Essays on Regulation and Competitive Dynamics

This thesis aims at analyzing how differences in the economic and institutional environment may shape the behavior of the economic actors. When differences in the type of economy, financial system, corporate governance, labour market institutions, regulations are involved, it is likely to have different outcomes when a cross-country analysis is of interest. In particular the thesis focuses on Germany and the UK, which are two European systems often under study, because of their opposite economic and institutional environments. Does the implementation of the same rule, in this case Basel, lead to different incentives in banks competitive behaviour, if applied to systems based on economies with different characteristics, namely Germany and the UK? In this work the level of competition measured via the Panzar and Rosse (1987) statistic arguing that the market power of a firm can be measured by the way in which the changes in the input prices affect the equilibrium of revenues. The empirical analysis shows that in a stability-oriented system, such as that in Germany, which is characterized by the risk-reducing drive of its policy and regulation, the implementation of Basel has the impact of aligning the incentives of banks and regulators. In a market-based system, such as that in the UK, the impact of Basel shapes banks’ behaviour towards less competitive dynamics and creates a particular category of banks which produces in monopolistic conditions.