New Economics Papers
on Law and Economics
Issue of 2008‒09‒13
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Rule of Law, Institutional Quality and Information By R. L. Bruno
  2. Bank competition - When is it Goog? By Christa Hainz;
  3. Exporting to Insecure Markets: a Firm-Level Analysis By Matthieu Crozet; Pamina Koenig; Vincent Rebeyrol
  4. Law applicable to merits of the arbitration dispute (an overview of the English, Swiss and French arbitration laws) By Athanasakis, Dimitrios

  1. By: R. L. Bruno
    Date: 2008–05
  2. By: Christa Hainz; (University of Munich, Akademiestr. 1/III, 80799 Munich, Germany; )
    Abstract: The effects of bank competition and institutions on credit markets are usually studied separately although both factors are interdependent. We study the effect of bank competition on the choice of contracts (screening versus collateralized credit contract) and explicitly capture the impact of the institutional environment. Most importantly, we show that the effects of bank competition on collateralization, access to finance, and social welfare depend on the institutional environment. We predict that firms’ access to credit increases in bank competition if institutions are weak but bank competition does not matter if they are well-developed.
    Keywords: Strategic Experimentation, Two-Armed Bandit, Exponential Distribution, Poisson Process, Bayesian Learning, Markov Perfect Equilibrium
    JEL: D82 G21 K00
    Date: 2008–09
  3. By: Matthieu Crozet; Pamina Koenig; Vincent Rebeyrol
    Abstract: This paper proposes an original approach to investigate the influence of insecurity and institutional quality on international trade. We emphasize that insecurity is hardly comparable with other trade barriers such as tariffs because it does not affect all firms similarly. We develop a monopolistic competition trade model with insecurity as a random additional sunk cost for exporting firms. A higher level of insecurity may dissuade large firms to export, while some smaller ones may be able to enter the export market. Hence, insecurity disrupts firms’ selection into export markets, and this has particular effects on trade margins. Two discriminating predictions are derived from the model and confronted to the data. Using individual French firms exports to 100 destination countries, we find clear evidence corroborating our theoretical predictions.
    Keywords: Insecurity; institutions; international trade; firm heterogeneity; trade margins
    JEL: F12 D8 K4
    Date: 2008–09
  4. By: Athanasakis, Dimitrios
    Abstract: Due to the plethora of international elements of a contract to arbitrate, i.e. nationalities of the parties, nature of the transaction and the legal background of the arbitrator, questions of law applicable to the substance of the dispute are always at stake. In the course of arbitral proceedings, issues of law applicable to the arbitral dispute are raised after a concise examination of the law applicable to the arbitration agreement, namely whether the parties have consented to arbitrate the subject-matter in issue and the law applicable to the arbitral procedure. The present study draws upon the principle of party autonomy, in both theoretical and practical aspects in the context of the freedom of contract principle. It further considers the restrictive role of mandatory rules upon the above principle. Light shall also be shed on the current trends of international mandatory rules and public policy as discussed in ICC awards by experienced arbitrators and solely developed within the ambit of international commercial arbitration. Furthermore, a consistent examination of possible choices of law and rules of law such as a-national rules i.e. lex mercatoria and general trade usages will sketch the existing variety of possibilities in choice of law both on the parties and lawyers leading arbitrations. The last Section will independently examine an absence of choice of law, and several doctrines which envisaged the stance of the three distinguished European arbitral systems: English, Swiss and French.
    JEL: K20 K00 K41
    Date: 2008–09–01

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