New Economics Papers
on Law and Economics
Issue of 2005‒08‒13
twenty-six papers chosen by
Jeong-Joon Lee, Towson University

  1. Globalization and Domestic Conflict By Michelle R. Garfinkel; Stergios Skaperdas; Constantinos Syropoulos
  2. Estimating police effectiveness with individual victimisation data By Ben Vollaard; Pierre Koning
  3. A Simple Scheme to Improve the Efficiency of Referenda By Casella, Alessandra; Gelman, Andrew
  4. Market Definition in the Printed Media Industry: Theory and Practice By Argentesi, Elena; Ivaldi, Marc
  5. The Optimal Amount of Falsified Testimony By Emons, Winand; Fluet, Claude
  6. Race to the Top or Bottom? Corporate Governance, Freedom of Reincorporation and Competition in Law By Fluck, Zsuzsanna; Mayer, Colin
  7. Why Do People Pay Taxes? Prospect Theory Versus Expected Utility Theory By Sanjit Dhami; Ali al-Nowaihi
  8. Law, Endowments, and Property Rights By Ross Levine
  9. Digital Rights Management and the Pricing of Digital Products By Yooki Park; Suzanne Scotchmer
  10. Policies Bearing on Product Market Competition and Growth in Europe By Carl Gjersem
  11. Product Market Competition and Economic Performance in Hungary By Carl Gjersem; Philip Hemmings; Andreas Reindl
  12. Product Market Competition and Economic Performance in Switzerland By Claude Giorno; Philippe Gugler; Miguel Jimenez
  13. Product Market Competition and Economic Performance in Japan By Jens Høj; Michael Wise
  14. Product Market Competition and Economic Performance in Sweden By Lennart Goranson; Martin Jørgensen; Deborah Roseveare
  15. Product Market Competition and Economic Performance in Norway By Jens Høj; Michael Wise
  16. Product Market Competition and Economic Performance in Korea By Yongchun Baek; Randall Jones; Michael Wise
  17. Product Market Competition and Economic Performance in Finland By Jens Høj; Michael Wise
  18. Product Market Regulation in OECD Countries: 1998 to 2003 By Paul Conway; Véronique Janod; Giuseppe Nicoletti
  19. Product Market Competition and Economic Performance in New Zealand By Annabelle Mourougane; Michael Wise
  20. To Give In or Not To Give In To Bribery? Setting the Optimal Fines for Violations of Rules when the Enforcers are Likely to Ask for Bribes By Celik, Gorkem; Sayan, Serdar
  21. The Governance of Occupational Pension Funds and the Politico- Economic Implications: The Case of Austria By Stefan W. Schmitz
  23. Institutions, Corruption and Tax Evasion in the Unofficial Economy By Douglas Hibbs; Violeta Piculescu
  24. Achieving Compliance when Legal Sanctions are Non-Deterrent By Jean-Robert Tyran; Lars P. Feld
  25. Morality and Conflicts By Dorothee Schmidt
  26. Trade and Foreign Exchange Liberalization, Investment Climate and FDI in the MENA By Khalid Sekkat; Marie-Ange Veganzones-Varoudakis

  1. By: Michelle R. Garfinkel; Stergios Skaperdas; Constantinos Syropoulos
    Abstract: We examine how globalization affects trade patterns and welfare when conflict prevails domestically. We do so in a simple model of trade, in which a natural resource like oil is contested by competing groups using real resources (”guns”). Thus, conflict is viewed as ultimately stemming from imperfect property-rights enforcement. When comparing autarky with free trade in such a setting, the gains from trade have to be weighed against the possibly higher resource costs of conflict. We find that importers of the contested resource gain unambiguously. By contrast, countries exporting the contested resource will lose under free trade, unless the international price of the resource is sufficiently high. Regardless of what price obtains in international markets, countries tend to over-export the contested resource relative to what we would observe if there were no conflict; for some range of prices, the presence of conflict even inverts the country's comparative advantage. We find further that an increase in the international price of the contested resource over an even wider range reduces welfare, an instance of the "natural resource curse".
    Keywords: globalization, trade openness, property rights, enforcement, insecurity, conflict
    JEL: D72 D74 D78 F02 F10 K42
    Date: 2005
  2. By: Ben Vollaard; Pierre Koning
    Abstract: In this paper, we present evidence on the effect of greater numbers of police personnel on victimisation of crime and experience of nuisance. We make use of individual data from a Dutch victimisation survey unique in its size, duration and scope. By using individual victimisation data we provide evidence on the effects of police on nuisance rather than 'hard crime' only, we circumvent measurement error common to police statistics, and we are able to control for both individual and municipality characteristics. We find significantly negative effects of higher police levels on property crime, violent crime and nuisance. The estimated elasticities are in line with the literature based on police statistics. Urban police forces are more effective than rural police forces for most types of crime and nuisance. Additionally, we find experience of nuisance mostly to be a characteristic of the municipality in which someone lives, with little variation across individuals in a municipality, whereas victimisation of violent crime varies across individuals rather than municipalities. For property crime, individual and municipality characteristics are about equally important. Finally, we provide evidence that greater police protection allows people to move around more freely, which is an additional benefit of higher police levels not reflected in a decline in victimisation rates.
    Keywords: police; crime; nuisance; effectiveness; crime prevention; victimisation survey
    JEL: K4 C23
  3. By: Casella, Alessandra; Gelman, Andrew
    Abstract: This paper proposes a simple scheme designed to elicit and reward intensity of preferences in referenda: voters faced with a number of binary proposals are given one regular vote for each proposal plus an additional number of bonus votes to cast as desired. Decisions are taken according to the majority of votes cast. In our base case, where there is no systematic difference between proposals’ supporters and opponents, there is always a positive number of bonus votes such that ex ante utility is increased by the scheme, relative to simple majority voting. When the distributions of valuations of supporters and opponents differ, the improvement in efficiency is guaranteed only if the distributions can be ranked according to first order stochastic dominance. If they are, however, the existence of welfare gains is independent of the exact number of bonus votes.
    Keywords: majority voting; referenda; voting mechanisms
    JEL: D70 H10 K19
    Date: 2005–06
  4. By: Argentesi, Elena; Ivaldi, Marc
    Abstract: This paper first discusses how the market is delineated in some recent antitrust cases in the printed media industry. It evaluates the extent to which the main features of the industry are incorporated into the analysis and affect market definition. In addition we argue that an econometric analysis that does not incorporate these features can lead to biased estimates of elasticities. As demand substitution is a crucial element for defining market, bad estimates of elasticities could blur the boundaries of relevant markets. Second we propose a simple model that encompasses these features and in particular the two-sidedness of the market. Thirdly, we review some empirical papers that analyse the issue of demand estimation in printed media. Finally, we perform a statistical estimation on a dataset of magazines in order to provide a measure of the possible bias that could arise in the estimation of elasticities when one does not use a proper model.
    Keywords: market definition; printed media; two-sided markets
    JEL: K21 L40 L82
    Date: 2005–06
  5. By: Emons, Winand; Fluet, Claude
    Abstract: An arbiter can decide a case on the basis of his priors or he can ask for further evidence from the two parties to the conflict. The parties may misrepresent evidence in their favour at a cost. The arbiter is concerned about accuracy and low procedural costs. When both parties testify, each of them distorts the evidence less than when they testify alone. When the fixed cost of testifying is low, the arbiter hears both, for intermediate values one, and for high values no party at all. The ability to commit to an adjudication scheme makes it more likely that the arbiter requires evidence.
    Keywords: adversarial; costly state falsification; evidence production; inquisitorial; procedure
    JEL: D82 K41 K42
    Date: 2005–07
  6. By: Fluck, Zsuzsanna; Mayer, Colin
    Abstract: This paper investigates the governance structure choices of firms when there is competition between legal systems. We study the impact of the allocation of control over choice of governance and reincorporation on firms’ technologies and technological specialization of countries in the context of a model of the firm in which there are agency conflicts between shareholders and managers. We show that the allocation of control over firms’ reincorporation decisions determines the corporate governance choice ex ante and the outcome of the competition between legal regimes ex post. When managers have control over firms’ reincorporation then competitive deregulation and ‘runs to the bottom’ ensue. When shareholders have partial or full control then there is diversity in governance structures. Runs to the bottom are not necessarily socially undesirable but they have a feedback effect on firms’ choices of technologies that may make the party in control worse off ex ante. We show that it is impossible for any country to achieve social welfare maximization of its existing and new enterprises. With competition between legal regimes, start-up and mature companies incorporate in different jurisdictions even when reincorporation is correctly anticipated.
    Keywords: competition between legal systems; corporate governance; freedom or reincorporation; managerial private benefits; shareholder protection; technology choice
    JEL: G34 K22
    Date: 2005–07
  7. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: Given actual probabilities of audit and penalty rates observed in the real world, tax evasion should be an extremely attractive gamble to an expected utility maximizer. However, in practice, one observes too much compliance relative to the predictions of expected utility. This paper considers an alternative theoretical model that is based on Kahneman and Tversky’s cumulative prospect theory. The model predicts empirically plausible magnitudes of tax evasion despite low audit probabilities and penalty rates. An increase in the tax rate leads to an increase in the amount evaded- a result, which is in broad agreement with the evidence, but is contrary to the prediction made by expected utility theory. Furthermore, we show that the optimal tax rates predicted by prospect theory, in the presence of tax evasion behaviour, are consistent with actual tax rates.
    Keywords: Reference Dependence; Loss Aversion; Decision Weights; Prospect Theory; Expected Utility Theory; Tax Evasion; Optimal taxation
    JEL: D81 H26 K42
    Date: 2005–08
  8. By: Ross Levine
    Abstract: While scholars have hypothesized about the sources of variation in property rights for over 2500 years, it is only very recently that researchers have begun to test these theories empirically. This paper reviews both the theory and empirical evidence supporting and refuting the law and endowment views of property rights. The law view holds that historically determined differences in national legal traditions continue to shape cross-country differences in property rights. The endowment view argues that during European colonization, differences in climate, crops, the indigenous population, and the disease environment influenced long-run property rights.
    JEL: N01 K4 O00
    Date: 2005–08
  9. By: Yooki Park; Suzanne Scotchmer
    Abstract: As it becomes cheaper to copy and share digital content, vendors are turning to technical protections such as encryption. We argue that if protection is nevertheless imperfect, this transition will generally lower the prices of content relative to perfect legal enforcement. However, the effect on prices depends on whether the content providers use independent protection standards or a shared one, and if shared, on the governance of the system. Even if a shared system permits content providers to set their prices independently, the equilibrium prices will depend on how the vendors share the costs. We show that demand-based cost sharing generally leads to higher prices than revenue-based cost sharing. Users, vendors and the antitrust authorities will typically have different views on what capabilities the DRM system should have. We argue that, when a DRM system is implemented as an industry standard, there is a potential for "collusion through technology."
    JEL: L13 L14 L15 K21 O33
    Date: 2005–08
  10. By: Carl Gjersem
    Abstract: <P>The strength of product market competition plays an important role in economic growth as it affects economic efficiency and the allocation of resources, and can also lead to improved labour market performance. This paper examines product market competition and economic performance in the European Union. The Community’s competition rules, which apply whenever anti-competitive practices have an implication for cross-border trade, are enforced primarily by the Commission’s Directorate General for Competition, and complement national competition legislation. Reforms have been adopted recently to sharpen the toolkit and to increase the role of national authorities in the enforcement process. However, the toolkit could still be made more effective. Competition policy is complemented by, and partly overlapping with, the regulation of newly liberalised network industries. Despite the EU’s commendable efforts in this area, competition is still undermined by dominant incumbents in some ...</P> <P>Politiques pour la concurrence et la croissance sur les marchés de produits en Europe <P>La vigueur de la concurrence sur les marchés de produits joue un rôle important dans la croissance économique, influence l’efficience économique et l’allocation des ressources, et peut aussi induire de meilleurs résultats sur le marché du travail. Cette étude examine la concurrence sur les marchés de produits et la performance économique dans l’Union Européenne. Les règles de concurrence communautaires, qui s’appliquent chaque fois que des pratiques anticoncurrentielles ont une incidence sur les échanges transfrontières, sont mises en œuvre principalement par la Direction générale de la concurrence de la Commission et viennent compléter le droit national de la concurrence. Des réformes ont été adoptées récemment pour affiner le dispositif et renforcer le rôle des autorités nationales dans le processus d’application. Toutefois, l’efficacité des instruments en place pourrait être encore améliorée. La réglementation des industries de réseau récemment libéralisées complète la ...</P>
    Keywords: regulatory reform, Regulated industries, European Union, competition, concurrence, réforme de réglementation, euro area, antitrust law, integration, protection, trade negotiations, aggregate productivity and growth, l’Union Européenne, la zone euro, loi anti-trust, industries réglées, intégration, protection, négociations commerciales, productivité globale et croissance
    JEL: F13 F15 K21 K23 O47 O50
    Date: 2004–01–12
  11. By: Carl Gjersem; Philip Hemmings; Andreas Reindl
    Abstract: <P>The establishment of competitive markets has been one of the cornerstones Hungarian economic policy over the past decade, alongside a successful strategy of attracting foreign investment. Broad statistical measures show no signs of endemically weak domestic competition, though the country’s relatively low productivity among domestic business likely signals some sheltering from international competition. The generally healthy level of competition is partly because competition legislation and its enforcement are of a good standard. Nevertheless, room for improvement is suggested in a number of areas. In particular, it is argued that individuals should be able to initiate legal actions directly, <I>i.e.</I> without having to proceed via the competition authority. And, it is suggested that sanctions against individuals in hard-core cartel cases are introduced. In examining specific sectors, this paper is critical of the pace of progress towards competition in the network industries. The rail ...</P> <P>Concurrence sur les marches de produits et performance economique en Hongrie <P>La mise en place de marchés concurrentiels a été l’une des pierres angulaires de la politique économique menée par la Hongrie au cours de la dernière décennie, parallèlement à des mesures qui ont permis d’attirer l’investissement étranger. Bien que les indicateurs statistiques généraux ne mettent pas en évidence d’insuffisance systématique de la concurrence sur le marché intérieur, la productivité relativement faible des entreprises locales témoigne probablement d’une certaine protection vis-à-vis de la concurrence internationale. Le niveau généralement soutenu de la concurrence tient en partie à la qualité de la réglementation en matière de concurrence et de son application. Néanmoins, des améliorations seraient sans doute possibles dans plusieurs domaines. En particulier, il semblerait souhaitable que les particuliers puissent engager directement des actions en justice, sans avoir à passer par l’autorité de la concurrence. De même, il serait probablement utile que des sanctions ...</P>
    Keywords: Hungary, Hongrie, regulatory reform, réforme de la réglementation, Regulated industries, competition, concurrence, antitrust law, protection, aggregate productivity and growth, protection, productivité globale et croissance, competition legislation, législation antitrust, législation en matière de concurrence, secteurs réglementés
    JEL: F13 K21 K23 O47 O52 O57
    Date: 2004–03–02
  12. By: Claude Giorno; Philippe Gugler; Miguel Jimenez
    Abstract: <P>The strength of product market competition plays an important role in ensuring dynamic economic growth. This paper examines product market competition and its link with economic performance in Switzerland whose growth has been weaker than in most OECD countries since 1980. It shows that substantial progress in reforming product markets can be made in many areas, which would contribute to reduce the excessive price differential vis-à-vis other countries and stimulate growth. These reforms should focus on the legal framework of competition, the network industries, the health sector, the revision of the Domestic Market Act, agriculture, the restriction on parallel imports and, more generally, the opening up of services to foreign competition ...</P>
    Keywords: Switzerland, Health, network industries, competition, cartel, protection, aggregate productivity and growth, parallel imports, agriculture
    JEL: J18 K21 L42 L8 L9 O47 Q18
    Date: 2004–03–19
  13. By: Jens Høj; Michael Wise
    Abstract: <P>Empirical work shows that competition is important for promoting economic growth. However, in Japan the promotion of competition has long been compromised by ministerial guidance and exemptions from the competition law. Thus, the level and growth of productivity have been low in many domestically oriented sectors and consumer welfare has suffered under high prices and the slow introduction of new goods and services. This misallocation of resources contributes to explaining why the Japanese economy had difficulty in coming out of the quasi-stagnation of the past decade. Recognising that gains from more pro-competition policies are substantial, the Japanese government has now made the promotion of competitive markets a cornerstone of its economic policy. Reforms to promote product market competition in Japan should inter alia focus on strengthening the legal framework by increasing fines to a deterrent level and introducing cartel destabilising measures, such as a leniency ...</P> <P>Concurrence sur les marchés de produits et performance économique au Japon <P>Des études empiriques montrent que la concurrence est importante pour promouvoir la croissance économique. Mais au Japon, la stimulation de la concurrence a longtemps été compromise par des directives ministérielles et des exemptions au droit de la concurrence. Aussi, le niveau et le taux de croissance de la productivité ont été bas dans de nombreux secteurs tournés vers le marché intérieur, et le bien-être des consommateurs a souffert de prix élevés et d’une diffusion trop lente des nouveaux biens et services. Cette mauvaise allocation des ressources contribue à expliquer pourquoi l’économie japonaise n’est pas parvenue à sortir de la quasi-stagnation de la dernière décennie. Conscient que des politiques plus propices au jeu de la concurrence peuvent s’avérer très bénéfiques, le gouvernement japonais a fait de la promotion des marchés concurrentiels l’une des pièces maîtresses de sa politique économique. Les réformes visant à stimuler la concurrence sur les marchés de produits au ...</P>
    Keywords: télécommunications, regulatory reform, network industries, réforme de la réglementation, industries de réseau, Japan, Japon, anti-trust law, competition law, cartel, productivity and growth, retail sector, energy, telecommunication, postal services, transportation, public procurement, réglementation anti-trust, droit de la concurrence, entente, productivité et croissance, secteur de détail, énergie, services postaux, transports, marchés publics
    JEL: F13 K21 L11 L16 L33 L42 L43 L81 L87 L92 L93 L94 L95 L96 O53 O57 Q18
    Date: 2004–05–06
  14. By: Lennart Goranson; Martin Jørgensen; Deborah Roseveare
    Abstract: <P>Vigorous product market competition plays a central role in bolstering productivity growth. Sweden has strengthened competition legislation and deregulated a number of sectors, including electricity, telecommunications and parts of transport, over the past 10 to 15 years. This paper examines the current state of product market competition and proposes further measures. A stronger institutional framework would facilitate identification and elimination of anti-competitive behaviour, such as hard-core cartels. Efforts to inject effective competition into a range of network industries have been broadly successful, but specific measures could increase competition in several sectors, such as retail and construction. There is also room to boost competition in Sweden’s large and decentralised public sector and in its interactions with the private sector, so that competitive neutrality applies to all public sector activities ...</P> <P>La vigueur de la concurrence sur les marchés de produits joue un rôle central dans la stimulation des gains de productivité. La Suède a renforcé la législation concernant la concurrence et déréglementé un certain nombre de secteurs, dont l’électricité, les télécommunications et certains segments des transports. Cette étude examine l’état actuel de la concurrence en Suède et propose des mesures supplémentaires. Un cadre institutionnel renforcé faciliterait la détection et l’élimination des comportements anticoncurrentiels, don’t les ententes injustifiables. Des efforts ont été accomplis pour introduire un peu plus de concurrence active dans un éventail d’industries de réseau et ils ont globalement été couronnés de succès, mais quelques mesures concrètes seront nécessaires pour améliorer la concurrences dans plusieurs autres secteurs, dont la distribution et la construction. Il y a lieu également d’intensifier les efforts pour stimuler la concurrence dans le vaste secteur public ...</P>
    Keywords: Sweden, Regulation, network industries, Réglementation, industries de réseau, competition, concurrence, public procurement, marchés publics, product markets, retail distribution, construction, public sector, competitive neutrality, La Suède, marchés de produits, grande distribution, construction, neutralité de concurrence
    JEL: H4 K21 L1 L32 L33 L41 L43 L44 L8 L9 O52
    Date: 2004–05–12
  15. By: Jens Høj; Michael Wise
    Abstract: <P>Norwegian growth has been strong over the past decade. This development has been supported by the off-shore sector, but depleting oil reserves implies that growth will have to rely increasingly on the mainland economy. Empirical work shows that competition is important for promoting economic growth. Recognising the benefits of competition, the government wants to introduce regulatory reforms to stimulate economic growth. However, the promotion of competition has often conflicted with other policy objectives, such as maintaining a regionally dispersed population and a high degree of public ownership. This has lead to weak competition in a number of sectors, resulting in high prices, weak innovative activity and inefficient resource allocation. Reforms to promote product market competition in Norway should therefore <I>inter alia</I> focus on separating the public sector’s roles and functions as owner and regulator. This requires an increase in the independence of sector ...</P> <P>Concurrence sur les marchés de produits et performance économique en Norvège <P>La Norvège a connu une croissance vigoureuse au cours des dix dernières années. Cette expansion a été alimentée par le secteur pétrolier offshore, mais l'épuisement progressif des réserves implique que l'économie continentale va devoir prendre peu à peu le relais pour soutenir la croissance. Des travaux empiriques montrent que la concurrence contribue de manière importante à l'expansion économique. Conscient des bienfaits de la concurrence, le gouvernement entend réformer la réglementation pour stimuler la croissance économique. Néanmoins, la promotion de la concurrence est souvent entrée en conflit avec d'autres objectifs, tels que le maintien d'une population géographiquement dispersée et du contrôle étendu de l'État sur diverses activités. Cela se traduit par un faible niveau de concurrence dans un certain nombre de secteurs, qui a pour corollaires des prix élevés, un manque de dynamisme en matière d'innovation et une allocation inefficiente des ressources. Les réformes ...</P>
    Keywords: Norway, Norvège, regulatory reform, network industries, réforme de la réglementation, industries de réseau, commerce de détail, competition law, productivity and growth, retail sector, public procurement, droit de la concurrence, productivité et croissance, marchés publics, product market competition, public ownership, concurrence sur les marchés de produits, actifs publics
    JEL: K21 L11 L16 L33 L43 L81 L87 L9 O57
    Date: 2004–05–14
  16. By: Yongchun Baek; Randall Jones; Michael Wise
    Abstract: <P>Maintaining rapid economic growth depends increasingly on productivity gains, particularly in the service sector. Competition has an important role to play in achieving such gains. However, Korea’s development strategy has tended to weaken competition and has left a legacy of government intervention. Strengthening competition requires upgrading competition policy, increasing openness to international trade and foreign direct investment and improving the regulatory framework in network industries. In particular, the power of the Korea Fair Trade Commission should be expanded, while raising the level of sanctions and scaling back special treatment for certain sectors. Barriers to imports remain above the OECD average, particularly in agriculture, while the stock of inward direct investment is among the lowest in the OECD area. Restructuring plans in the network industries, notably electricity and gas, have lagged behind schedule. Price distortions and the absence of independent ...</P> <P>Concurrence sur les marchés de produits et performances économiques en Corée <P>Le maintien d'une croissance économique rapide est de plus en plus tributaire des gains de productivité, en particulier dans le secteur des services. La concurrence a un rôle important à jouer dans la réalisation de ces gains. Néanmoins, la stratégie de développement de la Corée a eu tendance à affaiblir la concurrence et se traduit par une politique interventionniste héritée du passé. Le renforcement de la concurrence passe par une rénovation de la politique de la concurrence, une ouverture accrue aux échanges internationaux ainsi qu'à l'investissement direct étranger (IDE), et une amélioration du cadre réglementaire dans les industries de réseau. Il conviendrait de renforcer les prérogatives de la Commission coréenne de la concurrence, tout en alourdissant les sanctions prévues par la loi et en revoyant à la baisse les dispositions spéciales prévues pour certains secteurs. Les obstacles aux importations demeurent supérieurs à la moyenne de l'OCDE, notamment dans l'agriculture ...</P>
    Keywords: telecommunications, télécommunications, regulatory reform, network industries, réforme de la réglementation, industries de réseau, commerce de détail, Trade policy, politique commerciale, Korea, Corée, foreign direct investment, investissement direct étranger, anti-trust law, competition law, cartel, retail sector, droit de la concurrence, entente, législation antitrust, South Korean economy, electricity, gas, tariffs, chaebol, économie sud-coréenne, électricité, gaz, tarifs douaniers, chaebol
    JEL: F13 F21 K21 L11 L40 L43 L81 L94 L95 L96 O53 O57 Q17
    Date: 2004–08–09
  17. By: Jens Høj; Michael Wise
    Abstract: <P>Following the deep recession in the early 1990s growth has been strong, but the scope for economic catch-up remains considerable and cross-country empirical evidence suggests that enhancing competition is an important means of achieving this. Structural reforms to strengthen competition in the early 1990s did boost growth and were also ahead of similar developments in the EU. However, indicators suggest that relatively weak competition remains in a number of sectors. Moreover, potential competition is reduced by a sparse population and relative long distances to large markets, which together with the prevalence of local monopolies and public ownership in many network industries, point to the need for greater vigilance to sustain and promote competition. Further reforms to promote product market competition should focus on fundamental changes in the regulatory approach as well as more incremental measures to intensify competition. The competition authority should concentrate ...</P> <P>Concurrence sur le marché des biens et performance économique en Finlande <P>Après la sévère récession des années 1990, la croissance économique a été forte mais la convergence en termes de la productivité est encore loin d’être complète et les comparaisons empiriques internationales suggèrent qu’un renforcement de la concurrence pourrait résorber une part significative de ce retard. Certes, les réformes structurelles mises en œuvre au début des années 1990 pour renforcer la concurrence ont soutenu la croissance et ont même souvent été plus précoces qu’au sein de l’Union Européenne. Néanmoins, divers indicateurs suggèrent que le degré de concurrence reste insuffisant dans de nombreux secteurs. En outre, le degré potentiel de concurrence reste contenu en raison de l’éparpillement de la population et l’éloignement par rapport des longues distances d’accès aux grands marchés, qui, combinés à l’importance des monopoles locaux et de l’actionnariat de l’état dans de nombreuses industries de réseaux, suggèrent la nécessité d’une vigilance renforcée pour ...</P>
    Keywords: regulatory reform, network industries, Finland, Finlande, competition law, productivity and growth, retail sector, public procurement, droit de la concurrence, productivité et croissance, product market competition, public ownership, concurrence sur le marché des biens, réforme structurelle, vente au détail, industries de réseaux, achat public, secteur public
    JEL: K21 L11 L16 L33 L43 L81 L87 L9 O57
    Date: 2004–12–20
  18. By: Paul Conway; Véronique Janod; Giuseppe Nicoletti
    Abstract: <P>This paper describes trends in product market regulation in OECD countries over the period 1998 to 2003. The analysis is based on summary indicators of product market regulation that measure the degree to which policies promote or inhibit competition. The results suggest that regulatory impediments to competition have declined in all OECD countries in recent years. Regulation has also become more homogenous across the OECD as countries with relatively restrictive policies have, in some areas, moved towards the regulatory environment of the more liberalized countries. Within some countries product market policies have become more consistent across different regulatory provisions, although relatively restrictive countries still tend to have a more heterogeneous approach to competition. In general, domestic barriers to competition tend to be higher in countries that have higher barriers to foreign trade and investment, and high levels of state control and barriers to competition ...</P> <P>Ce document décrit les évolutions de la réglementation encadrant les marchés de produits dans les pays de l'OCDE sur la période 1998-2003. L'analyse est basée sur des indicateurs synthétiques de la réglementation des marchés de produits qui mesurent l’intensité avec laquelle les politiques favorisent ou restreignent la concurrence. Les résultats suggèrent que les entraves à la concurrence résultant de la réglementation ont décliné dans tous pays de l’OCDE ces dernières années. La réglementation est aussi devenue plus homogène à travers l'OCDE, les pays disposant de politiques relativement restrictives, s’étant ralliés, dans certains domaines, à l’environnement réglementaire des pays plus libéraux. Dans certains pays, les politiques concernant les marchés de produits sont devenues plus cohérentes au regard des différents dispositifs réglementaires, même si les pays relativement restrictifs ont toujours tendance à disposer d’une approche plus disparate de la concurrence. De façon ...</P>
    Keywords: product market regulation, Indicators, Indicateurs, Réglementation des marchés de produits
    JEL: K2 L5
    Date: 2005–04–01
  19. By: Annabelle Mourougane; Michael Wise
    Abstract: The paper examines the current state of competition in a number of sectors that are important for the economy. Because of the country’s small size and isolation, the analysis focuses on barriers to entry, investment and external trade, rather than some standard indicators of competition stance. The competition law and institutions are generally well-conceived, although high-profile litigation about mergers and market-power problems hasstretched their capacities and until recently, diverted attention from enforcement against price fixing. Overall, markets appear to function well in New Zealand, but progress towards liberalisation seems recently to have lost momentum. In particular, improvement could be made in three main areas: in the energy sector, lifting current barriers to investment and developing forward markets are necessary to ensure the economy will be able to cope with long-term challenges; in telecommunications markets, concerns have been mounting regarding high prices and slow deployment of broadband; and in the public sector, there is scope for further use of private delivery for public services and reducing state ownership, especially in potentially competitive markets. Some adjustments to the regulatory framework and policies in a number of other sectors would also be beneficial. This Working Paper relates to the 2005 OECD Economic Survey of New Zealand ( <P>Concurrence sur les marchés de produits et performance économique en Nouvelle-Zélande Cet article examine l’état actuel de la concurrence dans un certain nombre de secteurs importants pour l’économie. L’analyse est axée sur les obstacles à l’entrée, à l’investissement et au commerce extérieur, plutôt que sur des indicateurs types de l’intensité de la concurrence en raison de la faible superficie et l’isolement du pays. Le droit de la concurrence et les organismes connexes sont généralement bien conçus, même si des contentieux notoires en matière de fusions et des problèmes de pouvoir de marché ont fortement sollicité leurs capacités et, jusqu’à une date récente, détourné l’attention de la lutte contre les ententes sur les prix. Au total, les marchés semblent bien fonctionner en Nouvelle-Zélande, mais le processus de libéralisation a apparemment marqué le pas ces derniers temps. En particulier, des améliorations sont possibles sur trois grands fronts : dans le secteur de l’énergie, il faut supprimer les obstacles actuels à l’investissement et développer les marchés à terme pour permettre à l’économie de relever les défis de long terme ; sur les marchés des télécommunications, le niveau élevé des prix et la lenteur du déploiement du réseau à large bande suscitent des préoccupations grandissantes ; enfin, dans le secteur public, on pourrait recourir davantage à la prestation privée de services publics et réduire les participations de l’État, surtout sur les marchés potentiellement concurrentiels. Des ajustements du cadre et de la politique de la concurrence seraient également bénéfiques dans plusieurs autres secteurs. Ce Document de travail se rapporte à l'Étude économique de l'OCDE de la Nouvelle-Zélande, 2005 (
    Keywords: telecommunications, télécommunications, competition policy, politique de la concurrence, transport aérien, retail trade, commerce de détail, Trade, privatisation, banking, privatisation, agriculture, agriculture, electricity, électricité, natural gas
    JEL: H4 K20 K21 L50 L9 Q1 Q4
    Date: 2005–07–26
  20. By: Celik, Gorkem; Sayan, Serdar
    Abstract: In this paper, we develop a model of law enforcement with the possibility of corruption between the enforcer and the potential offender. We study how the violation rate changes with the level of the fine imposed on violations. We show that there is always equilibrium violation regardless of the fine level. Moreover, we find, in contrast to the conventional wisdom, that the fine level that minimizes violations can be intermediate rather than large.
    JEL: K42 D73 D78 D82
    Date: 2005–08–03
  21. By: Stefan W. Schmitz
    Abstract: This paper analyses the efficacy of the governance structure of occupational pension funds (Pensionskassen – PKs) in Austria. Based on the results of the analysis, it further investigates the politico- economic implications for the political and legislative process regarding recent changes to the relevant Act (Pensionskassengesetz – PKG). The first section explains the exclusion of the beneficiaries’ interests from the institutional interest of the PKs’ association, i.e. the distribution of power, by the underlying governance structure of PKs. This section focuses on the structural conflict of interest PKs face, namely between their beneficiaries and their shareholders (almost exclusively large Austrian banks and insurance companies). The institutional interests of PKs are determined by the governance structure at the micro and meso levels and the interests of the stakeholders, in particular those of the shareholders, while the governance structure is treated as given. The second section focuses on the empirical investigation of the politico-economic impact of the findings in the first section. It analyses the role of the PKs and in particular the PK association (Fachverband der Pensionskassen) in the political process in a case study. It argues that the repercussions of the governance structure at the micro and meso levels on the political level can result in a vicious circle for beneficiaries and that the political risks associated with long-term guarantees for beneficiaries of occupational pension funds are substantial and aggravated by the governance structure at the micro and meso level. It employs an actor- centred institutionalism.
    Keywords: Pension Funds, Governance,Positive Analysis of Policy-Making and Implementation, Law and Economics
    JEL: D G G K
    Date: 2005–08–02
  22. By: J.Ramon Martinez-Resano (Bank of Spain)
    Abstract: This paper deals with the economics of secondary markets for government bonds. Ultimately, the analysis is shaped by a public policy goal: assessing the elements of a regulatory framework for these markets. In that regard, the decisive role of market structure leads to a critical review of microstructure conclusions relevant specifically for government debt markets. It is argued that the nature of information asymmetries and matching costs in government debt markets determines a bias towards a fragmented microstructure at odds both with exchange-like arrangements and with ordinary regulatory approaches. Hence, a generic conclusion highlights the risks of blindly transposing regulatory principles from the equity markets area without due regard to the specifics of the bond market. As a specific application of this idea, the paper critically reviews electronic trading platforms that emulate exchange-like order execution solutions. More specifically, the paper opposes the hybrid microstructure (pure limit order book plus affirmative quoting obligation) faced by European primary dealers and the arbitrage-based approach to market-making found in US inter-dealer markets. The Citigroup disruptive trade in August 2004 is analyzed from this perspective. Government bond regulation is argued to necessarily depart from ordinary approaches also because it captures the diverse interests of various governmental agencies. As an application of this principle, the paper discusses repo and short-selling regulation in government bond markets. The atypical market structure and the multi- agency endeavour around government bond markets raise the chances of regulatory failures. Nevertheless, it is argued that a reliance on competition, integrative infrastructure and basic systemic protections as over-arching principles for regulation is consistent with recommendations from relevant economic theory. Finally, political economy issues arising in implementation of transparency, disclosure or retail investor protection will be addressed in the context of selected country cases.
    Keywords: government bonds, microstructure, regulation
    JEL: D40 G28 K22
    Date: 2005–08–05
  23. By: Douglas Hibbs (Göteborg University); Violeta Piculescu (Göteborg University)
    Abstract: In this paper we propose a model of how institutional benefits, taxation and government regulations affect the productive activity of private enterprises. We consider an environment in which public officials enforcing tax and regulatory obligations are potentially corruptible, and markets for corruption may therefore arise that give firms the option of producing unofficially and evading taxes and regulations. By contrast to some previous studies that view corruption and bribery as forces driving firms out of official production into the underground economy, our model features the idea that the `grabbing hands' of corrupt bureaucrats may alternatively serve as `helping hands' allowing firms to exploit profitable opportunities in the unofficial sector. And contrary to a traditional view maintaining that high tax rates are intrinsically a major cause of large shadow economies, our model implies that incentives to evade taxation and produce underground depend on statutory tax rates relative to firm-specific thresholds of tax toleration. Tax toleration is determined, among other things, by firm-specific institutional benefits available to official producers and the costs of corruption required to produce unofficially. Some core predictions of the model concerning the determinants of tax toleration and the relative size of unofficial activity and tax evasion receive broad support from empirical analyses based on firm-level data from the World Business Environment Surveys sponsored by the World Bank.
    Keywords: institutions corruption tax evasion unofficial economy underground economy
    JEL: D21 H26 K42 O17
    Date: 2005–08–05
  24. By: Jean-Robert Tyran; Lars P. Feld
    Abstract: Law backed by non-deterrent sanctions (mild law) has been hypothesized to achieve compliance because of norm activation. We experimentally investigate the effects of mild law in the provision of public goods by comparing it to severe law (deterrent sanctions) and no law. The results show that exogenously imposing mild law does not achieve compliance, but compliance is much improved if mild law is endogenously chosen, i.e. self-imposed. We show that voting for mild law induces expectations of cooperation, and that people tend to comply with the law if they expect many others to do so.
    Keywords: Deterrent effect of legal sanctions; Expressive law; Social norms; Public goods; Voting
    JEL: C92 D72 K42
    Date: 2005–02
  25. By: Dorothee Schmidt (Department of Economics, Johannes Gutenberg University of Mainz, Germany)
    Abstract: In recent debates, morality or social norms have been proposed as an instrument to reduce conflict behavior. As the argument goes, moral people will not engage in socially not-tolerated behavior or, less so than amoral people. Analyzing this question in the framework of contest theory, we find that if morality can discriminate between appropriation and defense, it is an effective instrument to lower socially unwanted behavior and support the enforcement of property rights. If it cannot discriminate between these different conflict efforts, strategic effects due to a one-sided increase in morality might actually lead to total increased conflict effort in the economy.
    Keywords: Contests, property right enforcement, morality, education
    JEL: D72 D74 I20 K42 Z13
    Date: 2005–07
  26. By: Khalid Sekkat (DULBEA, Université libre de Bruxelles, Brussels); Marie-Ange Veganzones-Varoudakis (CERDI and World Bank)
    Abstract: The paper assesses the relative importance of trade and foreign exchange liberalization, infrastructure availability and economic and political stability in increasing Middle East and North African (MENA) countries attractiveness with respect to FDI. The analysis is conducted for total FDI and for FDI in manufacturing. The results show that trade and foreign exchange liberalization, infrastructure availability and sound economic and political conditions increase FDI inflows. Their effects are much higher for FDI in the manufacturing sector than for total FDI. This result is robust to alternative indicators of trade and foreign exchange liberalization, and to change in the specification. The message to MENA’s policy makers is twofold. First, efforts toward trade and foreign exchange liberalization should be initiated or further increased in order to make the region attractive to foreign investors. Second improvements in other aspects of the investment climate are important complements to liberalization and result in additional and sensitive increase of FDI inflows.
    Keywords: Reforms, MENA, FDI.
    JEL: F21 F15 K42
    Date: 2005–02

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