New Economics Papers
on Law and Economics
Issue of 2009‒10‒31
three papers chosen by
Jeong-Joon Lee, Towson University

  1. The Quality of the Legal System and Labor Market Performance around the World By Feldmann, Horst
  2. Merger Performance and Efficiencies in Horizontal Merger Policy in the US and the EU By Kamerbeek, S.P.
  3. Contract Enforcement and Family Control of Business: Evidence from China By Yi, Lu; Zhigang, Tao

  1. By: Feldmann, Horst
    Abstract: Using data on 75 countries for six years in the period 1995 to 2003, this paper analyzes empirically whether and to what extent the quality of the legal system affects the performance of the labor market. According to the regression results, a legal system characterized by a dependent judiciary, biased courts, a lack of intellectual property protection and a lack of integrity increases unemployment and lowers the employment level. The magnitude of the effect seems to be substantial, particularly among young people.
    Keywords: employment; legal system; rule of law; unemployment
    Date: 2009
  2. By: Kamerbeek, S.P.
    Abstract: In current horizontal merger policy in the US and the EU an explicit efficiency defense is allowed. On both sides of the Atlantic mergers are unconditionally approved if internal efficiencies are sufficient to reverse the mergers’ potential to harm consumers in the relevant market. Current merger policy is implicitly based on the assumption that rational managers will only propose privately profitable mergers. In this thesis I will show that the empirical evidence on merger performance suggests that this assumption can’t be sustained. Managers do propose uneconomic mergers, motivated by non-wealth maximizing behavior. To tackle this problem I argue that efficiencies should not only be used as an efficiency defense, but efficiencies should work both ways. To avoid type I and type II errors the competition authorities in the US and the EU should undertake a sequential efficiency test in their assessment of specific mergers.
    Keywords: Merger; competition policy; efficiencies; efficiency defence; merger performance; rational manager
    JEL: K0 K21 L4
    Date: 2009–07–01
  3. By: Yi, Lu; Zhigang, Tao
    Abstract: Family control of business is prevalent in developing economies, and one of the leading theories suggests that it is a response to weak contract enforcement in such economies. In this paper, we investigate the impacts of contract enforcement on the degree of family control of business using a sample of China's private enterprises. It is found that weaker contract enforcement is associated with the higher degree of family control of business. Our results are robust to the control for omitted variables and reserve causality issues, to the adjustment for the sample attrition bias, to the use of a sub-sample, and to the inclusion of other explanations for the family control of business.
    Keywords: Family Control of Business; Contract Enforcement; China's Private Enterprises
    JEL: D21 P37 K12 L22
    Date: 2009–06

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