Competition, innovation and growth with limited commitment

We study how barriers to business start-up affect the investment in knowledge capital when contracts are not enforceable. Barriers to business start-up lower the competition for knowledge capital and, in absence of commitment, reduce the incentive to accumulate knowledge. As a result, countries with large barriers experience lower income and growth. Our results are consistent with cross-country evidence showing that the cost of business start-up is negatively correlated with the level and growth of income.

Rethinking the effects of financial liberalization

During the last few decades, many emerging markets have lifted restrictions on cross-borderfinancial transactions. The conventional view was that this would allow these countries to: (i)receive capital inflows from advanced countries that would finance higher investment and growth;(ii) insure against aggregate shocks and reduce consumption volatility; and (iii) accelerate thedevelopment of domestic financial markets and achieve a more efficient domestic allocationof capital and better sharing of individual risks. However, the evidence suggests that thisconventional view was wrong.In this paper, we present a simple model that can account for the observed effects of financialliberalization. The model emphasizes the role of imperfect enforcement of domestic debts and theinteractions between domestic and international financial transactions. In the model, financialliberalization might lead to different outcomes: (i) domestic capital flight and ambiguous effectson net capital flows, investment, and growth; (ii) large capital inflows and higher investmentand growth; or (iii) volatile capital flows and unstable domestic financial markets. The modelshows how these outcomes depend on the level of development, the depth of domestic financialmarkets, and the quality of institutions.

Prime property institutions for a subprime era: Toward innovative models of homeownership

This Article breaks new ground toward contractual and institutional innovation in models of homeownership, equity building, and mortgage enforcement. Inspired by recent developments in the affordable housing sector and other types of public financing schemes, we suggest extending institutional and financial strategies such as time- and place-based division of property rights, conditional subsidies, and credit mediation to alleviate the systemic risks of mortgage foreclosure. Two new solutions offer a broad theoretical basis for such developments in the economic and legal institution of homeownership: a for-profit shared equity scheme led by local governments alongside a private market shared equity model, one of "bootstrapping home buying with purchase options".

The role of institutions in the contractual process

Human beings increase their productivity by specializingtheir resources and exchanging their products. Theorganization of exchange is costly, however, becausespecialized activities need coordination and incentiveshave to be aligned. This work first describes how theseexchanges are organized in an institutional environment.It then focuses on the dual effect of this environment-as with any other specialized resource, institutions maybe used for expropriation purposes. They enjoyspecialization advantages in safeguarding exchange butthey also make possible new forms of opportunism,causing new costs of exchange. Three perverse tendenciesare identified:In the legal field, there is a surplus ofmandatory rules and, at the same time, a deficit in default rules. Second, courts activity is biased againstthe quasi-judicial role of the parties and the market. Third, Market enforcement is based on reputationalassets that are badly exposed to opportunism.

Property titling and conveyancing

This chapter analyzes titling institutions and the regulation of supporting conveyancingservices. After examining the tradeoff of enforcement benefits and consent costs posed byproperty rights, it explains how different public titling systems (privacy, recording andregistration) try to solve this tradeoff, and what the consequences are for the nature andregulation of private conveyancing services. The chapter ends with a discussion of someempirical issues and data which are useful for comparing, designing and managing titlingand conveyancing systems.

Judges' cognition and market order

We argue that during the crystallization of common and civil law in the 19th century, the optimal degree of discretion in judicial rulemaking, albeit influenced by the comparative advantages of both legislative and judicial rulemaking, was mainly determined by the anti-market biases of the judiciary. The different degrees of judicial discretion adopted in both legal traditions were thus optimally adapted to different circumstances, mainly rooted in the unique, market-friendly, evolutionary transition enjoyed by English common law as opposed to the revolutionary environment of the civil law. On the Continent, constraining judicial discretion was essential for enforcing freedom of contract and establishing a market economy. The ongoing debasement of pro-market fundamentals in both branches of the Western legal system is explained from this perspective as a consequence of increased perceptions of exogenous risks and changes in the political system, which favored the adoption of sharing solutions and removed the cognitive advantage of parliaments and political leaders.

Protestants and Catholics: Similar work ethic, different social ethic

This article develops two hypotheses about economically-relevant values of Christianbelievers, according to which Protestants should work more and more effectively, as in the work ethic argument of Max Weber, or display a stronger social ethic that would lead themto monitor each other s conduct, support political and legal institutions and hold morehomogeneous values. Tests using current survey data confirm substantial partial correlations andpossible different effects in mutual social control, institutional performance and homogeneityof values but no difference in work ethics. Protestantism therefore seems conducive to capitalisteconomic development, not by the direct psychological route of the Weberian work ethic butrather by promoting an alternative social ethic that facilitates impersonal trade.

Optimal magnitude and probability of fines

The economic literature on crime and punishment focuses on the trade-off between probability and severity of punishment, and suggests that detection probability and fines are substitutes. In this paper it is shown that, in presence of substantial underdeterrence caused by costly detection and punishment, these instruments may become complements. When offenders are poor, the deterrent value of monetary sanctions is low. Thus, the government does not invest a lot in detection. If offenders are rich, however, the deterrent value of monetary sanctions is high, so it is more profitable to prosecute them.

Contractual allocation of decision rights and incentives: The case of automobile distribution

We analyze empirically the allocation of rights and monetary incentives in automobile franchise contracts. These contracts substantially restrict the decision rights of dealers and grant manufacturers extensive contractual completion and enforcement powers, converting the manufacturers, de facto, in a sort of quasi-judiciary instance. Variation in the allocation of decision rights andincentive intensity is explained by the incidence of moral hazard in the relation. In particular, when the cost of dealer moral hazard is higher and the risk of manufactureropportunism is lower, manufacturers enjoy more discretion in determining the performance required from their dealers and in using mechanisms such as monitoring, termination and monetary incentives to ensure such performance is provided. We also explore the existence of interdependencies between the different elements of the system. and find some complementarities between completion and termination rights, and between monitoring rights and the intensity of incentives.

Corporate criminal law and organization incentives: A managerial perspective

Corporate criminal liability puts a serious challenge to the economictheory of enforcement. Are corporate crimes different from other crimes?Are these crimes best deterred by punishing individuals, punishing corporations, or both? What is optimal structure of sanctions? Shouldcorporate liability be criminal or civil? This paper has two majorcontributions to the literature. First, it provides a common analyticalframework to most results presented and largely discussed in the field.In second place, by making use of the framework, we provide new insightsinto how corporations should be punished for the offenses committed bytheir employees.

Aggregate consequences of limited contract enforceability

We study a general equilibrium model in which entrepreneurs finance investment with optimal financial contracts. Because of enforceability problems, contracts are constrained efficient. We show that limited enforceability amplifies the impact of technological innovations on aggregate output. More generally, we show that lower enforceability of contracts will be associated with greater aggregate volatility. A key assumption for this result is that defaulting entrepreneurs are not excluded from the market.

Os Problemas Ambientais em Cabo Verde - Políticas e Medidas de Protecção Ambiental

A presente dissertação teve como finalidade analisar os Problemas Ambientais em Cabo Verde, com destaque para as políticas e medidas implementadas no período que decorre de 1975 a 2010. Para tal, centrou-se no confronto de resultados de estudos que permitiram uma comparação entre os Concelhos da Praia e de São Salvador do Mundo, localizados no sul e no centro da ilha de Santiago, respectivamente. Como ponto de partida, fez-se uma caracterização climática/ambiental do país, salientando a sua fragilidade ambiental através de uma estreita ligação entre as suas características naturais e o estado de ambiente para delinear a evolução das medidas políticas e jurídicas tomadas no sentido de combater ou minimizar os problemas existentes. Todo o trabalho empírico foi realizado nos concelhos acima referidos, com base nos inquéritos efectuados junto dos moradores, escolas, técnicos e políticos que lidam com a problemática ambiental nesses Concelhos. Posteriormente, foi possível analisar profundamente as principais causas da degradação ambiental nos dois Concelhos como a pobreza, a escassez de água, o saneamento básico, o aumento da população, o êxodo rural e as construções clandestinas, estabelecendo uma correlação entre estas e o desenvolvimento económico-social e a qualidade de vida dos seus habitantes. Finalmente, expôs-se o trabalho realizado e o que se perspectiva fazer para sua mitigação, privilegiando a vertente pedagógica, destacando a importância do envolvimento de grupos comunitários para prossecução de acções diversificadas de sensibilização, de programação e da formação em paralelo com o reforço de fiscalização para melhor aplicação de normas existentes.

Iowa’s Drug Control Strategy, November 1, 2007

The attached annual report is submitted in satisfaction of Chapter 80E.1 of the Code of Iowa which directs the Drug Policy Coordinator to monitor and coordinate all drug prevention, enforcement and treatment activities in the state. Further, it requires the Coordinator to submit an annual report to the Governor and Legislature concerning the activities and programs of the Coordinator, the Governor’s Office of Drug Control Policy and all other state departments with drug enforcement, substance abuse treatment, and prevention programs. Chapter 80E.2 establishes the Drug Policy Advisory Council (DPAC), chaired by the Coordinator, and consisting of a prosecuting attorney, substance abuse treatment specialists, law enforcement officers, a prevention specialist, a judge and representatives from the departments of corrections, education, public health, human services, public safety and human rights. This report and strategy were in developed in consultation with the DPAC.

Combating corruption in international business transactions

We analyze the impact of different types of international conventions thatrequire signatory countries to penalize domestic firms that are found tohave bribed foreign public officials. We analyze enforcement of penaltiesunder a convention styled after the OECD's 'Convention on Combating Briberyof Foreign Public Officials in International Business Transactions', in whichsignatory countries commit to prosecuting firms that have bribed publicofficials of any foreign country. We compare the results with the case inwhich the convention requires signatory countries to commit to prosecutingfirms that have bribed public officials of signatory countries only.We argue that the second type of convention is more likely to ensureenforcement of penalties on firms found to have bribed foreign publicofficials.

How competition controls team production: The case of fishing firms

Under team production, those who monitor individual productivity areusually the only ones compensated with a residual that varies withthe performance of the team. This pattern is efficient, as is shownby the prevalence of conventional firms, except for small teams andwhen specialized monitoring is ineffective. Profit sharing in repeatedteam production induces all team members to take disciplinary actionagainst underperformers through switching and separation decisions,however. Such action provides effective self-enforcemnt when themarkets for team members are competitive, even for large teams usingspecialized monitoring. The traditional share system of fishing firmsshows that for this competition to provide powerful enough incentivesthe costs of switching teams and measuring team productivity must bebellow. Risk allocation may constrain the organizational designdefined by the use of a share system. It does not account for itsexistence, however.