New Economics Papers
on Law and Economics
Issue of 2011‒06‒04
three papers chosen by
Jeong-Joon Lee, Towson University

  1. On the Dual Nature of Weak Property Rights By Louis Hotte; Randy McFerrin; Douglas Wills
  2. Capital formation in new cooperatives in China: policy and practice By Li Zhao
  3. Law and Economy in Traditional China: A "Legal Origin" Perspective on the Great Divergence By Ma, Debin

  1. By: Louis Hotte (Department of Economics, University of Ottawa, Ottawa, ON); Randy McFerrin (New Mexico State University, U.S.A.); Douglas Wills (University of Washington)
    Abstract: In the natural resource literature, convertional wisdom holds that weak property rights will cause a resource to be over-exploited. This is because weak property rights are typically perceived as a problem of input exclusion. In this paper, we first present evidence to the effect that weak property rights often take the form of contestable output- or output theft - and that this has an impact or resource use. We then propose a theoretical model of natural resource use under generally weak prperty rights - or weak state presence - when resource users face the dual problem of input exclusion output appropriation. We show that introducing the possibility that outputs can be contested acts as an output tax, with the added twist that resource users effectively determine the level of the tax. This tax has a depressive effect on input use. As a result, whether the resource is under-or over-exploited in equilibrium will depend on the relative severity of output appropriation and input exclusion problems when property rights are generally weak.
    Keywords: Natural Resources, Property Rights, Trespass, Theft, Over-Exploitation,Under-Exploitation
    JEL: K11 K42 Q2 N50 O13
    Date: 2011
  2. By: Li Zhao
    Abstract: This paper aims to fill one knowledge gap on understanding the issue of capital formation in new co-operatives in developing countries. By doing so, it presents the main findings of capital formation and investment in a small sample of horticulture shareholding co-operatives in rural China, because shareholding co-operatives, as one best example of new multi-stakeholder co-operatives in China, have become a vehicle to mobilize additional resources. To better understand shareholder co-operatives’ stakeholder heterogeneity, two main groups of stakeholders are identified, namely, member stakeholders (investor-members and patron-members) and non-member stakeholders (non-member investors and non-member donors/grant-givers). Following a brief theoretical overview concerning co-operative multi-stakeholdership and capital acquisition and constraints, I then analyze both the rules-in-form and rules-in-use with respect to the co-operative stakeholders’ capital involvement in China. Cases observed indicate a hybridization feature of the co-operative capital base, including member contributions, public subsidies, income from the market sale, institutional capital and social capital. There exist at least four ways to raise equity capital from co-operative members. External capital comes mostly from direct government support in the form of grants and project funding, and indirect financial support through preferential treatment and policies. Different from the situation in the West, debt capital does not appear to be a widely-used traditional financing source. New co-operatives in China have difficulty even in borrowing short-term debt, not to mention receiving long-term loans. Also specialized/non-traditional external capital sources such as those provided by co-operative banks do not suffice. Co-operative banks are not always ready to provide micro-credit to co-operatives. Only when the government plays an active role, this lending process is facilitated. Many innovative financial systems are also observed in the field, which facilitate the mobilization of more external capital for co-operatives.
    Keywords: Capital Formation, Co-operative, Multi-stakeholder, China
    JEL: H44 K29 O13 P13 P26 Q13 Q18
    Date: 2011
  3. By: Ma, Debin
    Abstract: This article offers a critical review of recent literature on Chinese legal tradition and argues that some subtle but fundamental differences between the Western and Chinese legal traditions are highly relevant to our explanation of the economic divergence in the modern era. This paper seeks to elucidate the fundamental feature of traditional Chinese legal system and the mechanism of dispute resolution within the framework of a disciplinary mode of administrative law within a bureaucratic hierarchy and intermediation within social-networks. By comparing the contrasting development of the legal professions in China and Western Europe, it reveals the importance of political institution, legal regime and the growth of jurisprudence that would ultimately affect property rights, contract enforcement and ultimately long-term growth trajectories.
    Keywords: adjudication; common law; disciplinary mode of justice; economic growth; great divergence; jurisprudence; law; rule of law
    JEL: N00 O10
    Date: 2011–05

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