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on Regulation |
| By: | Berggren, Niclas (The Ratio Institute); Jordahl, Henrik (Uppsala University) |
| Abstract: | We present new evidence on how generalized trust is formed. Unlike previous studies, we look at the explanatory power of economic institutions, we use newer data, we incorporate more countries, and we use instrumental variables to handle the causality problem. A central result is that legal structure and security of property rights (area 2 of the Economic Freedom Index) increase trust. The idea is that a market economy, building on voluntary transactions and interactions with both friends and strangers within the predictability provided by the rule of law, entails both incentives and mechanisms for trust to emerge between people. |
| Keywords: | social capital; trust; economic freedom; rule of law; property rights; legal system |
| JEL: | K42 O40 Z13 |
| Date: | 2005–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0064&r=reg |
| By: | Chris Manning |
| Abstract: | This paper approaches the subject of labour standards from the standpoint of domestic labour market circumstances rather than international norms. The paper assesses government approaches to improving standards in the context of Indonesia's daunting 'employment challenge', and the capacity of institutions to implement reform since the fall of Soeharto. The discussion of recent reforms is divided into two parts: the affirmation of basic rights and freedoms, and legislation for the protection 'Survival' and 'Security' Rights. We find that while the protection of labour freedoms is long overdue, there is mounting evidence that regulation of setting labour standards in the modern sector benefits the few with 'better' jobs. It penalises many less fortunate Indonesians in the informal sector and agriculture, and also younger, new job seekers. Owing to a significant improvement in Basic and Civil Rights, the compliance regime in relation to labour standards has altered dramatically in recent years. This has closed the gap between rhetoric and reality: between formal ratification and the actual impact of labour regulations on labour costs, while giving no obvious boost to productivity. It is of concern especially in those internationally labour-intensive industries such as textiles footwear and clothing TCF, where Indonesia has had a comparative advantage in the past. |
| Keywords: | Labour Standards, Labour Rights, Employment, Indonesia Length (pages): 28 |
| JEL: | J23 J38 J80 J88 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2004-08&r=reg |
| By: | Philip E. Strahan |
| Abstract: | We examine empirically how legal origin, creditor rights, property rights, legal formalism, and financial development affect the design of price and non-price terms of bank loans in almost 60 countries. Our results support the law and finance view that private contracts reflect differences in legal protection of creditors and the enforcement of contracts. Loans made to borrowers in countries where creditors can seize collateral in case of default are more likely to be secured, have longer maturity, and have lower interest rates. We also find evidence, however, that ?Coasian? bargaining can partially offset weak legal or institutional arrangements. For example, lenders mitigate risks associated with weak property rights and government corruption by securing loans with collateral and shortening maturity. Our results also suggest that the choice of loan ownership structure affects loan contract terms. |
| JEL: | K0 G2 O5 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11052&r=reg |
| By: | Uwe Dulleck |
| Abstract: | Article VI of the GATT allows counter measures of goods are sold on a foreign market at a price below average production plus transportation costs. The present article analyzes Article VI based on a simple game theoretic model with two countries and economies of scale in the production of one homogeneous good. It is shown that multiple equilibria exist under the WTO rule for some parameter values which do not exist without the rule. In some equilibria the incumbent serves the entire market even if the entrant can porduce at lower costs. The model supports the criticism of the anti-dumping rule as an instrument of protection by industrialized countries against competition from developing countries. |
| JEL: | F13 F12 L13 |
| Date: | 2004–03 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:0407&r=reg |
| By: | Luigi Bonaventura (Department of Labor Studies, University of Milan, Italy) |
| Abstract: | – This paper examines the phenomenon of the underground economy. We analyze the choice by firms and workers to carry out their economic activities within the formal economy context (regular economy) or the underground economy context (irregular economy). We assume that there are two types of labor markets, a regular one, and a irregular one; and starting from a coordinated interaction between the firm and the worker we show the existence of multiple symmetric equilibria in each market. The proposed game of coordination (2x2), can be interpreted as a pre-contract interaction between the agents through which they determine in which labor market they will “meet”. In the model, we insert an exogenous policy parameter (t) that measures the impact of legislative policy interventions on the regular labor market. The parameter takes on a positive value with respect to those interventions that increase the incentives to operate in the regular market. Through the utilization of evolutionary dynamics we can explicate the mechanism that leads the system towards one of the two equilibria, and explain the fact that these equilibria are sustained among the different populations (firms and workers) by taking on the role of a social norm. In this framework, we show that policy interventions (t) do not alter the choice dynamics of each actor, nor do they eliminate the probability of having certain dynamics that push the system towards the underground market, even where there are strong incentives for acting in the regular economy. |
| Keywords: | Underground Labor Market, Social Norms, Evolutionary Games, Policy Incentives |
| JEL: | J41 J42 O17 |
| Date: | 2005–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0501008&r=reg |
| By: | Hong-Bum Kim (Geongsang National University); Chung H. Lee (Department of Economics, University of Hawaii at Manoa) |
| Abstract: | In the aftermath of the economic crisis of 1997-98 South Korea has undertaken a number of financial reforms under IMF auspices. One of such reforms was in financial supervision, which created the Financial Supervisory Commission and the Financial Supervisory Service. In spite of these reforms Korea has recently experienced a costly financial instability relating to credit-card companies and household debts. Korea’s success in bringing about rapid economic recovery from the crisis may have lessened, as suggested by the World Bank, the urgency for full financial reform. This paper, however, argues that the newly created supervisory agencies, although created as independent agencies, have not in fact functioned as such and thus failed to carry out proper supervision over credit-card companies. It is argued that those agencies have not been able to function independently due to institutional constraints imposed on them by other extant, formal as well as informal, institutions in Korea. |
| Keywords: | Financial reform, financial supervision, institutions |
| JEL: | G2 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:200410&r=reg |