New Economics Papers
on Law and Economics
Issue of 2008‒01‒19
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Basel II and the Value of Bank Differentiation By Hege, Ulrich; Feess, Eberhard
  2. Law, State Power, and Taxation in Islamic History By Metin Cosgel; Rasha Ahmed; Thomas Miceli
  3. The Concept of a World Economic Order By Horst Siebert
  4. The causes and consequences of informality in Peru By Norman Loayza

  1. By: Hege, Ulrich; Feess, Eberhard
    Abstract: This paper analyzes optimal bank capital requirements when regulation can be differentiated according to banks’ heterogeneous risk-assessment capabilities. The new Basel II Accord provides the opportunity to do by introducing distinct regulatory systems for banks authorized to apply internal ratings and externally rated banks.
    Keywords: bank capital regulation; capital adequacy; bank competition; risk-taking; Basel Accord; internal ratings
    JEL: H41 K13
    Date: 2007–10–01
  2. By: Metin Cosgel (Economics Dept., The University of Connecticut.); Rasha Ahmed (Economics Dept., The University of Connecticut.); Thomas Miceli (Economics Dept., The University of Connecticut.)
    Abstract: This paper studies the unique nature, institutional roots, and economic consequences of the ruler’s political power in Islamic History. An influential interest group in Islamic societies has been the legal community, whose power could range from being able to regulate the rulers to being entirely under their control. The struggle was over the provision of legal goods and services, the legal community gradually gaining control of the law in history and the rulers seeking to appropriate political power by controlling the legal community. The economic consequence of power was the ability to dictate the choice of tax bases and rates.
    Keywords: state power, taxation, political economy, Islamic Law, legal community
    JEL: K3 H2
    Date: 2008–01–15
  3. By: Horst Siebert
    Abstract: This paper studies the concept of an international economic order, i.e. an institutional arrangement of international rules. Such rules emerge from negative experiences – historical disasters – that inflict severe hardship on people. A taxonomy for rules reducing transaction costs is developed, for instance through decentralization of decisions, property rights, territoriality and the internalization of border-crossing negative externalities and mechanisms for global public goods. Some aspects of the rule system are studied including the process of ceding sovereignty and philosophical thoughts on international rules.
    Keywords: International rules, transaction costs, welfare gains of rules, property rights, hierarchy of rules, concept of order, Freiburg school, philosophical ideas
    JEL: A12 F02 F15 K00 N00 P00
    Date: 2008–01
  4. By: Norman Loayza (The World Bank)
    Abstract: Adopting a legal definition of informality, this article studies the causes of informality in general and with a particular application to Peru. It starts with a discussion on the definition and measures of informality, as well as on the reasons why widespread informality should be of great concern. Then, the article analyzes informality’s main determinants, arguing that informality is not single-caused but results from the combination of poor public services, a burdensome regulatory regime, and weak monitoring and enforcement capacity by the state. This combination is especially explosive when the country suffers from low educational achievement and features demographic pressures and primary production structures. Finally, using cross-country regression analysis, the article evaluates the empirical relevance of each determinant of informality. It then applies the estimated relationships to the case of Peru in order to assess the country-specific relevance of each proposed mechanism.
    Keywords: Regulation, government performance, economic growth, informal economy
    JEL: K20 K30 H11 O40 O17
    Date: 2007–12

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