Does legal system matter for directed technical change? Evidence from the auto industry

Does the effect of fuel taxes on clean innovations (e.g. hybrid technology) depend on the legal system’s rigidity? Using 1986–2005 data from more than 1900 firms, evidence suggests that auto-industry firms located in civil law (with more rigid laws) countries increase clean technology patenting more than common law (with more flexible laws) firms when the tax-inclusive fuel price rises. A rigid legal system appears to raise clean technology innovation.     

What firms know

The present paper contributes to the literature on legal origins by showing that the ease with which information on rules and regulations is available to firms is much better in common law compared with civil law countries.     

The interplay between labor market rigidity and volatility-growth nexus

Using a simple innovation‐driven growth model I investigate to what extent labor market regulations underlie the devastating effects of output volatility on long‐run growth trends. Empirical analysis conducted for 154 countries over the 1996–2005 period shows that an increase from low values of the rigidity of employment index strengthens the influence of volatility on growth. This effect weakens with further increases in rigidity. Hence implementation of labor protection legislation is recommended in economies frequently hit by shocks.     

Stock return, risk, and legal environment around the world

This paper investigates how the legal environment in a country influences performance and risk of stock across countries at different developmental stages and of various rules of jurisdiction. Using data of 4916 stocks from 37 countries, our empirical findings confirm that equities in countries with English common law origin have higher risk premiums than those in civil law countries, particularly for countries of the French/Spanish code. The indicators representing high efficiency in law system, low corruption, strong legal protection of investors' rights, and reliable political environment are associated with low risk and high performance. The various elements of legal procedural formalism, however, have differing effects on volatility and return.     

From family security to the welfare state: Path dependency of social security on the difference in legal origins

We provide a new framework to analyze law and public finance from the perspective of difference in legal origins. The size of the welfare system differs from country to country. The security net provided by the family and other informal institutions also varies. Our two-sector model links these phenomena. We consider two cases of security. The first considers security achieved through intra-household resource redistribution in the traditional sector. The second case considers the welfare state, which taxes the modern sector. Switching from intense family security to an extensive welfare state model enhances growth because state taxation on the modern sector harnesses the potential productivity of the entire economy. In contrast, countries with low levels of family security should transition to a small welfare state model to sustain growth. This finding explains the different trends of welfare benefits in civil law and common law countries. The different sizes of the welfare state have their origins in family law, which differently stipulates family security between civil law and common law countries.     

Colonization and the Rule of Law: Comparing the Effectiveness of Common Law and Civil Law Countries

The rule of law is one of the most important components of any explanation of cross-national differences in economic well-being. But what leads to better rule of law in a country? Using an institutional approach this paper probes the effect of legal systems in influencing the rule of law. There has long been speculation that the countries adopting English common law are better at providing legal dispute resolution than those adopting the continental forms of civil law. That speculative assessment is found to be true only in those countries that have been colonized, further analysis demonstrates that it is the effectiveness of the protection of property rights in common law systems rather than the institutions themselves that influence rule of law statistics. The paper calls for a more refined examination of legal systems which takes into consideration whether law is organically developed or transplanted.     

Financial development in adversarial and inquisitorial legal systems

This paper aims to understand why common law countries have more developed financial markets than civil law countries. One difference between these two legal origins is the procedure of evidence collection for a trial: It is adversarial in common law and inquisitorial in civil law. The adversarial system delegates the collection of evidence to a larger extent to lawyers than the inquisitorial system does. The paper presents a model of law and finance in which investors use courts to enforce their financial contracts with entrepreneurs. Investors are willing to lend more if courts collect evidence more efficiently. Financial markets are more developed in the adversarial than in the inquisitorial system if investors are richer than entrepreneurs or if lawyers are more productive than judges. Manipulation of evidence by lawyers has an ambiguous impact on finance.     

A New Test of Price Dispersion

In recent years considerable attention has been devoted to differences across countries in the institutional environments in which corporations operate, and the consequences of these institutional differences for corporate performance. In this paper we test for the presence of differences in corporate performance across 38 countries, and in particular whether these differences are related to the types of legal systems existing in each country. To measure corporate performance we estimate returns on investment relative to company costs of capital in each country. We find significant differences in the investment performance of corporations across our sample of countries. Companies in countries with English-origin, common law legal systems perform significantly better on average than do those in civil law systems.     

International comparisons of rural-urban educational attainment: Data and determinants

We study cross-country differences in rural and urban educational attainment by using a data set comprising 56 countries. We focus on the determinants of rural-urban educational inequality, which is measured by the ratio of rural to urban average years of schooling within each country. We find that riskier human capital investment, less credit availability, a colonial heritage, a legal system of French origin and landlockedness of nations are all associated with relatively lower rural educational levels and greater rural-urban educational inequality. Conversely, larger formal labor markets, better infrastructure and a legal system of British origin are associated with relatively higher rural educational levels and lower rural-urban educational inequality. We also identify an interaction effect between economic development level and some of these factors. In particular, we find that as development level increases, the negative (positive) relationship between French (British) legal systems and rural-urban educational inequality is reversed and becomes positive (negative).     

贸易增长、劳动力市场刚性与产业间劳动力转移——基于面板数据门槛效应模型的实证研究

劳动力市场刚性的存在是决定国际贸易能否促进产业间劳动力转移的关键因素之一,然而现有的实证研究却忽视了劳动力市场刚性的决定性作用。本文基于国外文献的度量方法构建劳动力市场刚性和产业间劳动力转移的度量指标,并利用面板数据门槛效应模型研究当劳动力市场刚性存在差异时贸易增长对产业间劳动力转移所产生的不同影响。本文的研究发现,当劳动力市场刚性程度低于门槛值时,贸易增长能加速产业间劳动力转移;而当劳动力市场刚性程度高于门槛值时,贸易增长则会阻碍产业间劳动力转移。由此得出结论,欲使中国的贸易增长起到促进产业间劳动力转移的效果,必须先在劳动力市场领域进行改革,消除劳动力市场刚性。     

Legal systems and performance of microfinance institutions

The paper investigates the impact of institutional environment resulting from the legal systems, on the financial performance of microfinance institutions (MFIs). Broadly categorized into common law and code law, the legal systems are found to significantly influence the efficiency of MFIs. We use an unbalanced panel of 1272 MFIs over a period of 16 years to analyze the effect of legal systems on their financial performance. In contrast to the accepted notion that common law systems are more conducive to effective market systems, our results show that MFIs operating under code law systems exhibit better financial performance than in common law systems.     

Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa

What happens when a previously uncovered labor market is regulated? We exploit the introduction of a minimum wage in South Africa and variation in the intensity of this law to identify increases in wages for domestic workers and no statistically significant effects on employment on the intensive or extensive margins. These large, partial responses to the law are somewhat surprising, given the lack of monitoring and enforcement in this informal sector. We interpret these changes as evidence that strong external sanctions are not necessary for new labor legislation to have a significant impact on informal sectors of developing countries, at least in the short-run.     

中日经济立法比较及启示

尽管中国和日本历史上具有相同的政治和文化背景,但两国经济立法中存在的诸多不同之处直接导致了两国经济法发展的不同状况.在对两国经济立法中的法律移植、立法体系及经济立法中政府干预经济状况进行比较分析后,提出了完善中国社会主义市场经济立法的三个方面的构想:在经济立法中应注重法律移植的本土化;建立统一的经济法体系;在经济立法中要规制政府干预经济的权限.     

Economic development, legality, and the transplant effect

We analyze the determinants of effective legal institutions (legality) using data from 49 countries. We show that the way the law was initially transplanted and received is a more important determinant than the supply of law from a particular legal family. Countries that have developed legal orders internally, adapted the transplanted law, and/or had a population that was already familiar with basic principles of the transplanted law have more effective legality than countries that received foreign law without any similar predispositions. The transplanting process has a strong indirect effect on economic development via its impact on legality, while the impact of particular legal families is weaker and not robust to alternative legality measures.     

Labor market institutions and industrial performance: an evolutionary study

This study investigates the impact of labor market institutions on industrial performance from a Schumpeterian perspective. We suggest that labor market institutions play a very important role in the process of creative destruction, because they may create an environment that encourages and enforces innovation, and help to reallocate resources, most importantly labor, through swift elimination of weak performers. We specifically look at the effects of the quantity of labor market regulations and inter-industry wage differentials on labor productivity for a panel of 44 countries for the period 1965–1999. Our findings suggest that those countries that introduce more regulations on conditions of employment and wages achieve higher levels of productivity. Moreover, wage compression raises productivity by reallocating resources to productive activities.     

Predicting FDI inflows: Exploring a nonlinear relationship between peace years,oil wealth,and the rule of law

Despite previous studies investigating the impacts of various factors such as peace years, natural resources, and the rule of law on foreign direct investment (FDI), empirical findings remain inconclusive. Therefore, this study investigates the interplay between these factors in shaping host country conditions that facilitate FDI inflows. Using generalized additive models, we examine the simultaneous effects of peace years, oil wealth, and the rule of law on FDI inflows in a sample of non-OECD countries from 1970 to 2009. Our results reveal that established peace is a critical factor in attracting FDI inflows for both oil-exporting and non-oil-exporting countries. However, the effects of the rule of law vary depending on oil wealth. Oil-exporting countries receive more FDI inflows when they have a weak rather than a strong rule of law, while non-oil-exporting countries tend to receive more foreign investments when they have a moderately strong rule of law. We argue that countries with oil wealth combined with a moderately weak rule of law provide an environment that is conducive to multinational corporations (MNCs) in extractive industries seeking monopoly rents. Conversely, countries without oil wealth should create stable yet efficient environments that protect property rights and promote labor market flexibility to appeal to non-resource-seeking MNCs.     

科技伦理治理机制的法治因应与逻辑转换——由生物技术科技伦理规制问题展开

针对新兴技术的科技伦理治理,关键在于健全的法治保障,而法治手段主要包括基于私领域市场调节功能的民法手段、基于刑事处罚的刑法手段、基于行政管制的行政法手段。其中,行政法模式应当成为通过科技伦理规制科研活动常态化的有效手段,而现行科技伦理的行政规制模式存在过度依赖行政命令、行政法律主体范围受限、对科技风险预防不足以及多元共治相关制度缺失的问题。通过分析传统科技伦理行政规制模式的缺憾和不足,提出建立多元共治的科技伦理治理机制。     

Labor market rigidity and productivity growth in a model of innovation-driven growth

Empirical studies investigating the relationship between productivity performance and labor market rigidity have generated a negative result. In this paper we try to provide a theoretical explanation for this empirical result. In doing so, we construct a no-shirking model of innovation-based growth and investigate the steady-state impact of a set of active labor market policies aimed at reducing labor market rigidity and knowledge mismatch generated by innovations. We find that, while enhancing job finding activity definitively improves the equilibrium growth-unemployment mix of the economy, reducing the knowledge mismatch of innovation through active measures is less effective in reducing the equilibrium unemployment and improving growth.     

Bargaining frictions, labor income taxation, and economic performance

This paper is an attempt to explain differences in economic performance between a subset of OECD countries. We classify countries in terms of their degree of rigidity in the labor market, and use a matching model with labor/leisure choice, bargaining frictions, and labor income taxation to capture these rigidity differences. Added flexibility improves economic performance in different ways depending on whether income taxation is high or low. Feeding income taxation rates estimated from the countries at hand, we find that the model is able to replicate the observed rigidity levels. The model is also shown to reproduce well cross-country differences in non-employment population ratios and the share of part-time jobs. In the absence of rigidity differences, taxation shows little promise to replicate cross-country differences, as it has insufficient quantitative effects on production and productivity. However, the interaction of rigidity and income taxation is crucial in explaining the empirical patterns of the non-employment rate and of the share of part-time jobs.     

Flexible Labor Regulations and Informality in Egypt

Do more flexible labor market regulations reduce informal employment in formal firms? This paper examines the effects of changes in labor regulations on the incidence of formal employment. Using the case of Egypt, we study the effects of the introduction of more flexible labor regulations in 2003 on the probability that non‐contractual workers will be granted a formal employment contract. To identify the effect of the law and control for potential confounding factors, we use a difference‐in‐difference estimator that measures the difference in the pre‐ and post‐law probability of obtaining a formal contract across a treatment group of non‐contractual workers initially employed in formal firms and a comparison group of non‐contractual workers initially employed in informal firms. The latter serve as a useful comparison group since informal firms are unlikely to formalize as a result of the law, so that the only way their workers can become formal is to move to another firm. Our findings show that the passage of the new labor law did in fact increase the probability of transitioning to formal employment for non‐contractual workers employed in formal firms by about 3–3.5 percentage points, or the equivalent of at least a fifth of informal workers in formal firms.