial regulatory making, crises do not appear to affect the continued relevance of such private actors in regulating the financial sector. Theoretical insights from the field of transnational private regulation and governance suggest that the State deliberately enrols and transfers power to such private bodies, maintaining a role as the orchestrator of regulatory activity. However, reality defies existing regulatory theories. Rather, a progressive, yet steady transfer of power to private regulatory bodies can be observed.
This paper innovates by arguing that such transfer of power is the result of pro-active attempts by private bodies active in financial regulation to expand the purview of their regulatory activities (and thus their regulatory power) in the aftermath of regulatory failures that shake the fundamentals of the financial sector. The paper hypothesizes that private financial regulators manage to remain afloat and even become more controlling thanks to their core rule-making activities, more specifically the continuous promulgation of voluntary standards that are quickly prepared, adopted and diffused to pre-empt rules by (public) rule-making competitors. Rather than bringing about a decisive State intervention that increases the accountability mechanisms and rationalizes the relevant market structures, financial crises create ideal conditions for opportunism by private rule-making bodies, allowing them to consolidate their autonomy and proactively seek more power and undermining any effort for effective supervision by the public regulatory authorities. After presenting a novel conceptual framework to scrutinize and understand the evolution of private authority based on private standard-setting and regulatory disasters in the financial sector, the paper will apply this framework to the case of the International Swaps and Derivatives Association (ISDA), focusing on the role of ISDA in the Great Recession and its derivatives-related activities that arguably allow testing the main hypothesis of the paper, notably when viewed in relation to the Financial Stability Board (FSB). Some of the questions that we will examine relate to: the type of strategies used by ISDA internally and externally to maintain and strengthen its relevance and resilience; the type of interaction with and supervision by the FSB; the role of national supervisors in this equation.
The Nonprofit’s Dilemma
Nonprofit firms active in the production of public goods --- mission-driven organizations --- face higher labor turnover than for-profit firms. Simultaneously, they pay lower wages and often use low-powered incentive schemes, which has been explained by binding financial constraints and the threat to attract wrong worker types if wages are increased.
We construct a simple model that reproduces these stylized facts, explains the high labor turnover of mission-driven organizations, and suggests a way out of this nonprofit's dilemma, based on insights from the economic psychology literature. Intrinsically motivated workers in the nonprofit sector learn the true philanthropic impact of their work only on the job, which can lead to disappointment. Some disappointed workers leave the firm but many others costly manipulate their own recollection of the facts and keep believing in making a difference. We construct testable empirical hypotheses and offer managerial and policy implications.
Sharing energy data: at the intersection between data protection and energy legislation
Access to electricity data of consumers who are natural persons is (to be) governed by two simultaneously applicable regimes: on the one hand, sector specific rules adopted by Member States implementing the Electricity Directive (2019/944). On the other hand, the GDPR, which applies to the processing of personal data horizontally, across all sectors and Member States. These two regulatory frameworks have different policy objectives, scope and levels of implementation and yet intersect when it comes to the processing of electricity data that qualifies as personal.
This research explores what kinds of tensions or uncertainties may arise when applying simultaneously the horizontal rules of the GDPR and the sectoral rules on access to consumer data in electricity markets, with insights from a case. The case is constructed around the context, content and consequences of a ruling issued by the Dutch Trade and Industry Appeals Tribunal in early 2020 (ECLI:NL:CBB:2020:3).
The ruling put forward an interpretation concerning one of the lawful basis for data processing under GDPR (necessity to comply with a legal obligation) that indirectly led Dutch Distribution System Operators (DSOs) to stop giving electricity suppliers access to data of the consumers to prepare a so-called ‘Customized Offer’.
Incentives for lobbying at transnational level: A case study of lobbying by banking associations at the Basel Committee on Banking Supervision
Few lines about the presentation: Banking regulation changed substantially after the financial crisis of 2007-08. Along with major domestic regulatory changes, standard-setting and regulatory bodies at a transnational level were urged to develop a new set of regulations aimed at maintaining financial stability.
Perhaps most prominently, the Basel Committee on Banking Supervision revised its banking regulatory standards and promulgated a new set of standards, i.e. Basel III. Historically, the banking industry is said to have exerted influence over relevant regulations through lobbying, both at the level of their national policy-making and at the level of the Committee. The Crisis has been, partly, blamed on lobbying and the resultant regulatory capture of the financial regulations. Albeit increased awareness and criticism of the existence of regulatory capture and aggressive lobbying in the wake of the Crisis, the process of exerting influence over regulations through lobbying did not disappear from policy-making.
This project aims at understanding lobbying by associations that represent interests of banks at the transnational banking standard-setter, i.e. the Committee, after the Crisis.
The International Organization for Standardization: A 75-year journey towards organizational resilience
The standard setting environment of the International Organization for Standardization (ISO) has seen important changes since ISO’s creation in 1946. The evolution of ISO can be explained in relation to its ability to respond these changes and relating challenges, and to adjust in order to ensure its continued relevance. This chapter identifies certain exogenous trends, changes and challenges posed by its environment across different time periods in ISO’s history, and in relation to crises. It examines their implications for ISO and relating responses and transformations of the organization. This empirical case study of ISO develops the argument that ISO has built its resilience by meeting these challenges and achieving transformations that enabled it to ensure its continued relevance. This study serves to illuminate how transformations related to ISO’s organizational system and key elements (leadership, culture, membership, decision-making processes, standard setting procedures) have contributed to its resilience over time. The goal of facilitating the development of trade is still of key importance to ISO today, and its core activity remains standardization. ISO has also resisted changes, inter alia, to its business model. This chapter recognizes the importance of a contextualized approach to understanding the evolution and resilience of private/hybrid standard setting bodies (SSBs), in relation to crises. Nonetheless, lessons can be learned from this case study about how SSBs can build resilience over time.
This first section of this chapter introduces the analytical framework. The second section provides background information about the methodology of this empirical case study. The third part explores the challenges posed by ISO’s evolving and dynamic environment and responses of ISO’s across three different time periods in ISO’s history. These time periods are separated by shifts in regulatory paradigms within ISO. Drivers of change and relating risks and opportunities for ISO to ensure its continued relevance are identified for each period. The third part is an assessment of how changes to ISO’s organizational system and key elements have contributed to ISO’s resilience. Finally, this chapter concludes.
The effects of human rights due diligence on voluntary sustainability standards
In the paper studies the impact that human rights due diligence (HRDD) and perspective regulation making it mandatory is having on the polycentric governance of trade and deforestation, with a focus on voluntary sustainability standards. The contribution employs a comparative and dynamic perspective in uncovering effects of HRDD the most relevant multi- stakeholder and industry-driven initiatives in the domain of deforestation generated by demand of agricultural commodities.
This issue area is characterised by NGO pressure and a declining trust in voluntary certification. A lack of binding international framework resulted in considerable institutional emergence and proliferation of heterogeneous private standards.
This contribution illustrates isomorphic pressures among private certifications that stem both directly from HRDD and, indirectly, from benchmarking initiatives enrolling HRDD constructs to advance social and environmental objectives across private governance initiatives. Private schemes are expanding the application of certain key requirements to non-certified volumes and firms in order to account for human rights responsibilities of entities at different levels of the value chain. This allows schemes to better fit in firms' HRDD systems as they cover risks for a broader number of value chain entities, while potentially having a wider impact. VSS themselves enact enhanced due diligence and risk management procedures accounting for their own HRDD responsibilities vis-à-vis human rights impact committed by members and certified firms.
By strengthening their efforts in the provision of collaborative tools between firms at different levels in the value chain, VSS’ function is partially re-aligning, testifying to their resilience at a juncture in which they face considerable criticism and even competitive pressures from other private regulatory tools. From providing standards and associated services, VSS also exercise non-regulatory activities such as offering fora for engagement for risk mitigation, remediation and sharing costs of social and environmental compliance required by HRDD.
Collective Labour Agreements and EU Competition Law: Five Reconfigurations
The European Commission has recently begun to reflect on whether competition law is a barrier to the formation of collective labour agreements between industry and atypical workers. This was spurned by the growth of the so-called gig economy. The policy focus to date has been on whether and how to extend the antitrust labour exemption to certain classes of atypical workers. This paper shows how efforts in this direction in the Netherlands and Ireland have revealed that this is a tricky path to pursue. As a result the paper proposes four other types of reconfiguration: three of these suggest that even if atypical workers are treated as undertakings and collective bargains between them and employers fall to be assessed under competition law, many will unlikely have anticompetitive effects and for those that may do so, exemptions are possible. The final reconfiguration is that active antitrust enforcement against employers imposing unfair terms on atypical workers may function to solve the same concerns that collective bargaining seeks to address.
The Clean energy package and demand response: Setting correct incentives
We describe how recent EU regulation affects demand response (DR) and highlight some of the remaining regulatory challenges from a legal and economic viewpoint. With the Clean Energy Package (CEP), the EU has opted for a fully market-based, consumer-centered approach for DR. The development of business models and products is left to a large extent to market forces. However, to enable the efficient development of those DR markets, network regulation has to adapt. (1) Network tariffs have to become more cost-reflective to provide correct incentives to market participants. The capacity tariffs have to increase, net-metering should be abolished, and optional tariff components for providing flexibility may need to be considered. (2) The regulation for distribution system operators (DSOs) may need to be fine-tuned to reflect their new roles. We present three scenarios: (a) a horizontal merger of unbundled DSOs under incentive regulation, (b) a DSO as a subsidiary of an integrated utility under cost plus regulation, (c) a transfer of some activities from DSO to TSO.
Walking While Black: Racial Gaps in Hit-an-Run Cases
Is there a racial gap in the treatment of crime victims, and when does it first occur?
We provide a causal test for racial gaps in victimization and clearance rates, using the unintentional nature of vehicle-pedestrian crashes: the victim’s race should not depend on the driver’s characteristics, conditional on location and time. We find that American drivers flee 13% more often if they hit a black pedestrian, and clearance rates of hit-and-run cases are 11% lower for black victims. The evidence points to out-group bias as a mechanism, but does not exclude different expectations of punishment as another cause.
The Industrial Organization of Financial Markets: An Analytical Framework for Policymakers
This paper proposes an analytical framework designed to ensure that considerations of industrial organization are taken into account by policymakers who set policy for financial markets. Considerations of industrial organization in general concern the impact of the choice of ways of organizing transactions on outcomes, including in particular transaction costs. While it is apparent that some ways of organizing transactions have a greater impact on the reduction of transaction costs, the ways of organizing transactions that have a lesser impact often persist longer than necessary resulting in a significant loss of welfare, not least because of risks to financial stability they entail. The framework posits that to ensure that considerations of industrial organization are taken into account by policymakers who set policy for financial markets, policymakers should, apart from traditional regulatory considerations, such as informational efficiency, examine all financial markets by scrutinizing
- the role of non-profit organizations in organizing transactions,
- the governance and membership in those organizations and
- competition in those markets.