On job loss estimates from regulation

The current talk in Republican circles is that one can achieve significant job growth by deregulating. One may want to question this idea on two fronts. First, regulation has been initially imposed not for the fun of killing jobs, but because it improves the well-being of people. There is a trade-off, and sometimes it is worth having a little fewer jobs if it means improving the life of a lot of people. Second, the job loss numbers from regulation are often more fantasy than reality.

This is not a new question. Take the case of Australia, as discussed by Bruce Chapman. He looks at estimate of job loss in Australian mining from the implementation of an emission trading scheme. These 23,510 lost jobs are not as large as they appear. First, there would be job gains elsewhere, in particular in alternative energies. Second, when compared to normal job flows in the mining sectors, this number is quite negligible. Third, once you look at a somewhat longer horizon, say, ten years, a job loss is virtually undetectable. I would add finally, measurement of jobs losses has high uncertainty, and any result commissioned by one party in the debate needs to be taken as an extreme value.

So, do not have too high hopes that a sudden deregulation will create a job boom, especially in a country that has remarkably little regulation to start with.

The imperfect market for re-insurance

The insurance market is thought to be rather competitive, at least for the most common risks. That is in part because insurance companies are willing to take risks thanks to re-insurance, where they can insure large event risks and to some degree over-exposure. But there are rather few actors on the re-insurance market. Is this bad, and does it have an impact on the insurance market?

Sabine Lemoyne de Forges, Ruben Bibas and Stéphane Hallegatte play with a model of re-insurance and find that there is a trade-off. The lack of competition leads to sub-optimal re-insurance provision, obviously. But is also allows the few players to take on larger risks, some of which may not have been insured otherwise. And, the larger the re-insurers, the more resilient the market can be. As a regulator, this means that means that you may to let the re-insurance companies grow larger than want is optimal in terms of competition.