|
on Law and Economics |
| By: | Rafael La Porta; Florencio Lopez-de-Silanes; Andrei Shleifer |
| Abstract: | In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform. |
| JEL: | K00 N20 P51 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13608&r=law |
| By: | Vladimir Atanasov; Vladimir Ivanov; Kate Litvak |
| Abstract: | Venture capital contracts give VCs enormous power over entrepreneurs and early equity investors of portfolio companies. A large literature examines how these contractual terms protect VCs against misbehavior by entrepreneurs. But what constrains misbehavior by VCs? We provide the first systematic analysis of legal and non-legal mechanisms that penalize VC misbehavior, even when such misbehavior is formally permitted by contract. We hand-collect a sample of over 177 lawsuits involving venture capitalists. The three most common types of VC-related litigation are: 1) lawsuits filed by entrepreneurs, which most often allege freezeout and transfer of control away from founders; 2) lawsuits filed by early equity investors in startup companies; and 3) lawsuits filed by VCs. Our empirical analysis of the lawsuit data proceeds in two steps. We first estimate an empirical model of the propensity of VCs to get involved in litigation as a function of VC characteristics. We match each venture firm that was involved in litigation to otherwise similar venture firm that was not involved in litigation and find that less reputable VCs are more likely to participate in litigation, as are VCs focusing on early-stage investments, and VCs with larger deal flow. Second, we analyze the relationship between different types of lawsuits and VC fundraising and deal flow. Although plaintiffs lose most VC-related lawsuits, litigation does not go unnoticed: in subsequent years, the involved VCs raise significantly less capital than their peers and invest in fewer deals. The biggest losers are VCs who were defendants in a lawsuit, and especially VCs who were alleged to have expropriated founders. |
| JEL: | G24 G34 K22 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13641&r=law |
| By: | Ines Macho-Stadler (Universitat Autonoma de Barcelona); David Perez-Castrillo (Universitat Autonoma de Barcelona) |
| Abstract: | We analyze environments where firms chose a production technology which, together with random events, determines the final emission level. We consider the coexistence of two alternative technologies. The cost of the adoption of the clean technology and the actual emissions are firms' private information. The environmental regulation is based on taxes over reported emissions, and on monitoring and penalties over unreported emissions. We show that the optimal monitoring is a cut-off policy, where all reports below a threshold are inspected with the same probability, while reports above the threshold are not monitored. We show that if the adoption of the technology is firms' private information, too few firms will adopt the clean technology under the optimal monitoring policy. However, when the EA can check the technology adopted by the firms, the optimal policy may induce overswitching or underswitching to the clean technology. |
| Keywords: | Production technology, random emissions, environmental taxes, optimal monitoring policy. |
| JEL: | K32 K42 D82 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0060&r=law |
| By: | Grimm, Michael; Klasen, Stephan |
| Abstract: | - There is well-known debate about the respective role of geography versus institutions in explaining the long term development of countries. These debates have usually been based on cross country regressions where questions about parameter heterogeneity, unobserved heterogeneity, and endogeneity cannot easily be controlled for. The innovation of Acemoglu, Johnson and Robinson (2001) was to address this last point by using settler morality as an instrument for endegenous institutions and found that this supported their line of reasoning. We believe there is value-added to consider this debate at the micro level within a country as particularly questions of parameter heterogeneity and unobserved heterogeneity are likely to be smaller than between countries. Hence, we examine the determinants of agricultural growth across villages on the Indonesian Island of Sulawesi and find technology adoption to play a crucial role. We show that geography through its effects on migration and institutions is a valid instrument to establish the causal links between institutions and technology adoption as well as technology and agricultural growth. |
| Keywords: | Geography, land rights, migration, technology adoption, agricultural developement, Indonesia |
| JEL: | K11 O12 Q12 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gdec07:6532&r=law |
| By: | Anke S. Kessler (Simon Fraser University); Christoph Luelfesmann (Simon Fraser University); Gordon M. Myers (Simon Fraser University) |
| Abstract: | The paper studies a world where a region provides essential inputs for the successful implementation of a local public policy project with spill-overs, and where bargaining between different levels of government may ensure efficient decision making ex post. We ask whether the authority over the public policy measure should rest with the local government or be centralized, allowing financial relationships within the federation to be designed optimally. We show that centralization is always dominant when governments are benevolent, and that both governance structures are otherwise inefficient as long as political bargaining is disregarded. With bargaining, however, the first best can often be achieved under decentralization, but not under centralization. At the root of the result is the alignment of decision making over both essential inputs and final project size under decentralization. |
| Keywords: | Federalism, Constitutions, Decentralization, Grants, Political Bargaining. |
| JEL: | D23 D78 H21 H77 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:sfu:sfudps:dp07-19&r=law |