Dissertations / Theses on the topic 'Market distortions'

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This dissertation is a conjunction of three essays on the Industrial Organization field, this empirical work is applied to the Brazilian retail gasoline market. The first essay investigates the existence of spillover effects from cartel activity. The second essay relates the well-known economic puzzle of asymmetric cost pass through to prices with the existence of horizontal coordination - cartels - in the relevant market. Finally, the third essay investigates the effectiveness of antitrust interventions inside the offenders and the consequences of its disclosure in related markets.
Esta tese é uma conjunção de três ensaios sobre no campo de organização industrial, o trabalho empírico é aplicado ao mercado brasileiro de revenda de combustíveis, especificamente gasolina. O primeiro ensaio investiga a existência de efeitos indiretos, repercussões para outros mercados, resultantes da atividade do cartel. O segundo ensaio relaciona o conhecido tema da literatura de repasse assimétrico de custos aos preços com a existência de coordenação horizontal - cartéis - nos mercados em questão. Finalmente, o terceiro ensaio investiga a eficácia das intervenções de defesa da concorrência dentre os infractores e as consequências da sua divulgação em mercados relacionados.

This thesis aims to provide new and useful insights into the effects that various tax, labour and product market reforms have on the overall economic performance. Additionally, it aims also to provide insights about the optimal monetary and fiscal policy behaviour within the economy characterized with various real labour market frictions. We analyze the benefits of tax reforms and their effectiveness relative to product or other labour market reforms. A general equilibrium model with imperfect competition, wage bargaining and different forms of tax distortions is applied in order to analyze these issues. We find that structural reforms imply short run costs but long run gains; that the long run gains outweigh the short run costs; and that the financing of such reforms will be the main stumbling block. We also find that the effectiveness of various reform instruments depends on the policy maker's ultimate objective. More precisely, tax reforms are more effective for welfare gains, but market liberalization is more valuable for generating employment. In order to advance our understanding of the tax and product market reform processes, we then develop a dynamic stochastic general equilibrium model which incorporates search-matching frictions, costly ring and endogenous job destruction decisions, as well as a distortionary progressive wage and a at payroll tax. We confirm the negative effects of marginal tax distortions on the overall economic performance. We also find a positive effect of an increase in the wage tax progressivity and product market liberalization on employment, output and consumption. Following a positive technology shock, the volatility of employment, output and consumption turns out to be lower in the reformed economy, whereas the impact effect on inflation is more pronounced. Following a positive government spending shock the volatility of employment, output and consumption is again lower in the reformed economy, but the inflation response is stronger over the whole adjustment path. We also find detrimental effects on employment and output of a tax reform which keeps the marginal tax wedge unchanged by partially offsetting a decrease in the payroll tax by an increase in the wage tax rate. If this reform is anticipated one period in advance the negative effects remain all over the transition path. We investigate the optimal monetary and fiscal policy implication of the New-Keynesian setup enriched with search-matching frictions. We show that the optimal policy features deviation from strict price stability, and that the Ramsey planner uses both inflation and taxes in order to fully exploit the benefits of the productivity increase following a positive productivity shock. We also find that the optimal tax rate and government liabilities inherit the time series properties of the underlying shocks. Moreover, we identify a certain degree of overshooting in inflation and tax rates following a positive productivity shock, and a certain degree of undershooting following a positive government spending shock as a consequence of the assumed commitment of policy maker.

In contrast to past literature on competitive bribery, the thesis demonstrates that competitive bribery for rents generated from market distortions is inefficient. However, self enriching policy makers have incentives for implementing these distortions in order to maximize the appropriation of rents. Their success in raising distortions is higher when the electoral process is easily manipulated. Thus distortions are higher and last longer in the absence of electoral accountability. Such distortions worsen the deprivation of human capabilities and functionings, as evidenced by worsening health outcomes among children in Zimbabwe after the policy changes since 2000. Market distortions are sub-optimal and attract bribery. Given arguments in the literature that competitive bribery is efficient, this thesis investigates whether this 'efficiency outcome' extends to bribery for rents generated from distortions. This analysis questions the generalization of the 'efficiency outcome' from models of competitive bribery. The thesis applies auction theory to demonstrate that a symmetric model of competitive bribery can produce an inefficient outcome. In particular, it shows that efficiency in competitive bribery models is sensitive to the source of rents. If the valuation of rents is misaligned to society's preferences, then competitive bribery produces an inefficient outcome. The generalization that competitive bribery is efficient is therefore misleading. This is illustrated using rents generated from market distortions hence the outcome confirms the inefficiency of bribery for rents generated from market distortions. Bribes for rents generated by market distortions accrue to office bearers. Therefore, self enriching policy makers find rent generating distortions attractive despite their negative impact on efficiency and social outcomes. These policy makers seek to extract maximum rents from distortions subject to constraints imposed by considerations for political survival. The political considerations are determined by the quality of electoral institutions. When electoral institutions are weak, incumbents can use electoral fraud to circumvent political pressure generated by the negative effects of high distortions. They maximize on financial rents by raising the level of distortions even when large welfare losses arise. Uni democratic regimes will therefore choose higher levels of distortions. They are less likely to adjust high distortions too. The thesis demonstrates this argument using a model of electoral accountability to compare distortions chosen by an incumbent with and without the possibility of electoral manipulation. The model shows that an incumbent chooses higher distortions when electoral manipulation is feasible. This theory is confirmed on exchange rate distortions in Sub-Saharan Africa. Dictatorships overvalue by between 22.4 and 26.6 percentage points more than complete democracies. These estimates are obtained from dynamic panel GMM estimation using data for non CFA Sub-Saharan countries. The quality of democracy is measured by the polity 2 score from the Polity IV data and exchange rate overvaluation by the black market to official exchange rate ratio. Further confirmation of the hypothesis comes from conditional logit estimation results. They show that undemocratic regimes are more likely to excessively overvalue the exchange rate than democratic regimes. This explains the persistence of excessive distortions in countries with weak institutions. Such distortions can not be wholly attributed to lobbying by special interest groups or to the political use of economic inefficiency as generally argued in the literature. Zimbabwe offers a practical example of distortions which are implemented or sustained for maximizing the appropriation of rents by the incumbent. The government stepped up its intervention in markets since 2000. The resulting distortions shifted command over resources and placed them in the hands of the elite while their intensity and persistence had devastating effects on the economy. Elections over this period have been accompanied by electoral intimidation and manipulation. Thus the incumbent government relied on electoral manipulation to continue the appropriation of rents from market distortions. Zimbabwe provides a good case study of the consequences of market distortions that are sustained to benefit the incumbent in the presence of weak democratic institutions. The thesis uses the 1999 and 2005/06 DHS data to make a comparative analysis of changes in social outcomes after the policy shift in Zimbabwe. This analysis sheds light on the social costs of market distortions that are sustained to benefit the incumbent. The average number of items consumed by under 5 year old children declined by 34%, mean height for age by 19% and mean weight for age by 16%. The biggest declines were on outcomes for children living in poor and middle class households. Children in richer households were the least affected. The significant negative coefficient of food consumption in the height and weight for age regressions show that food consumptions worsened child health outcomes. The decline in food consumption contributed to 37% and 57% decline in means of height and weight for age respectively. ii Wealth inequality in 2005/06 was 16% relatively higher than inequality in 1999. Wealth is measured by an asset index derived from principle component analysis and its inequality by the McKenzie 2005 index. Inequality in food consumption increased as evidenced by a change in the Kakwani concentration index for food consumption by 48% of the 1999 value. A decomposition of changes in health inequality shows that increased inequality in food consumption contributed to increased nutrition inequality by a magnitude of 11% and 6% of stunting and underweight concentration indices in 1999. These results indicate that market distortions worsened social outcomes in Zimbabwe. Yet the distortions persisted for almost a decade due to weak electoral accountability in that period. This shows that a weak intuitional environment which erodes electoral accountability promotes policies that are costly to society. Distortions that arise from such policies have an impact that extends beyond efficiency in allocation. They affect outcomes which are intrinsically important aspects of well-being. iii

This thesis investigates distortions in credit and equity markets. It provides insight into sources of volatility in these markets and their implications for monetary policy. Chapter 2 analyses optimal monetary policy in an economy with a credit friction and capital. A central bank implementing policy optimally will face a trade-off in stabilising inflation, the composition of output, and the net worth of borrowers. The importance of net worth is a new finding in the literature, and reflects the central bank's concern that distortions in credit markets can reduce welfare if ignored. In addition, it is shown that some tolerance of inflation can be optimal in response to shocks that reduce borrowers' net worth. Chapter 3 considers distortions in equity markets and their implications for economic decision-making. It analyses whether changes in the distribution of technology, coupled with optimal expectations on the part of investment-firm managers, can induce endogenous optimism or pessimism. And whether this optimism or pessimism can in turn lead to equity mispricing, and distorted economic decisions. Using a simple general equilibrium model, it is shown that a favourable change in the distribution of technology can induce endogenous optimism leading to over-valued equity prices and over-investment, when compared with an economy in which rational expectations are used. Chapter 4 focuses on identifying the effects of mispriced equity. I find that equity mispricing has statistically significant effects on household consumption and portfolio allocation decisions. These effects are estimated to be non-trivial when allowing for episodes of significant mispricing such as an equity price bubble. Taken together, these chapters suggest that distortions in credit and equity markets can be important, and should be taken into consideration by policymakers to the extent that they affect real economic decisions.

Thesis (S.M. in Technology and Policy)--Massachusetts Institute of Technology, Engineering Systems Division, 2012.
Cataloged from PDF version of thesis. Page 91 blank.
Includes bibliographical references (p. 87-90).
Speculation is not monolithic; it comes in many forms. A certain level of speculation is required for commodity futures markets to function. On the other hand, certain types of trading activities by speculators may damage a market's price discovery function and in turn its hedging function. However, there is great disagreement as to which types of speculation can distort commodity futures prices and the mechanisms for how a price distortion may occur. This thesis advances three distinct categories of speculative activities alleged to distort commodity prices and reviews evidence for each. Those three categories are: corner and squeeze manipulations, nonfundamental futures demand, and large speculative demand. Case studies are presented for each of the three categories. In addition, the effectiveness of speculative position limits in decreasing the occurrence of each category is analyzed. A question that arises, but is left unanswered, is whether the marginal benefits outweigh the possible costs of speculation once speculation rises above certain levels required for price discovery and hedging.
by Devin B. Helfrich.
S.M.in Technology and Policy

Agricultural support levels are at a crossroad with reduced distortions in OECD countries and increasing support for agricultural producers in emerging economies over the last decades. This paper studies the determinants of distortions in the agricultural markets by putting a specific focus on the role of trade policy. Applying various different dynamic panel data estimators and explicitly accounting for potential endogeneity of trade policy agreements, we find that an increase in the number of bilateral free trade agreements exhibits significant short- and long-run distortion reducing effects. By contrast, WTO's Uruguay Agreement on Agriculture has not been able to systematically contribute to a reduction in agriculture trade distortions. From a policy point of view our findings thus point to a lack of effectiveness of multilateral trade negotiations.
Series: Department of Economics Working Paper Series

In this thesis a mathematical description and analysis of the Cumulative Prospect Theory is presented. Conditions that ensure well-posedness of the problem are provided, as well as existence results concerning optimal policies for discrete-time incomplete market models and for a family of diffusion market models. A brief outline of how this work is organised follows. In Chapter 2 important results on weak convergence and discrete time finance models are described, these facts form the main background to introduce in Chapter 3 the problem of optimal investment under the CPT theorem in a discrete time setting. We describe our model, present some assumptions and main results are derived. The second part of this work comprises the description of the martingale problem formulation of diffusion processes in Chapter 4. A key result on the limits and topological properties of the set of laws of a class of Itô processes is described in Chapter 5. Finally, we introduce a factor model that includes a class of stochastic volatility models, possibly with path-depending coefficients. Under this model, the problem of optimal investment with a behavioural investor is analysed and our main results on well-posedness and existence of optimal strategies are described under the framework of weak solutions. Further research and challenges when applying the techniques developed in this work are described.

The interaction between competition and environmental policy is quite complex, particularly before state aids, whose control level reflects the emerging opportunity cost between both policies. In order to illustrate the potential efficiency losses or the imbalances on level playing field of competition, this article analyzes the legal, economic and political dimensions of the European Union Emissions Trading System (EU ETS) free allocation of allowances mechanism for the power generation sector.
La interacción entre la política de competencia y la medio ambientales bastante compleja, especialmente en el caso de las ayudas estatales, cuyo nivel de control refleja el coste de oportunidad emergente entre ambas. Con el fin de ilustrar las potenciales pérdidas de eficiencia o los desequilibrios en la equidad de condiciones de competencia, este artículo analiza las dimensiones legal, económica y política del mecanismo de asignación gratuita de permisos de emisión del Régimen Comunitario de Comercio de Derechos de Emisión (RCCDE) de la Unión Europea para el sector de la generación eléctrica.

This master thesis is engaged in problematics of creation and compensation of geometric distortions in 1D agarose electrophoresis. This master thesis analyze the problematics of cause of these distortions and summarize the theory needed for compensation of these distortions. Based on acquired theory and created electrophoretic phantoms, the master thesis contains several suggestions for compensation of incurred distortions. These suggestions are recreated into functions, which are connected into a functional user interface for gel image analysis and geometric distortions compensation.

Dissertação de mestrado em Direito dos Negócios, Europeu e Transnacional
This thesis shows that taxes are frequently a foe but also an ally of competition. Traditionally, both the legal doctrine and economic theory see taxes as an obstacle to competition. The imposition of a tax affects the supply and demand and therefore interferes with the normal balance of the market. Custom duties and tax aids are basic examples of how taxes can restrict competition. In the European context, the lack of tax coordination in the internal market is another factor that contributes to distort competition considering that it obliges European firms to compete under different rules and involves high compliance costs. These and other situations where taxes affect competition will be analysed in this study. Despite of the obstacles that taxes often represent to competition, the author believes that taxes must also be regarded as an ally to the extent that they can foster competition as well as be used to correct serious market failures, some of the most important purposes of competition policy. That is the case e.g., of taxes that foster competition in monopolistic markets, patent boxes and even environmental taxes. Through these and other examples the author will try to sustain that the negative and the positive effects that taxes have on competition are two sides of the same coin. As taxes are more often a foe than an ally, it is necessary from a competition policy perspective to eradicate the obstacles that taxes create for competition. Therefore in this work the author contributes with a list of recommendations for the EU policymakers, hoping that in the future they will be reflected in European tax law.
Esta tese demonstra que os impostos são frequentemente um inimigo, mas também um aliado da concorrência. Tradicionalmente, não só a doutrina jurídica mas também a teoria económica, vêm os impostos como um obstáculo à concorrência. A imposição de um imposto interfere com o normal funcionamento do mercado, afectanto a oferta e a procura, uma vez que aumenta os preços do mercado. Impostos alfandegários e auxílios fiscais são exemplos básicos de como os impostos podem restringir a concorrência. No contexto Europeu, a falta de coordenação fiscal no mercado interno é outro factor que contribui para a distorção da concorrência, considerando que obriga as empresas europeias a competir sob diferentes regras e envolve elevados custos de cumprimento. Estas e outras situações em que os impostos afectam a concorrência serão analisados neste estudo. Apesar dos obstáculos que os impostos frequentemente representam para a concorrência, o autor acredita que os impostos devem também ser considerados um aliado, na medida em que eles podem fomentar a concorrência, assim como ser utilizados para corrigir graves falhas de mercado, alguns dos principais objectivos da política da concorrência. Esse é o caso, por exemplo, de impostos que fomentam concorrência em mercados monopolistas, regimes fiscais próprios para direitos de propriedade intelectual e até mesmo impostos ambientais. Através destes e de outros exemplos, o autor irá tentar sustentar que os efeitos negativos e positivos que os impostos têm na concorrência são dois lados da mesma moeda. Uma vez que os impostos são mais frequentemente um inimigo do que um aliado, é necessário, de uma perspectiva da política da concorrência, eliminar os obstáculos que os impostos criam para a concorrência. Portanto, neste trabalho o autor contribui com uma lista de recomendações para os decisores políticos da UE, na expectativa de que no futuro elas estejam reflectidas no direito fiscal europeu.

Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Information Analysis and Management
Since the mid-1970s, the global economy has been dominated by the spread of capitalist market economies, growing inequality and increasing ecological degradation. The latter may be the most serious of these trends. Human economic activities have reached a level that is bound to instigate irreversible change to the global environment, creating conditions likely to be less conducive to human development. The market system demand curve is distorted if inequality is sufficiently great and the purchasing power has a greater impact on allocation than preferences. If we attempt to internalize the ecological costs of essential resources into their market prices, driving up price, the best case scenario is that the poor reduce consumption by more than the rich, even though the rich have been the primary drivers of ecological degradation. The thesis focuses on the food allocation and demand curve distortion. Mainstream economists argue that it is impossible to objectively compare marginal utility across individuals, and the best we can do is equate willingness to pay with utility. However, food consumption is a physiological need, and it is quite possible to objectively compare the marginal utility it provides to different individuals. Certainly, a malnourished person gains more from additional food than an overfed one. A comprehensive econometric modeling of an aggregated and two-staged food demand systems is carried out for one hundred-seventy-seven countries. The data is retrieved from the 2011 round of the World Bank International Comparison Program. In the first stage, the Florida preference independence model is applied to the main broad groups of goods and services. In the second stage, a conditional demand system for food subcategories is estimated using the Florida Slutsky model. An Inaccuracy measure and the Stroble decomposition are used in the outliers detection procedure The system equations are corrected for both groupwise and scale heteroskedasticity. The iterated nonlinear seemingly unrelated regression (ITNLSUR) is applied in the final estimation, while the iterated nonlinear least squares (ITNLLS) produces the initial values. The gauss-newton method is used to approximate the maximums of the objective functions. Expenditures elasticities, Slutsky own price elasticities, Frisch own price elasticities and Cournot own price elasticities constitute the estimate of the elasticities structure. Expenditure and marginal expenditure shares are the most valued direct outcome of the models. In a perfect allocation system food marginal shares would be equal for every country. The discrepancies shown are an indicator of the market distortion. A redistribution towards poorer countries would increase total utility. Even if a pareto optimum is in place in every economy (normally it is not), the solution captured by the model seems to be far from a global optimum. It is of upmost importance to know what are the implications on the real income of the poor if ecological thresholds are put in place through a market based mechanism. The Cournot elasticity estimates make evident that the poorer countries have more elastic demand curves, resulting primarily from the impact of increasing prices on real income, since there are no substitutes for food. This means that in an unequal market economy, if market based instruments are used to reduce the ecological degradation caused by food production, the poor will reduce consumption by a much greater percentage than the rich in response to price increases. Since the rich are responsible for far more ecological degradation than the poor, this outcome is highly perverse. This distortion is associated with the food shares and the marginal food shares that are higher in less affluent countries.