New Economics Papers
on Law and Economics
Issue of 2012‒01‒25
five papers chosen by
Jeong-Joon Lee, Towson University

  1. The State’s Enforcement Monopoly and the Private Protection of Property By Christoffel Grechenig; Martin Kolmar
  2. Do Traffic Tickets Reduce Motor Vehicle Accidents? Evidence from a Natural Experiment By Dara Lee
  3. Towards effective emerging infectious disease surveillance: H1N1 in the United States 1976 and Mexico 2009 By Ear, Sophal
  4. Towards effective emerging infectious disease surveillance: Cambodia, Indonesia, and NAMRU-2 By Ear, Sophal
  5. The chinese financial system at the Dawn of the 21st century: An Overview By Yulu, Chen; Yong, Ma; Ke, Tang

  1. By: Christoffel Grechenig (Max Planck Institute for Research on Collective Goods, Bonn); Martin Kolmar (Institute of Economics, University of St. Gallen)
    Abstract: The modern state has monopolized the legitimate use of force. This concept is twofold. First, the state is empowered with enforcement rights; second, the rights of the individuals are (partly) restricted. In a simple model of property rights with appropriation and defense activity, we show that a restriction of private enforcement is beneficial for the property owner, even if there are no economies of scale from public protection. We emphasize the role of the state as a commitment device for a certain level of enforcement. However, commitment will only work if the state can regulate private protection. A ban of private enforcement measures can even be beneficial in situations where there would be no private enforcement at first place because the “shadow” of defense has a negative impact on the investments in property rights infringements. From a legal perspective, our approach emphasizes a regulation of victim behavior as opposed to the standard approach which focuses on the regulation of criminal behavior.
    Keywords: Contests, Property Rights, Enforcement, Private Protection, Law
    JEL: K42 P14 P37 P48 N40
    Date: 2011–09
  2. By: Dara Lee (Department of Economics, University of Missouri-Columbia)
    Abstract: This paper analyzes the effect of traffic tickets on motor vehicle accidents. OLS estimates may be upward-biased because police officers tend to focus on areas where and periods when there is heavy traffic and thus higher rates of accidents. This paper exploits the dramatic increase in tickets during the Click-it-or-Ticket campaign to identify the causal impact of tickets on accidents using data from Massachusetts. I find that tickets significantly reduce accidents and non-fatal injuries. However, there is limited evidence that tickets lead to fewer fatalities. I provide suggestive evidence that tickets have a larger impact at night and on female drivers.
    Keywords: traffic tickets, motor vehicle accidents, natural experiment
    JEL: K32 K42 I18 R41
    Date: 2011–10–05
  3. By: Ear, Sophal
    Abstract: The comparison of Mexico’s 2009 A/H1N1 outbreak with the U.S. H1N1 outbreak of 1976 provides notable observations—based on the strengths and weaknesses of each country’s response—that can be used as a starting point of discussion for the design of effective Emerging Infectious Diseases (EIDs) surveillance programs in developing and middle-income countries. Strengths Mexico’s strongest characteristics were its transparency, as well as the cooperation the country exhibited with other nations, particularly the U.S. and Canada. These were the result of Mexico’s existing professional relationships with other scientific communities—informal networks, existing without institutional ties, which proved highly beneficial. Mexico also showed savvy in its effective management of public and media relations. By maintaining transparency and a united political front as it disseminated public health information, Mexico was able to mobilize in this area—something the U.S. handled less effectively in 1976. Uneven economic development was a barrier that prevented full dissemination across more rural regions of Mexico, but on a larger scale, public relations were handled relatively well. In the U.S., the speed and efficiency of the 1976 U.S. mobilization against H1N1 was laudable. Although the U.S. response to the outbreak is seldom praised, the unity of the scientific and political communities demonstrated the national ability to respond to the situation. In parallel, Mexico also effectively responded to the situation, but in addition it had a preparedness plan for such a pandemic or bio-safety threat, which highlights the necessity of working out such strategies ahead of time. Mexico’s effective pandemic-preparedness plan was comprehensive, but it was also based on simple issues: logistics, administrative structure, and information. The questions it answered included: Is there a national database on the cases of the virus at hand? Is there a network or panel of specialists that the government can pull to their aid? Who is maintaining this network? Are there designated transportation routes and potential central facilities to hold vaccines? Is there a designated individual who reviews the plan? Weaknesses In the U.S., the major weakness was turning the response to the outbreak into a single go-or-no-go decision instead of splitting the decision into smaller action tasks or phases of implementation from which decisions could then be made. What made this situation more difficult was the unquestioning support of the Center for Disease Control’s (CDC) decision to execute a massive immunization campaign. While then President Ford and CDC Director David Sencer may have acted reasonably considering the circumstances, the move to immunize has since been much criticized, especially owing to the following rise in cases of Guillain-Barré Syndrome and the fact that H1N1 was never identified outside the Fort Dix, New Jersey, army base where it was first detected. In Mexico, despite the country’s overall success in handling A/H1N1, there were myriad political weaknesses that hampered efforts, and these problems persist. Loyalty to political groups is prized above competence. In addition, individuals who are qualified for their position are perennially moved or must leave when there is a change in government, causing the loss of valuable institutional knowledge and relationships. These issues are hardly unique to Mexico, and will be especially important for countries developing EID surveillance tools to address in the coming years. An even greater challenge for Mexico was an inflexible workplace culture that did not encourage workers to report abnormalities in patients and therefore delayed the identification of A/H1N1. Inefficiencies can be eliminated if laboratory employees are given the freedom to question situations and are provided with the hardware and tools for executing their duties. Worker compensation, relatively low for an Organization for Economic Cooperation and Development member country, could be an important factor as well.
    Keywords: Mexico; USA; H1N1; Swine Flu; Political Economy; Emerging Infectious Diseases Surveillance
    JEL: K32 N32 H51 I18 N36
    Date: 2011–10–26
  4. By: Ear, Sophal
    Abstract: Emerging infectious diseases (EIDs) pose international security threats because of their potential to inflict harm upon humans, crops, livestock, health infrastructure, and economies. The following questions stimulated the research described in this report: What infrastructure is necessary to enable EID surveillance in developing countries? What are the cultural, political, and economic challenges that are faced? Are there generalizations that may be made to inform engagement with developing countries and support EID surveillance infrastructure? Using the U.S. Naval Area Medical Research Unit No. 2 (NAMRU-2) as a common denominator, this report compares barriers to EID surveillance in Cambodia and in Indonesia and presents key factors—uncovered through extensive interviews—that constrain disease surveillance systems. In Cambodia, the key factors that emerged were low salaries, poor staff and human resources management and the effect of patronage networks, a culture of donor dependence, contrasting priorities between the government and international donors, and the lack of compensation for animal culling. Cambodian authorities have resisted a compensation scheme thus far, with speculation suggesting that the reason for this is the government’s concern that the possibility for corruption among poultry-holders is too great a risk. The Cambodian military has also played a part. The government ceased a merit-based salary supplement scheme for civil servants (including laboratory employees funded by the Global Fund to Fight Aids, Tuberculosis and Malaria) after the military is alleged to have demanded similar pay incentives which donors had no interest in funding. In Indonesia, the key issues emerging as barriers to effective surveillance include poor host-donor relationships, including differing host-donor priorities and a misunderstanding of NAMRU-2 by Indonesian Authorities; low salaries; a decline in the qualifications of personnel in the Ministry of Health; poor compensation for culling; and difficulties incentivizing local-level reporting in an era of decentralization. Conflict between external and host actors was given the greatest emphasis, with “viral sovereignty” the primary problem. The Indonesian government perceived unfair treatment when it was asked to pay millions of dollars for a vaccine developed from a sample it originally provided for diagnostic purposes to the U.S. government through NAMRU-2. A poor host-donor relationship is a major barrier in Indonesia, which exhibits greater political and financial autonomy than Cambodia and other less-developed countries. Ultimately these differences are symptomatic of Cambodia’s and Indonesia’s different levels of development and their roles within the international community. This context demonstrates the primary difference in existing barriers to surveillance between the countries. Thus, it is reasonable to hypothesize that other developing countries face similar barriers along a continuum from one extreme (Cambodia, where a genocide resulted in the death of a quarter of the population) to another (Indonesia, where state-of-the-art-labs can be run by Indonesians educated in countries such as France and Australia with some donor funds). Scientists are fully capable of fixing technical problems in surveillance systems, but non-technical barriers have been more difficult to confront. Not surprisingly, the primary challenges impeding surveillance are observed on the human resources side of the equation. When it comes to viral sovereignty, technology transfer has been proposed as a possible solution to enable resource-constrained countries to produce their own vaccines. Yet this is easier said than done; international development has tried for more than six decades to raise living standards with limited success. What is certain is that Indonesia’s human resources are already capable of producing some vaccines given sufficient technology, while Cambodia will require a decade or more to develop such a capability. It is clear that in Cambodia, technology transfer is necessary but not sufficient. Many of the key factors emerging from interviews with in-country practitioners are the direct result of the existing level of development and, as such, are perhaps beyond the scope of health and scientific agencies at this point. Nevertheless, greater understanding is a critical first step in mitigating negative outcomes.
    Keywords: Cambodia; Indonesia; Namru-2; Avian Influenza; H5N1; Political Economy
    JEL: K32 N35 H51 I18
    Date: 2011–10–08
  5. By: Yulu, Chen; Yong, Ma; Ke, Tang
    Abstract: Based on a systematic review and summarization of China’s 30 years of financial reform and development, this paper comprehensively analyzes the past, present and future development of China’s financial system and also presents the mechanism for China’s financial development from the view of political economics. Generally, the Chinese financial system is bank-oriented. The property rights structure, led by state-owned banks, is the prominent feature of the Chinese banking system. Equity, bond, money, currency and real estate markets have been developing rapidly; however, the development rate of these markets varies, and institutional construction generally falls behind the market development. China’s financial decision-making authority belongs to the State Council, and the financial supervision system adopts the mode of “separate regulation.” China’s state-driven, progressive financial reforms have promoted the formation of the government-led financial structure, which is composed of three parts: first, monetary policy, balancing both inflation control and economic growth; second, bank credit expansion under the implicit guarantee of the state; and third, the adjustable pegged exchange rate system based on capital controls. The next phase of financial reform in China will mainly focus on the following four key goals: first, to further improve the corporate governance and the mixed operation of financial institutions; second, to construct the institution of a financial market system and improve the effectiveness of the financial markets; third, to re-integrate regulatory resources, combine macro- and micro-prudent views, and establish a comprehensive framework for financial stability; fourth, to promote the liberalization of interest rates, marketization of the exchange rate and the opening of capital accounts based on a progressive approach and to improve the openness of the financial system based on macroeconomic stability.
    Keywords: China; Financial System; Bank-oriented; Political Economics
    JEL: K0 G2 O5
    Date: 2011–07

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