on the pareto optimality of futures contracts over islamic forward contracts implications for the emerging muslim economies a general equilibrium approach is used to demonstrate that i futures contracting on islamically permissible commodities is pareto optimal over the islamic forward contract of bai salam and ii both forms of contracting constitute a quasi equity claim instead of debt dayn as construed by the majority of islamic jurists these results are of import as they i remove a major hurdle against futures contracting by the islamic jurists thereby enabling the renovation of the financial intermediation system of emerging muslim economies and ii demonstrate that the arbitrage principle needs to be re examined under non linear asset pricing

islamic banking and finance recent empirical literature and directions for future research this paper examines the recent empirical literature in islamic banking and finance highlights the main findings and provides a guide for future research early studies focus on the efficiency production technology and general performance features of islamic versus conventional banks whereas more recent work looks at profit and loss sharing pls behaviour competition risks as well as other dimensions such as small business lending and financial inclusion apart from key exceptions the empirical literature suggests no major differences between islamic and conventional banks in terms of their efficiency competition and risk features although small islamic banks are found to be less risky than their conventional counterparts there is some evidence that islamic finance aids inclusion and financial sector development results from the empirical finance literature dominated by studies that focus on the risk return features of mutual funds finds that islamic funds perform as well if not better than conventional funds there is little evidence that they perform worse than standard industry benchmarks some recent evidence however suggests that islamic bond sukuk issuance destroys value for shareholders

loan loss provisions bank valuations and discretion a comparative study between conventional and islamic banks this study investigates the use of reported loan loss provisions llp by investors in their valuations of banks within the middle east and north africa region between the years 2006 and 2011 we decompose llp into discretionary and non discretionary components to test for differential valuations in the two banking sectors we use alternative criteria to define the components of llp in banks loan quality size and earnings management manipulation incentives we employ a price level valuation model estimated using two stage analyses we find that llp has positive value relevance to investors in both banking sectors investors in islamic banks price the discretionary component relatively lower than their conventional counterparts we attribute this result to differences in product and governance structures as well as to the religious perception of islamic banking in both banking sectors investors construe an increase in the non discretionary component as irrelevant valuation information our results are relevant to bank regulators in showing the signalling effect of llp to bank value and stability

differences in pollution levels among civil law countries a possible interpretation abstract the aim of this paper is to shed light on the way the legal systems of different countries can explain the discrepancies in their pollution levels in particular we underline the factors of capital accumulation and the financial market development that are driven among other things by the various levels of protection accorded by the legal system to both shareholders and creditors the research develops in two directions firstly we supply a theoretical analysis to explain how constraints on the process of capital accruement affect the pollution level in the model a crucial role is assigned to the rate of interest and its relationship with discount rates which constitutes an important variable in decisions to implement anti pollution devices secondly we perform an econometric analysis using the data of eighty five countries belonging to the legal family of civil law for the period from 1992 to 2003 adopting four pollution indicators as dependent variables our main findings are that legal families and financial market development can help to explain the differences in environmental indicators observed among nations

a gift is not always a gift heterogeneity and long term effects in a gift exchange experiment we study gift exchange in a field experiment where a random subsample of participants in the swiss labour force survey received vouchers to be used in adult training actual voucher redemption can be traced giving us the unique opportunity to study whether gift exchange in the form of participation in future rounds of the survey depends on the perceived usefulness of the gift the group of voucher recipients as a whole has significantly higher response rates there is considerable heterogeneity however our results point to a long lasting gift exchange relationship only for the subgroup that redeemed their vouchers

market power versus efficiency under uncertainty conventional versus islamic banking in the gcc in this article we estimate the effect of concentration on intermediation margins in gulf cooperation council s gcc islamic and conventional banking under the assumption that margins are uncertain the empirical model which we formally derive from an expected utility maximization problem allows us to test for risk aversion as well as competitive conduct in loan and the deposit markets the model also yields an expression showing that the effect of concentration on margins is the sum of its respective effects on market power marginal cost of intermediation and marginal cost of uncertainty the expression allows us to test whether concentration is welfare enhancing reducing or neutral we find islamic banks to be risk averse and conventional banks to be risk neutral we also find that concentration is welfare neutral in islamic loans and deposits welfare enhancing in conventional loans and welfare neutral in conventional deposits we used nonlinear two stage least squares n2sls and nonlinear three

courts the lex mundi project in cooperation with lex mundi member law firms in 109 countries we measure and describe the exact procedures used by litigants and courts to evict a tenant for non payment of rent and to collect a bounced check we use these data to construct an index of procedural formalism of dispute resolution for each country we find that such formalism is systematically greater in civil than in common law countries moreover procedural formalism is associated with higher expected duration of judicial proceedings more corruption less consistency less honesty less fairness in judicial decisions and inferior access to justice these results suggest that legal transplantation may have led to an inefficiently high level of procedural formalism particularly in developing countries

bank runs in emerging market economies evidence from turkey s special finance houses recent banking crises in emerging market countries have renewed debates about deposit insurance because insurance erodes banks incentives to manage risks prudently some argue that its elimination would improve bank stability yet eliminating insurance could be de stabilizing if it recreates risks of self fulfilling runs this paper examines dynamics of depositor behavior during a set of runs on turkey s special finance houses an uninsured sub sector of islamic banks detailed data on withdrawals are analyzed in a vector autoregressive framework that enables us to distinguish between informational and self fulfilling elements of runs we found that both types of dynamics were at work during the runs suggesting a role for deposit insurance judiciously used in ruling out expectational problems that fuel tendencies to run

workers of the world unite franchise extensions and the threat of revolution in europe 1820 1938 abstract we test the hypothesis that the extension of the voting franchise in europe was related to the threat of revolution we contend that international diffusion of regime contention and information about revolutionary events happening in neighboring countries generate the necessary variation in the perceived threat of revolution using two samples of european countries covering the period from 1820 to 1938 we find robust evidence which is consistent with the threat of revolution hypothesis we also find some evidence that war triggered suffrage reform

gift giving and worker productivity evidence from a firm level experiment abstract we present results from a field experiment designed to measure worker response to a monetary gift from their employer the experiment took place inside a tree planting firm paying its workforce incentive contracts firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity we compare planter productivity the number of trees planted per day on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block and thus under similar planting conditions we find direct evidence that the gift had a significant and positive effect on daily planter productivity controlling for planter fixed effects weather conditions and other random daily shocks

susceptibility to manipulation all positional voting procedures can be manipulated so it is natural to question whether some of these systems are more susceptible to being manipulated than others in this essay this susceptibility factor is measured for strategic action involving small groups it is shown that the system least susceptible to micro manipulations for n 3 candidates is the borda count bc the optimal choice changes with n but the analysis shows that the bc always fares fairly well on the other hand the plurality and anti plurality vote as well as multiple voting systems such as approval voting and cumulative voting always fare quite poorly with respect to susceptibility finally it is shown why it is possible to justify any voting method by choosing an appropriate measure of susceptibility and imposing the appropriate assumptions on the profiles of voters this statement emphasizes the importance of the basic assumptions of neutrality used throughout this essay

corporate chartering an exploration in the economics of legal change the corporate form of business organization characterized principally by limited liability share transferability and perpetual life existed far in advance of its official recognition by government in the early nineteenth century and before the unincorporated joint stock company offered through private contracts many of the advantages typically thought to reside exclusively in the corporation 1 despite these deep historical roots however the legal framework surrounding the corporation as we know it today is a relatively recent phenomenon permission to incorporate was long granted sparingly by the state and when granted was accompanied by restrictions on the amount of authorized capital on the scope of operations and on the length of the corporate franchise permission to incorporate for any lawful purpose was not common until 1875 2 thus while corporateness flourished early regulation delayed the beginning of the chartered corporation s rise to prominence until not much more than a century ago

inefficiency and heterogeneity in turkish banking 1990 2000 recent studies have stressed the importance of privatization and openness to foreign competition for bank efficiency and economic growth we study bank efficiency in turkey an emerging economy with great heterogeneity in bank types and ownership structures earlier studies of turkish banking had three limitations i excessive reliance on cost function frontier analyses wherein volume of loans is a measure of banking output ii pooling all banks or imposing ad hoc heterogeneity assumptions and iii lack of a comprehensive panel data set for proper analysis of productivity and heterogeneity we use an estimation classification procedure to find likelihood driven classification of bank technologies in an 11 year panel in addition we augment traditional cost frontier analysis with a labour efficiency analysis we conclude that state banks are not particularly inefficient overall but that they do utilize labour inefficiently this partially supports recent calls for privatization we also conclude that special finance houses or islamic banks utilize the same technology as conventional domestic banks and do so relatively efficiently this suggests that they do not cause harm to the financial system finally we conclude that foreign banks utilize a different technology from domestic ones this suggests that one should not overstate their value to the financial sector copyright 2005 john wiley sons ltd

financial intermediation and economic performance historical evidence from five industrialized countries this paper examines the nature of links between the intensity of financial intermediation and economic performance that operated in the united states the united kingdom canada norway and sweden over the 1870 1929 period after describing the coevolution of the financial and real sectors in these countries vector error correction models vecms establish the quantitative importance of long run relationships among measures of financial intensity and real per capita levels of output and the monetary base granger causality tests then suggest a leading role for the intermediation variables in real sector activity while feedback effects are largely insignificant the results suggest an important role for intermediation in the rapid industrial transformations of all five countries

economic and security consequences of supreme values islamic societies have in contemporary times lagged western societies in income growth and human development indicators the supreme values of radical islam further de prioritize economic achievement and impose self deprivation on own populations this paper investigates the reasons for economic outcomes under islam contemporary illustrations are also provided of the self deprivation predicted from pursuit of the supreme value objectives of radical islam the self deprivation is placed in a rent seeking context

islamic economics and the islamic subeconomy although islamic economics was developed to serve cultural and political ends efforts have been made to put its ideals into practice there now exist islamic banks which claim to offer an interest free alternative to conventional banking and government run islamic redistribution systems which were established to reduce inequalities these institutions have not revolutionized the economic lives of muslims yet along with a wide variety of enterprises that have emerged outside the purview of islamic economics they have formed vibrant islamic subeconomies in numerous metropolises these subeconomies are expanding because they foster interpersonal trust and offer opportunities for guilt relief

to debt or not to debt are islamic banks less risky than conventional banks we empirically analyze the market risk profiles of islamic banks with two sets of conventional banks taken from the same geographical locations as islamic banks and from a random global sample respectively for the period 2000 2013 moreover we divided our sample period into pre financial crisis during financial and post financial crisis estimates of value at risk var and expected shortfall es which incorporates losses beyond var are used as market risk measures for both univariate and multivariate portfolios our key input is the share price by market capitalization of publicly traded banks of similar size in islamic and non islamic countries univariate analysis finds no discernible differences between islamic and conventional banks however dynamic correlations obtained via a multivariate setting shows islamic banks to be less riskier for both sets of conventional banks and especially so during the recent global financial crisis the policy implications are i that the inclusion of islamic banks within asset portfolios may mitigate potential risk ii that the basel committee should consider the es measure of risk for islamic banks in preference to the current var methodology which over estimates the market risk of islamic banks

in search of workers real effort reciprocity a field and a laboratory experiment we present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages work effort neither reacts to an increase of the own wage nor to a positive or negative peer comparison this result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort in an additional real effort laboratory experiment we show that explicit cost and surplus information that enables an exact calculation of an employer s surplus from the work contract is a crucial prerequisite for a positive wage effort relation this demonstrates that an employee s reciprocity requires a clear assessment of the surplus at stake jel c91 c92 j41

worker reciprocity and employer investment in training standard economic theory predicts that firms will not invest in general training and will underinvest in specific training empirical evidence however indicates that firms do invest in general training of their workers evidence from laboratory experiments points to less underinvestment in specific training than theory predicts we propose a simple model in which a firm invests the socially optimal amounts in general and specific training if the worker is sufficiently motivated by reciprocity a reciprocal worker may be willing to give the firm a full return on its investment we present empirical evidence that supports the proposed mechanism workers with a high sensitivity to reciprocity have 15 higher training rates than workers with a low sensitivity to reciprocity

does the size of islamic banking matter for industry growth international evidence islamic banking which has witnessed unprecedented growth in the last quarter of the century is hypothesized to be able to contribute to the development of the financial sector and thus to economic

the taxman tools up an event history study of the introduction of the personal income tax abstract the introduction of income taxation was a landmark in the historical development of the fiscal state of the now developed world this paper presents an event history study of the adoption of the income tax in 17 countries from western europe north america oceania and japan between 1815 and 1939 we find evidence that spending pressures reductions in tax collection costs and to a lesser extent social learning played a significant role for the adoption decision we also find evidence that the extension of the franchise at first reduced the likelihood of adoption of the income tax but eventually as universal suffrage was approached increased the likelihood

the extent of the market and the supply of regulation we present a model in which setting up and running a regulatory institution takes a fixed cost as a consequence the supply of regulation is limited by the extent of the market we test three implications of this model first jurisdictions with larger populations affected by a given regulation are more likely to have it second jurisdictions with lower incremental fixed costs of introducing and administering new regulations should regulate more this implies that regulation spreads from higher to lower population jurisdictions and that jurisdictions that build up transferable regulatory capabilities should regulate more intensely consistent with the model we find that higher population u s states have more pages of legislation and adopt particular laws earlier in their history than do smaller states we also find that the regulation of entry the regulation of labor and the military draft are more extensive in countries with larger populations as well as in civil law countries where we argue that the incremental fixed costs are lower

an evaluation of the swedish system of active labour market programmes in the 1990s we investigate the presence of short and long term effects from joining a swedish labor market program vis a vis more intense job search in open unemployment overall the impact of the program system is found to have been mixed joining a program has increased employment rates among participants a result robust to a misclassification problem in the data on the other hand it has also allowed participants to remain significantly longer on unemployment benefits and more generally in the unemployment system this being particularly the case for those entitled individuals entering a program around the time of their unemployment benefits exhaustion

islamic banks and investment financing islamic law prohibits charging interest we study financial instruments used by islamic banks and find that most are not based on profit and loss sharing equity but instead are very debt like in nature we see some bias against providing financing for agriculture and industry long term financing is rarely offered to entrepreneurs our model shows that debt like instruments are a rational response by islamic banks to their contracting environments as agency problems become more severe debt becomes the dominant instrument of finance we give conditions under which banning debt increases social welfare as well as conditions under which banning debt decreases social welfare

deadweight costs and the size of government abstract we provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare an improvement in the efficiency of either taxes or spending would reduce political pressure for suppressing the growth of government and thereby increase total tax revenue and spending we demonstrate the similarity of the political responses to revenue shocks spending shocks changes in tax efficiency and changes in spending program efficiency empirical analysis of oil shocks intergovernmental grants and other autonomous changes in taxes or spending indicates that cause and effect is not only from spending to tax structures

law finance and firm growth we investigate how differences in legal and financial systems affect firms use of external financing to fund growth we show that in countries whose legal systems score high on an efficiency index a greater proportion of firms use long term external financing an active though not necessarily large stock market and a large banking sector are also associated with externally financed firm growth the increased reliance on external financing occurs in part because established firms in countries with well functioning institutions have lower profit rates government subsidies to industry do not increase the proportion of firms relying on external financing the corporate finance literature suggests that market imperfections caused by conflicts of interest and informational asymmetries between corporate insiders and investors constrain firms in their ability to fund investment projects the magnitude of these imperfections depends in part on the effectiveness of the legal and financial systems because these systems differ across countries the literature implies that there should exist systematic cross country differences in firms ability to obtain external capital to finance investment in this paper we examine whether the underdevelopment of legal and financial systems does prevent firms in some countries from investing in potentially profitable growth opportunities in particular we focus on the use of long term debt or external equity to fund growth see our earlier work demirgut kunt and maksimovic 1996a which compares firms financial structures in developed and developing countries and finds the greatest difference to be in the provision of long term credit we estimate a financial planning model to obtain the maximum growth rate that each firm in our thirty country sample could attain without access to long term financing we then compare these predicted growth rates to growth rates realized by firms in countries with differing degrees of development in their legal and financial systems our approach enables us to identify specific characteristics of the legal and financial systems that are associated with long term financing of firm growth thus we provide a micro level test of the hypoth

a reason for quantity regulation in a variety of situations governments regulate undesirable activities by controlling quantities rather than charging taxes blue laws prohibit all liquor sales on sundays rather than impose higher taxes on that day zoning restrictions limit commercial construction in residential areas rather than charge for nuisance to neighbors anti smoking and anti trust laws restrict rather than tax particular conduct fishing and hunting rules allow hunting during particular time periods rather than tax the catch pollution controls impose limits rather than tax emissions quantity regulations are common in the financial sphere as well in the united states banking regulations for many years prohibited interstate banking as well as ownership of investment banks by commercial banks in many countries commercial banks are limited in the amount of various activities they can pursue such as real estate investments or borrowing in foreign currency in some countries banking laws prohibit all lending to the parties related to the owners of the bank the so called related lending rather than impose liability rules on loans to related parties that are found to be fraudulent or unsafe rafael la porta et al 2000 despite this common practice economists generally prefer taxes and liability rules to quantity controls and property rights rules robert ellickson 1973 louis kaplow and steven shavell 1996 1997 nathaniel keohane et al 1998 as the instrument for reducing undesirable conduct when explaining why quantity regulations are so pervasive they first make the political economy argument that quantity restrictions are favored by incumbent firms that wish to deter entry james buchanan and gordon tullock 1975 but this argument is not general it does not explain such quantity restrictions as blue laws and hunting and fishing regulations which affect all market participants equally some academics also argue that because certain activities such as smoking are seen as morally wrong by the community their level is regulated at zero in other instances however such as pollution and hunting positive but limited levels of activity are allowed inconsistent with the moral argument that the reason for quantity regulation is the special attraction of zero in this paper we present an alternative reason for quantity regulations one from the perspective of a benevolent government we begin with the observation of gary becker and george stigler 1974 that law enforcement is not free but is fundamentally an economic problem throughout human history and throughout the world today there are chronic problems of under enforcement witness the low level of tax compliance in much of the developing world and over enforcement by politically motivated prosecutors or regulators an analysis of pigouvian taxes versus quantity restrictions must recognize that in reality neither policy is free and automatic to enforce in general the choice of policies itself can facilitate or discourage enforcement in two ways first policies can shape the incentives for enforcement second policies can influence the costs of enforcement in our earlier work glaeser and sheifer 2000 glaeser et al 2001 we have focused on incentives and shown that quantity regulations can be used as an optimal instrument to raise the rewards to law enforcers for identifying violations here we focus not on the incentives for the enforcers but on the costs of finding violations these costs are often lower in the case of quantity restrictions we show that even when quantity regulations unlike taxes restrict some socially efficient conduct the reduced costs of identifying violations can enhance enforcement and overall efficiency such reliance of quantity regulation is especially important when private enforcement is crucial as in the case of enforcing department of economics harvard university cambridge ma 02138 we thank the national science foundation for financial support and louis kaplow for extremely helpful comments

a new database on the structure and development of the financial sector this article introduces a new database of indicators of financial structure and financial development across countries and over time the database is unique in that it combines a wide variety of indicators that measure the size activity and efficiency of financial intermediaries and markets it improves on previous efforts by presenting data on the public share of commercial banks introducing indicators of the size and activity of nonbank financial institutions and constructing measures of the size of bond and primary equity markets this article introduces a new database the first to provide comprehensive measures of the development structure and performance of the financial sector this database is the first to define and construct indicators of the size and activity of nonbank financial intermediaries such as insurance companies pension funds and non deposit money banks it is also the first to include indicators of the size of primary equity markets and primary and secondary bond markets in constructing the database authors carefully deflate measures and match stock and flow variables

regulation and distrust in a cross section of countries government regulation is strongly negatively correlated with social capital we document this correlation and present a model explaining it in the model distrust creates public demand for regulation while regulation in turn discourages social capital accumulation leading to multiple equilibria a key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt we test this and other implications of the model using country and individual level data on social capital and beliefs about government s role as well as on changes in beliefs and in trust during the transition from socialism

manufacturing growth and financial development evidence from oecd countries recent theoretical models conjecture that the development of the financial sector is essential for economic growth we investigate this hypothesis from a time series perspective and find that financial sector gdp is cointegrated for many oecd countries not so much with manufacturing gdp but mostly with manufacturing total factor productivity moreover this relation is in some instances characterized by long run causality in the sense of granger and lin however even within this homogeneous group of countries the variety of results suggests a more complex picture than is apparent from cross sectional evidence

earnings management behaviors under different monitoring mechanisms the case of islamic and conventional banks abstract we investigate the impact of organizational religiosity on the earnings quality of listed banks in the middle east and north africa region we analyze islamic banking institutions which operate within strict religious norms and extended accountability constraints and compare them with their conventional counterparts during 2008 2013 we find that islamic banks are less likely to manage earnings and that they adopt more conservative accounting policies based on these findings we argue that religious norms and moral accountability constraints in these organizations have a significant impact on financial reporting quality and agency costs which have implications for both regulators and market participants

private politics and public regulation public regulation is increasingly facing competition from private politics in the form of activism and corporate self regulation however its effectiveness welfare consequences and interaction with public regulation are poorly understood this article presents a unified dynamic framework for studying the interaction between public regulation self regulation and boycotts we show that the possibility of self regulation saves on administrative costs but also leads to delays without an active regulator firms self regulate to preempt or end a boycott and private politics is beneficial for activists but harmful for firms with an active regulator in contrast firms self regulate to preempt public regulation and private politics is harmful for activists but beneficial for firms our analysis generates a rich set of testable predictions that are consistent with the rise of private politics over time and the fact that there is more self regulation and activism in the u s while public regulation continues to be more common in europe

coase versus the coasians who should enforce laws or contracts judges or regulators many coasians though not coase himself advocate judicial enforcement we show that the incentives facing judges and regulators crucially shape this choice we then compare the regulation of e nancial markets in poland and the czech republic in the 1990s in poland strict enforcement of the securities law by a highly motivated regulator was associated with a rapidly developing stock market in the czech republic hands off regulation was associated with a moribund stock market i introduction at the heart of economists traditional skepticism about government regulation is the coase theorem coase 1960 the theorem states that when property rights are well dee ned and transaction costs are zero market participants will organize their transactions in ways that achieve efe cient outcomes when they can do so it is not necessary for the government to engage in corrective actions through taxes regulations or even legal rules financial markets are often used to demonstrate the coase theorem s case against regulation advocates of the regulation of these markets point to a variety of potential failures such as the ability of security issuers to expropriate both potential and existing investors through misrepresentation or proe t diversion investors fear of such expropriation prevents e rms from raising external funds and keeps efe cient projects from being undertaken not so reply the coasians they point out that most securities transactions take place between sophisticated adults and that both the buyers and the issuers of securities have available to them a vast range of private arrangements to achieve efe ciency including contracts such as corporate charters certie cation by intermediaries and various forms of bonding such contracts render most laws and regulations unnecessary stigler 1964 easterbrook and fischel 1991

does islamic finance spur banking sector development abstract islamic finance is one of the most prominent phenomena over the last decade in the banking industry in the middle east and south east asia in spite of the substantial size and growth of this segment recently the role of islamic banking in the economy is still heavily debated and very few empirical work is available this paper studies the empirical impact of islamic banking on banking sector development it circumvents the lack of data through a newly constructed and comprehensive database ifirst covering islamic commercial banks worldwide over the period 2000 2005 this database is to our knowledge unique in the industry we find strong and consistent empirical evidence that the development of islamic banking in muslim countries leads to a higher banking sector development as measured by the amount of private credit or bank deposits scaled to gdp this effect occurs through the development of a new shariah compliant banking industry which does not crowd out the conventional banking system additionally we provide evidence that the islamic banking sector acts as a complement to the conventional banking in muslim countries when both systems co exist and the islamic sector reaches a medium penetration in the total banking sector

statehood experience legal traditions and climate change policies this study investigates how the implementation of modern climate change policies is related to former colonies length of state history and their legal heritage we argue that countries with longer statehood experience around the time of colonization were better equipped to implement the legal philosophies transplanted by their colonial powers therefore the implications of receiving british common law versus french civil law should be particularly important in countries with a greater accumulated history of statehood using a cross section of up to 78 former colonies our results provide support for this hypothesis in particular our estimates demonstrate that common law countries have weaker modern climate change policies than civil law countries and the difference is inflated by a longer statehood experience measured by the length of state history from 1 to 1800 ad legal origin has no effect in areas which by the time of colonization had no statehood experience finally we report similar results for the pattern of labor market regulations jel k15 k31 k32 o44 q54 q58

family values and the regulation of labor flexible labor markets requires geographically mobile workers to be e cient otherwise rms can take advantage of the immobility of workers and extract monopsony rents in cultures with strong family ties moving away from home is costly thus individuals with strong family ties rationally choose regulated labor markets to avoid moving and limiting the monopsony power of rms even though regulation generates lower employment and income empirically we do nd that individuals who inherit stronger family ties are less mobile have lower wages are less often employed and support more stringent labor market regulations there are also positive cross country correlations between the strength of family ties and labor market rigidities finally we nd positive correlations between labor market rigidities at the beginning of the twenty rst century and family values prevailing before world war ii which suggests that labor market regulations have deep cultural roots

the regulation of labor author s botero juan djankov simeon la porta rafael lopez de silanes florencio shleifer andrei abstract we investigate the regulation of labor markets through employment collective relations and social security laws in 85 countries we find that the political power of the left is associated with more stringent labor regulations and more generous social security systems and that socialist french and scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries however the effects of legal origins are larger and explain more of the variation in regulations than those of politics heavier regulation of labor is associated with lower labor force participation and higher unemployment especially of the young these results are most naturally consistent with legal theories according to which countries have pervasive regulaory styles inherited from the transplantation of legal systems

sharing contracts marginalisation adverse selection and markup calculation this paper proposes a new approach to explain the dominance in the islamic banking market of markup contracts at the expense of sharing ones we show that the dual pricing practised in this market produces an additional or artificial dimension of adverse selection which is causing the sharing contracts marginalization we suggest specialized use of two islamic contractual categories as a device for eliminating artificial adverse selection we suggest also an endogenous calculation of the markup that is independent of the interest rate based on the financing cost unification this approach allows the deduction of default and liquidity risk premiums

the borda rule is also intended for dishonest men this paper examines the welfare consequences of strategic voting under the borda rule in a comparison of utilitarian efficiencies in simulated voting games under two behavioural assumptions expected utility maximising behaviour and sincere behaviour utilitarian efficiency is higher in the former than in the latter strategic voting increases utilitarian efficiency particularly if the distribution of preference intensities correlates with voter types the borda rule is shown to have two advantages strategic voting is beneficial even if some but not all voter types engage in strategic behaviour and even if the voters information is based on unreliable signals

which countries have state religions among 188 countries 72 had no state religion in 2000 1970 and 1900 58 had a state religion throughout and 58 had 1 or 2 transitions we use a hotelling spatial competition model to analyze the likelihood that the religion market would be monopolized similar forces influence a government s decision to establish a state religion consistent with the model the probability of state religion in 1970 and 2000 is increasing with the adherence rate to the main religion has a nonlinear relation with population and has little relation with per capita gdp the probability of state religion decreases sharply under communism but lagged communism has only a weak effect with costly adjustment for institutions the probability of state religion in 1970 or 2000 depends substantially on the status in 1900 this persistence is much stronger for countries with no major regime change than for countries with such a change

when and how do voters try to manipulate experimental evidence from borda elections we study strategic voting in a laboratory experiment using a borda mechanism we find that manipulation rates are surprisingly low even for individuals who know that they possess superior information about the other agents preferences exploring possible explanations we find that manipulation rates rise significantly if individuals are not only informed about the other agents preferences but also about their actual votes this suggests that uncertainty plays a key role in understanding strategic behavior in elections by contrast distributional concerns e g in the form of inequality aversion are found to play a negligible role in our context

neither a borrower nor a lender be an economic analysis of interest restrictions and usury laws interest rate restrictions are pervasive and important regulations this article suggests that these restrictions served in part as a primitive means of social insurance lowering the rate of interest effectively transfers income to states of the world where individuals have a high marginal utility of income and are borrowers from states of the world where individuals have a low marginal utility of income and are lenders the model predicts that interest rate restrictions will be tighter when income inequality is high and impermanent and when growth rates are low furthermore loan supply must be somewhat inelastic data from u s states support a connection between inequality income shocks and tighter usury laws usury laws were also stricter in older more stable communities the history of usury laws suggests that this social insurance mechanism is one reason usury laws exist and persist but this history also suggests that usury laws have played many roles across time and that no one theory can po

behavioral norms in the islamic doctrine of economics a critique abstract at the heart of the contemporary islamic doctrine of economics lies a set of behavioral norms derived from the first islamic society in seventh century arabia this paper demonstrates that these norms cannot be expected to serve as the spearhead of a drive for modern economic development for one thing the proposed norms are unlikely to enjoy widespread adherence in large societies where it is difficult to achieve a common perception of reality elicit generalized altruism and overcome the free rider problem secondly many islamic norms are ambiguous and some interfere with institutions designed to improve the workings of markets

funding growth in bank based and market based financial systems evidence from firm level data the authors investigate whether firms access to external financing to fund growth differs between market based and bank based financial systems using firm level data for forty countries they compute the proportion of firms in each country that relies on external finance and examine how that proportion differs across financial systems they find that the development of a country s legal system predicts access to external finance and that stock markets and the banking system have different effects on access to external markets the development of securities markets is related more to the availability of long term financing whereas the development of the banking sector is related more to the availability of short term financing they find no evidence however that firms access to external financing is predicted by an index of the development of stock markets relative to the development of the banking system

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

trust regulation and market failures abstract government regulation of firms is associated with more negative externalities and unofficial activity across countries i argue that this correlation mainly reflects causality going from concerns about market failures to demand for government intervention using trust in others as a proxy for such concerns i show that differences in trust explain a great deal of variation in entry regulations then controlling for trust in the regression of market failures on regulation the latter is no longer associated with worse economic outcomes the same result is confirmed when i exploit country population as an alternative source of variation in regulation

is the food and drug administration safe and effective in the united states the food and drug administration fda provides public oversight of the safety and efficacy of drugs medical devices biologics like vaccines and blood products cosmetics radiation emitting electronic products veterinary products and all foods except meat and poultry which are regulated by the department of agriculture according to the fda the products it regulates account for more than one fifth of u s consumer spending in the area of medical products the fda is responsible for determining whether marketed products are both safe and effective before and after they have been marketed in this paper we will explore whether the policies of the agency itself are safe and effective we stress two issues one static and one dynamic the static issue concerns the potential duplication inefficiency when product safety is protected not only by the fda but also by the private sector through product liability law put another way what is the rationale for using product liability and the fda to regulate drug safety while intuitively it may seem that two systems must be better than one in ensuring drug safety each system comes with costs we then turn to the dynamic issue the speed safety trade off and consider the extent to which higher safety is achieved at a cost of later market entry of effective and even life saving products we assess the prescription drug user fee acts pdufas which increased the speed of the agency s regulatory process starting in 1992 although according to some at the cost of reducing drug safety we conclude by suggesting a research agenda for future work on the food and drug administration

the unequal enforcement of liberalization evidence from russia s reform of business regulation we document the unequal enforcement of liberalization reform of business regulation across russian regions with different governance institutions which leads to unequal effects of liberalization national liberalization laws were enforced more effectively in subnational regions with more transparent government a more informed population a higher concentration of industry and stronger fiscal autonomy as a result liberalization had a substantial positive effect on the performance of small firms and the growth of the official small business sector in regions with stronger governance institutions in contrast in regions with weaker governance institutions we observe no effect of reform and in some cases even a negative effect

culture openness and finance abstract differences in culture proxied by differences in religion and language cannot be ignored when examining why investor protection differs across countries we show that a country s principal religion predicts the cross sectional variation in creditor rights better than a country s natural openness to international trade its language its income per capita or the origin of its legal system catholic countries protect the rights of creditors less well than protestant countries a country s natural openness to international trade mitigates the influence of religion on creditor rights culture proxies are also helpful in understanding how investor rights are enforced across countries

cultivating trust norms institutions and the implications of scale we study the co evolution of honesty norms and institutions new trading opportunities require institutional changes to be realised since the initial vulnerability of institutions to opportunistic behaviour leads to the deterioration of norms we show how an escape from opportunism requires that institutional improvements outpace norm deterioration a key prediction emerges larger economies are more likely to evolve to steady states with strong honesty norms but need not have better institutions this prediction is tested using a cross section of countries population has a significant positive relationship with trust even when controlling for standard trust determinants and institutional quality

default and renegotiation a dynamic model of debt we analyze the role of debt in persuading an entrepreneur to pay out cash e ows rather than to divertthem in the e rstpartof the paper we study the optimal debt contract specie cally the trade off between the size of the loan and the repayment under the assumption that some debt contract is optimal in the second part we consider a more general class of nondebt contracts and derive sufficient conditions for debt to be optimal among these

debt and seniority an analysis of the role of hard claims in constraining management we argue that long term debt has a role in controlling management s ability to finance future investments a company with high widely held debt will find it hard to raise capital since new security holders will have low priority relative to existing creditors conversely for a company with low debt we show there is an optimal debt equity ratio and mix of senior and junior debt if management undertakes unprofitable as well as profitable investments we derive conditions under which equity and a single class of senior long term debt work as well as more complex contracts for controlling investment behavior

setting the record straight a note on sophisticated voting under borda s method the purpose of this note is to correct some inaccuracies in the literature regarding sophisticated voting under borda s method it is shown that if a single candidate must be elected and voters vote sophisticatedly under borda s method then 1 contrary to both black s 1976 and ludwin s 1978 claims a voter s undominated voting strategy may require him not to give top ranking to his most preferred candidate 2 contrary to black s 1976 claim an undominated strategy may be such that all candidates except the most preferred one are ranked last 3 whereas a candidate who constitutes the true bottom preference of an absolute majority of the voters will never be elected if voters vote sincerely this candidate may be elected if voters vote strategically 4 the election of a candidate who constitutes the true top preference of an absolute majority of the voters is not systematic ceteris paribus this candidate may be definitely elected when voters vote sincerely but not when they vote strategically as well as vice versa