the political economy of corporate control and labor rents in a democracy a political majority can influence both the corporate governance structure and the return to human and financial capital we argue that when financial wealth is sufficiently concentrated there is political support for high labor rents and a strong governance role for banks or large investors the model is consistent with the great reversal phenomenon in the first half of the twentieth century we offer evidence that in several financially developed countries a financially weakened middle class became concerned about labor income risk associated with free markets and supported a more corporatist financial system

the value of corporate voting rights and control a cross country analysis this paper measures the value of corporate voting rights specifically of the control block of votes in a sample of 661 dual class firms in 18 countries in 1997 a consistent measure across countries is proposed the measure is adjusted for takeover probability block holding costs and dividend and liquidity differences between the share classes the value of controlblock votes varies widely across countries it is close to half of firm market value in south korea andclose to zero in finland the value of control block votes is interpretedas a lower bound for actual private benefits of the controlling shareholder the legal environment law enforcement investor protection takeover regulations andpower concentrating corporate charter provisions explain 68 of the cross country variation in the value of control block votes

industry growth and capital allocation does having a market or bank based system matter are market based or bank based financial systems better at financing the expansion of industries that depend heavily on external finance facilitating the formation of new establishments and improving the efficiency of capital allocation across industries we find evidence for neither the market based nor the bank based hypothesis while legal system efficiency and overall financial development boost industry growth new establishment formation and efficient capital allocation having a bank based or market based system per se does not seem to matter much

loss aversion and labor supply in many occupations workers labor supply choices are constrained by institutional rules regulating labor time and effort provision this renders explicit tests of the neoclassical theory of labor supply difficult here we present evidence from studies examining labor supply responses in neoclassical environments in which workers are free to choose when and how much to work despite the favorable environment the results cast doubt on the neoclassical model they are however consistent with a model of reference dependent preferences exhibiting loss aversion and diminishing sensitivity jel j22 b49

the influence of financial and legal institutions on firm size abstract theory does not predict an unambiguous relationship between a country s financial and legal institutions and firm size using data on the largest industrial firms for 44 countries we find that firm size is positively related to financial intermediary development the efficiency of the legal system and property rights protection we do not find any evidence that firms are larger in order to internalize the functions of the banking system or to compensate for the general inefficiency of the legal system

princes and merchants european city growth before the industrial revolution as measured by the pace of city growth in western europe from 1000 to 1800 absolutist monarchs stunted the growth of commerce and industry a region ruled by an absolutist prince saw its total urban population shrink by one hundred thousand people per century relative to a region without absolutist government this might be explained by higher rates of taxation under revenue maximizing absolutist governments than under nonabsolutist governments which care more about general economic prosperity and less about state revenue

mathematical programming for the efficient allocation of health care resources previous discussions of methods for the efficient allocation of health care resources subject to a budget constraint have relied on unnecessarily restrictive assumptions this paper makes use of established optimization techniques to demonstrate that a general mathematical programming framework can accommodate much more complex information regarding returns to scale partial and complete indivisibility and program interdependence methods are also presented for incorporating ethical constraints into the resource allocation process including explicit identification of the cost of equity

ranking income distributions a large variety of policy questions involve choices between social states and a consequent ordering of the feasible alternatives when these social states are related to the levels of welfare experienced by individuals or households two central issues stand out in determining the relative desirability of different social outcomes one of these is the essentially positive exercise of achieving comparability between households with different characteristics such as composition or preferences operating in different environments for example facing different price structures the other concerns the normative judgments implicit in the evaluation of alternative allocations of resourcesthe emphasis placed on inequality between households and the extent to which greater inequality can be compensated by higher average living standards this paper focuses on the second of these issues and in doing so we abstract from the problem of household comparability by considering a population of n households identical in all respects except for their incomes the question of ordering social states then becomes one of ranking income distributions over a group of anonymous households or individuals borrowing the usual assumptions imposed on consumer preferences we may suppose that a social ordering of income distributions can be represented by a welfare function 2

health utility indices and equity considerations the aim of this paper is to propose methods that incorporate equity concerns into cost utility analysis the focus of the paper is on qalys but the results apply to health utility indices in general two interpretations of qalys are considered qalys as von neumann morgenstern utilities and qalys as measures of health a justification is provided for aggregating consistently scaled qalys as utilities over individuals the conditions underlying unweighted aggregation of qalys are identified these conditions exclude two common types of equity concern algorithms are proposed that take into account equity concerns and that are relatively easy to apply

cost effectiveness utility analyses do current decision rules lead us to where we want to be despite the growing literature on economic evaluation of health care programmes little attention has been paid to the theoretical foundations of cost effectiveness and cost utility analyses and the validity of the decision rules adopted as methods of achieving the stated goals we show that although applications of the techniques can be used to pursue some managerial objectives in the context of highly constrained environments such applications are inconsistent with both welfare economic objectives and the interpretations of the findings of these applications alternative strategies are identified as potential and practical methods for pursuing welfare economic objectives

the legal environment banks and long run economic growth this paper examines the relationship between the legal system and banlding development and traces this connection through to long run rates of per capita gdp growth capital stock growth and productivity growth the data indicate that countries where the legal system 1 emphasizes creditor rights and 2 rigorously enforces contracts have better developed banks than countries where laws do not give a high priority to creditors and where enforcement is lax furtherrnore the exogenous component of banking development the component defined by the legal environment is positively and robustly associated with per capita growth physical capital accumulation and productivity growth this paper addresses two questions first do crosscountry differences in the legal rights of creditors the efficiency of contract enforcement and the origin of the legal system explain cross country differences in the level of banking development second do better developed banks cause faster economic development that is is the component of banking development defined by the legal environment positively associated with long run rates of economic growth capital accumulation and productivity growth examining the relationship between the legal system and banking development is valuable irrespective of issues associated with long run growth first banks may influence the level of income per capita and the magnitude of cyclical fluctuations bernanke and gertler 1989 1990 second many economists stress that understanding the evolution of legal and financial systems is essential for understanding economic development north 1981 engerman and sokoloff 1996 consequently quantitative information on the relationship between the legal environment and banks will improve our understanding of business cycles and the process of economic development furthermore examining the causal links between banks and economic growth has both conceptual and policy implications on the conceptual front a long literature debates the importance of banks in economic development starting as early as bagehot 1873 economists have argued that better banks banks that are better at identifying creditworthy firms mobilizing savings pooling risks and facilitating transactions

economic development legality and the transplant effect abstract 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

history lessons institutions factor endowments and paths of development in the new world the explanations offered for the contrasting records of long run growth and development among the societies of north and south america most often focus on institutions the traditional explanations for the sources of these differences in institutions typically highlight the significance of national heritage or religion we in contrast argue that a hemispheric perspective across the wide range of colonies established in the new world by the europeans suggests that although there were many influences factor endowments or initial conditions had profound and enduring effects on the long run paths of institutional and economic development followed by the respective economies

aversion to health inequalities in healthcare prioritisation a multicriteria optimisation perspective abstract in this paper we discuss the prioritisation of healthcare projects where there is a concern about health inequalities but the decision maker is reluctant to make explicit quantitative value judgements and the data systems only allow the measurement of health at an aggregate level our analysis begins with a standard welfare economic model of healthcare resource allocation we show how under the assumption that the healthcare projects under consideration have a small impact on individual health the problem can be reformulated as one of finding a particular subset of the class of efficient solutions to an implied multicriteria optimisation problem algorithms for finding such solutions are readily available and we demonstrate our approach through a worked example of treatment for clinical depression

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

qalys and the equity efficiency trade off as the volume of research on quality adjusted life years qalys has increased concern has begun to be expressed about the equity aspects of resource allocation decisions based on the results of this research this paper suggests that a common theme running through the criticisms of the qaly approach is a concern about inequality it also suggests that the method for incorporating distributional concerns which is currently being pursued by advocates of the qaly approach will only ever capture concerns other than a concern about inequality the paper suggests a method for incorporating both sets of concerns into resource allocation decisions

the role of law in economic growth a literature review abstract compared with other explanatory variables such as capital accumulation technological innovations geographical endowments economic openness and cultural factors institutions especially legal institutions have been regarded as a crucial condition for economic growth in recent years the importance of legal rules is systematically revealed by a series of cross country econometric studies conducted by la porta et al who claim that legal origins are central to understanding the divergence in living standards across the regions and countries of the world and compared with civil law countries especially those countries with french civil law tradition common law countries have enjoyed superior economic outcomes the controversies set off by la porta et al s proposition indicate that there are a number of questions that are difficult to explain by la porta et al s theory and hence call for more work on comparative analysis of different legal families before a consensus can be reached

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

does legal enforcement affect financial transactions the contractual channel in private equity analyzing 210 developing country private equity investments we find that transactions vary with nations legal enforcement whether measured directly or through legal origin investments in high enforcement and common law nations often use convertible preferred stock with covenants in low enforcement and civil law nations private equity groups tend to use common stock and debt and rely on equity and board control transactions in high enforcement countries have higher valuations and returns while relying on ownership rather than contractual provisions may help to alleviate legal enforcement problems these results suggest that private solutions are only a partial remedy

the normative economics of health care finance and provision whereas in many countries the crisis in medical care has been seen in terms of excess spending on health services in the uk it has been seen at least by most of those who manage and work in the nhs as a crisis of underfunding this has come about as the result of the government s successful attempts to restrain the rate of growth of real spending on the nhs which in turn reflects the government s belief that its principal effective weapon against what it perceives to be inefficiency in the nhs is to challenge management itself reformed and to some extent liberated by systematic financial squeezes the same concern has given rise to a host of proposals for reform of the nhs most of which involve a much greater role for private insurance private finance of other kinds such as out of pocket payments and private provision of health care itself

to steal or not to steal firm attributes legal environment and valuation data on corporate governance and disclosure practices reveal wide within country variation that decreases with the strength of investors legal protection a simple model identifies three firm attributes related to that variation investment opportunities external financing and ownership structure using firm level governance and transparency data from 27 countries we find that all three firm attributes are related to the quality of governance and disclosure practices and firms with higher governance and transparency rankings are valued higher in stock markets all relations are stronger in less investor friendly countries demonstrating that firms adapt to poor legal environments to establish efficient governance practices

assessing risky social situations this paper reexamines the welfare economics of risk it singles out a class of criteria the expected equally distributed equivalent as the unique class that avoids serious drawbacks of existing approaches such criteria behave like ex post criteria when the final statistical distribution of well being is known ex ante and like ex ante criteria when risk generates no inequality the paper also provides a new result on the tension between inequality aversion and respect of individual ex ante preferences in the vein of harsanyi s aggregation theorem

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

the integration of claims to health care a programming approach the paper contributes to the use of social choice and welfare theory in health economics by developing and applying the integration of claims framework to health care rationing related to sen s critique of neo classical welfare economics the integration of claims framework recognises three primitive sources of claim consequences deontology and procedures a taxonomy is presented with the aid of which it is shown that social welfare functions reflecting these claims individually or together can be specified some of the resulting social choice rules can be regarded as generalisations of health maximisation and all have normative justifications though the justifications may not be universally acceptable the paper shows how non linear programming can be used to operationalise such choice rules and illustrates their differential impacts on the optimal provision of health care following discussion of relations to the capabilities framework and the context in which rationing occurs the paper concludes that the integration of claims provides a viable framework for modelling health care rationing that is technically rigorous general and tractable as well as being consistent with relevant moral considerations and citizen preferences