New Economics Papers
on Law and Economics
Issue of 2005‒04‒24
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Are EU Environmental Policies Too Demanding for New Members States? By Lorenzo Pellegrini; Reyer Gerlagh
  2. Why So Small? Explaining the Size of Firms in Latin America By Eduardo A. Lora; Ana Maria Herrera
  3. The Evolution of Precedent By Nicola Gannaioli; Andrei Shleifer
  4. Enhancing Brazil's regulatory framework for network industries: the case of electricity, oil and gas, and water and sanitation By Edmar Almeida; Nanno Mulder

  1. By: Lorenzo Pellegrini (Vrije Universiteit); Reyer Gerlagh (Vrije Universiteit)
    Abstract: In 2004, ten new states entered the European Union. Relative to the pre-2004 member states, these accession states have lower environmental standards, and some worry that it will be too demanding for these new EU members to fully comply with European environmental provisions. In this paper, we assess one rationale for such harmonization. Specifically, we analyze the determinants of environmental policies’ stringency, and show that differences in corruption levels are more important as explanatory factor when compared to income differentials. Since high levels of corruption characterize some countries in the enlarged EU, we argue that this is a good reason for an upward harmonization of environmental policies at the EU level.
    Keywords: Corruption, European union, Environmental policy
    JEL: C31 K00 Q53
    Date: 2005–03
  2. By: Eduardo A. Lora (Research Department, Inter-American Development Bank); Ana Maria Herrera (Michigan State University - Department of Economics)
    Abstract: On average, Latin American firms are small with respect to world patterns, both in terms of the quantity of assets they control and the amount of employment they generate. We examine data on firm size from developed and developing countries around the world to assess the influence on demand, supply and institutional factors on the size of the largest firms in each country. We find that, besides the size of the economy and the level of income per capita, the key determinants of the size of firms are trade openness, stock market capitalization and physical infrastructure. Our simulations suggest that if the gaps with respect to the best Latin American performer were closed in each of these three areas, firm size in the countries of the region would - on average - reach world patterns.
    Keywords: firm size, Latin America, openness, financial sector, infrastructure
    JEL: D23 G30 K40 L20
    Date: 2005–03
  3. By: Nicola Gannaioli; Andrei Shleifer
    Abstract: We evaluate Richard Posner's famous hypothesis that common law converges to efficient legal rules using a model of precedent setting by appellate judges. Following legal realists, we assume that judicial decisions are subject to personal biases, and that changing precedent is costly to judges. We consider separately the evolution of precedent under judicial overruling of previous decisions, as well as under distinguishing cases based on new material dimensions. Convergence to efficient legal rules occurs only under very special circumstances, but the evolution of precedent over time is on average beneficial under more plausible conditions.
    JEL: K13 K4
    Date: 2005–04
  4. By: Edmar Almeida; Nanno Mulder
    Abstract: This paper assesses Brazil’s regulatory framework and agencies for several network industries (electricity, oil and gas, and water and sanitation). Private investment can be encouraged by tackling regulatory uncertainty in many areas. To this end, recent initiatives include a new regulatory model for the electricity sector, and new draft legislation on the role and structure of the regulatory agencies (currently in Congress). The overall approach to regulatory reform in network industries, particularly in electricity, is well thought out but the risk of regulatory failure should not be underestimated. Implementation will be the ultimate test of reform in this area. In natural gas, the dominance of Petrobras, the national oil company, throughout the industry has often been perceived as an obstacle to its development. Private investment in water and sanitation is constrained by a lack of clarity over the assignment of regulatory powers across different levels of government. These reforms are consistent with the government’s agenda for growth, focusing on meeting the challenge of improving the business environment. This Working Paper relates to the 2005 OECD Economic Survey of Brazil ( <p> Améliorer le cadre réglementaire des industries de réseau au Brésil: le cas de l'électricité, du pétrole et du gaz, et de l'eau et de l'assainissement <p> Cet article évalue le cadre réglementaire ainsi que les agences régulatrices pour plusieurs industries de réseau (électricité, pétrole et gaz, eau et assainissement). L’investissement privé pourrait être encouragé en réduisant l’incertitude réglementaire dans plusieurs domaines. A ce propos, des initiatives récentes incluent un nouveau modèle réglementaire pour le secteur de l’électricité et un projet de loi sur le rôle et la structure des agences régulatrices (actuellement au Congrès). L’approche générale retenue en ce qui concerne la réforme de la réglementation dans les industries de réseau, notamment dans le secteur de l’électricité, est judicieuse, mais le risque de défaillance de la réglementation ne doit pas être sous-estimé. C’est au stade de sa mise en œuvre que la réforme dans ce domaine sera mise à l’épreuve. Pour ce qui est du gaz naturel, la position dominante de la société pétrolière nationale Petrobras dans l’ensemble du secteur a souvent été perçue comme un obstacle au développement de celui-ci. L’investissement privé dans les secteurs de l’eau et de l’assainissement se heurte à un manque de clarté dans la répartition des pouvoirs de réglementation entre les différents niveaux d’administration. Ces réformes se situent dans la lignée du programme de croissance du gouvernement, en mettant l’accent sur l’amélioration de l’environnement des entreprises. Ce document de travail se rapporte à l'Étude économique de l'OCDE du Brésil, 2005 (
    Keywords: Brazil; regulation; regulatory agencies; economics of regulation; electricity; oil; gas; pipelines; water utilities; sanitation; Government Policy (Energy)
    JEL: K23 L51 L94 L95 O54 Q48
    Date: 2005–04–08

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