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

biofuel investment in tanzania omissions in implementation abstract increasing demand for biofuels as a component of climate change mitigation energy security and a fossil fuel alternative attracts investors to developing countries like tanzania ample unused land is critical for first generation biofuels production and an important feature to attract foreign direct investments that can contribute towards agricultural modernization and poverty reduction initiatives despite the economic justifications the existing institutional and infrastructural capacities dictate the impacts of biofuels market penetrations furthermore exogenous factors like global recessionary pressure depressed oil prices below the level at which biofuel production were profitable in 2007 making tanzania s competitiveness and potential benefits questionable this paper investigates the extent that first generation jatropha based biofuels industry development in tanzania observed during fieldwork in kisarawe and bahi may fulfill policy objectives this paper argues that without strong regulatory frameworks for land investment management and rural development biofuel industrialization could further exacerbate poverty and food insecurity in tanzania the paper concludes with policy recommendations for first generation biofuel development while keeping in mind implications of second generation production since the topic is broad and multifaceted a multidisciplinary approach is used that includes political institutional and agricultural economics to analyze and conceptualize biofuel industry development and food security

transforming the energy sector the evolution of technological systems in renewable energy technology this paper analyses the development and diffusion of technologies that utilize renewable energy sources in germany sweden and the netherlands the analysis enlarges the life cycle model of industry evolution to one where the focus is on the formation and evolution of new technological systems particular focus is on explaining success and failures in shifting from a formative phase into one characterized by positive feedbacks a set of challenges is identified for policy makers attempting to influence the process of transforming the energy sector

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

productive investment and growth testing the validity of the ak model from a panel perspective in this article we analyse the relationship between productive physical investment and economic growth from a panel perspective for a sample of 61 countries spanning the period 1950 to 1992 the analysis can be thought of as two fold first we test the empirical validity of ak models following the logic by jones 1995 for that purpose we determine the degree of persistence of physical investment rates and growth by employing recently developed panel unit root tests that enable us to make more reliable inferences about the existence of stochastic trends in the series second we estimate the long run effect of physical investment on growth by using panel data techniques rather than cross section regressions overall our findings cast doubts on the rejection of the empirical validity of the ak model as suggested by jones analysis

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

is the ak model still alive the long run relation between growth and investment re examined to explore the empirical validity of ak type endogenous growth models the long run relation between growth and investment is examined contrary to jones s 1995 findings the broadly measured rate of investment exerts a long run positive effect on the growth rate this result is supported by evidence from twenty four oecd countries 1950 92 and five major industrialized countries 1870 1987 the panel data evidence from oecd countries also supports an extended ak model based on the uzawa 1965 lucas 1988 two sector model with transitional dynamics these findings suggest that the long run relation between growth and investment is consistent the ak model jel classification o4 est ce que le modele ak est encore en vie un autre coup d il sur la relation a long terme entre croissance et investissement pour explorer la validite empirique des modeles de croissance endogene de type ak l auteur jette un autre coup d il sur la relation a long terme entre croissance et investissement contrairement a ce que suggerent les resultats de l etude de jones 1995 le taux d investissement mesure d une maniere assez comprehensive exerce un effet positif sur le taux de croissance a long terme ce resultat est supporte par les donnees recoltees pour vingt quatre pays de l ocde entre 1950 et 1992 et pour cinq pays industrialises importants entre 1870 et 1987 les resultats tires des etudes longitudinales des pays de l ocde supportent aussi une version generale du modele ak fondee sur le modele a deux secteurs a la uzawa 1965 lucas 1988 avec dynamique de transition ces resultats suggerent que la relation en longue periode entre croissance et investissement est consistante avec le modele ak

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

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

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

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

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

the emerging liquid biofuel market in argentina implications for domestic demand and international trade while the world s transport energy matrix is still strongly linked to limited and heavily polluting fossil fuels new markets are appearing for the production and use of alternative transport fuels such as liquid biofuels due to an interconnected global economy such markets today are developing on a global scale with actors looking to meet local as well as potential international demand the aim of this paper is to describe and evaluate the emergence of markets for liquid biofuels in argentina it reveals that biodiesel production for international supply is likely to emerge in the short run up to 2010 giving the opportunity to be switched back to local supply in the medium run post 2010 it also suggests that a bioethanol market demand and supply does not seem to be likely in the short run and it is highly uncertain in the medium run as the most influential actors oppose its development on the other hand the current constellations of the biodiesel market appear to leave many uncertainties regarding its sustainability especially in regard to a limited role of small and medium sized enterprises and a suitable and diversified biodiesel feedstock currently the focus lies solely on very large scale production of biodiesel derived from soybean oil for the export market

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

the political economy of biodiesel in an era of low oil prices abstract global biodiesel production grew by 23 per annum between 2005 and 2015 leading to a seven fold expansion of the sector in a single decade rapid development in the biodiesel sector corresponded to high crude oil prices but since mid 2014 oil prices have fallen dramatically this paper assesses the economic and policy factors that underpinned the expansion of biodiesel and examines the near term prospects for biodiesel growth under conditions of low fossil fuel prices we show that the dramatic increase in biodiesel output would not have occurred without strong policy directives subsidies and trade policies designed to support agricultural interests rural economic development energy security and climate targets given the important role of policy and the political context within each country that shapes policy objectives instruments and priorities case studies of major biodiesel producing countries are presented as a key element of our analysis although the narrative of biodiesel policies in most countries conveys win win outcomes across multiple objectives the case studies show that support of particular constituents such as farm lobbies or energy interests often dominates policy action and generates large social costs looking out to 2020 the paper highlights risks to the biodiesel industry associated with ongoing regulatory and market uncertainties

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

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

capital accumulation and growth a new look at the empirical evidence using annual data for 75 countries in the period 1960 2000 we present evidence of a positive relationship between investment as a share of gross domestic product gdp and the long run growth rate of gdp per worker this result is robust for our full sample and for the subsample of non oecd countries but not for the subsample of oecd countries our analysis controls for time invariant country specific heterogeneity in growth rates and for a range of time varying control variables we also address endogeneity issues and allow for heterogeneity across countries in model parameters and for cross section dependence

is physical investment the key to china s growth miracle i introduction unprecedented high rates of economic growth in china over the past decades have stimulated a wide interest among researchers and policymakers in establishing whether rapid physical capital accumulation is the main driving force behind such outstanding growth performance and whether it suffices to sustain china s rapid economic growth in the next decades by exploiting the different implications that the relation between investment and growth has according to the neoclassical paradigm pioneered by solow 1956 and cass 1965 and endogenous growth models of the ak type this paper will attempt to test the empirical validity of the ak model for the chinese economy the main difference between the ak model and the solow model is that the former allows for the existence of constant returns to a sufficiently broad definition of capital which in turn enables investment to have a long run impact on growth in contrast under the neoclassical paradigm diminishing returns to reproducible capital leads inevitably to only temporary growth effects along the transitional path and long run growth depends on exogenous technological progress constant returns to reproducible capital characterizing linear accumulation driven models may stem from different sources like 1 positive externalities as in the models of frankel 1962 lucas 1988 and romer 1986 2 bounding the marginal product of reproducible factors away from zero jones and manuelli 1990 or 3 the existence of constant returns to all accumulable factors characterizing the different sectors of the economy barro 1990 rebelo 1991 according to standard linear accumulation driven models steady state output growth directly depends on the total investment rate in physical capital hence the dynamics of output growth should behave similarly to the dynamics of the investment rate as noted by jones 1995a a hallmark of the endogenous growth literature implies that any large permanent change in total investment should translate into a permanent change in long run growth in the same direction jones 1995a constitutes the first attempt at testing the ak type growth models using a time series framework his sample includes 15 organization for economic co operation and development oecd countries with data spanning over the period 1950 1988 he shows that the investment share in producer durables and to a lesser extent the total investment rate presents an upward deterministic trend and is generally found nonstationary when augmented dickey fuller adf 1979 tests are applied in contrast rates of economic growth remain fairly stable jones then claims that the fact that output growth rates exhibit no large permanent movements imposes a strong and testable restriction on endogenous growth models if an endogenous growth model predicts that permanent movements in some variable x have permanent effects on growth then either a x must exhibit no large persistent movements or b some other variable or variables must also have persistent effects on growth that offset the movements of x in a way that is determined by the endogenous growth model jones 1995a 502 despite the considerable effort using this framework to try to test the empirical validity of ak type growth models for the oecd countries jones 1995a li 2002 romero avila 2006 no work has been conducted along these lines for the chinese economy this is surprising because this issue should be particularly important for a country like china which is expected to become the leading economy in the coming decades with a population more than 1 3 billion which is more than four times the population of the united states this paper tries to fill this gap in the literature by applying jones test to the chinese economy over the past five decades the chinese economy has shown spectacular growth performance with an average annual growth rate of real per capita gross domestic product gdp equal to 6

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

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

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

impacts of biodiesel on the brazilian fuel market this paper investigates market effects of the brazilian biodiesel law which made the use of biodiesel blended with petroleum diesel mandatory in brazil the study estimates the demand curve for diesel fuel biodiesel and petroleum diesel and the industry supply curve of biodiesel these two pieces of information have been used in a static analysis to draw scenarios with different biodiesel mandates the results show that the current proportion of biodiesel in the diesel mixture 5 increases consumers price by 1 7 and decreases the consumption by 1 5 compared to the scenario without biodiesel also an increase in the biodiesel percentage to 10 would raise the price by 3 5 and reduce the consumption by 3 2012 elsevier b v

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

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

simulation for assessing the liberalization of biofuels abstract global biofuel consumption has been growing in recent years as different countries worldwide have been exploring alternatives and complements to gasoline and diesel fuel for transport this is due to a hike in oil prices and their increasing volatility as well as both a high dependence of the transport sector on oil and also because arguably the supply chain of biofuels emits less co2 than that of fossil fuels biofuels have been available around the world for a while with the aid of some government support brazil pioneered this renewable solution for transport from the early 1930s as the country had little access to local fuels while oil and other alternatives became more expensive biofuels are currently widely considered as part of the solution to affordable fuels for transport this paper makes use of a system dynamics model to analyse the current leading policies aiming at increasing the penetration of biofuels in this context and given multiple uncertainties that include technology evolution and fuel prices scenario analysis has been considered for the examination of different extreme though plausible futures simulations under extreme scenarios helped in assessing the possibility of removing incentives that is leaving decisions to an open market and a partial reduction of subsidies this paper concludes that for the case of colombia the potential of biofuels seems promising

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

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

terrorism and the world economy abstract it has been argued that terrorism should not have a large effect on economic activity because terrorist attacks destroy only a small fraction of the stock of capital of a country see e g becker g murphy k 2001 prosperity will rise out of the ashes wall street journal october 29 2001 in contrast empirical estimates of the consequences of terrorism typically suggest large effects on economic outcomes see e g abadie a gardeazabal j 2003 the economic cost of conflict a case study of the basque country american economic review 93 113 132 the main theme of this article is that mobility of productive capital in an open economy may account for much of the difference between the direct and the equilibrium impact of terrorism we use a simple economic model to show that terrorism may have a large impact on the allocation of productive capital across countries even if it represents a small fraction of the overall economic risk the model emphasizes that in addition to increasing uncertainty terrorism reduces the expected return to investment as a result changes in the intensity of terrorism may cause large movements of capital across countries if the world economy is sufficiently open so international investors are able to diversify other types of country risks using a unique data set on terrorism and other country risks we find that in accordance with the predictions of the model higher levels of terrorist risks are associated with lower levels of net foreign direct investment positions even after controlling for other types of country risks on average a standard deviation increase in the terrorist risk is associated with a fall in the net foreign direct investment position of about 5 of gdp the magnitude of the estimated effect is large which suggests that the open economy channel impact of terrorism may be substantial

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

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

international bioenergy trade a review of past developments in the liquid biofuel market policies aimed to promote biofuels locally had tremendous effects on global market developments across the past decade this article develops insights into the interaction of these policies and market forces via a comprehensive collection and analysis of international production and trade data it shows that world biofuel production and trade has grown exponentially from below 30 pj in 2000 to 572 pj in 2009 for biodiesel from 340 pj in 2000 to over 1540 pj in 2009 for fuel ethanol the eu has dominated world biodiesel whereas the us and brazil have led fuel ethanol production world net biofuel trade reached 120 130 pj in 2009 and was directed towards the most lucrative markets for biodiesel this has been the eu whose imports rose to 92 pj in 2008 and remained at 70 pj in 2009 regarding fuel ethanol both the us and the eu have been prime destinations for competitively priced exports the vast majority of which originated in brazil international biofuel trade is both supply and demand driven the demand side was shaped by support policies which generally increased the domestic market value of biofuels trade developed wherever these policies prices were not accompanied by respective measures it is found that import duties largely influenced trade volumes whereas trade routes were mainly driven by tariff preferences trade regimes appear to have been designed and adapted unilaterally along national interests causing market disruptions trade inefficiencies and disputes to avoid these it is important to explicitly consider international trade implications of national trade policies a prerequisite is to improve the understanding of the underlying complex and interwoven links within the market the current lack of adequate homogeneous international reporting of biofuel production and trade statistics could be bridged via internationally standardized custom clarifications trade factor interrelations also need to be investigated further

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

sell or not sell biodiesel local competition and government measures the introduction of biofuels is one of the objectives of the european union for this reason measures to promote the production and consumption of this product have been implemented such as tax exemptions fixing a minimum amount of mixture or the introduction of public transport that consume biofuels in this paper we test different factors that can affect the introduction of biodiesel in the spanish gasoline market these factors are mainly the level of local competition technical difficulties and local government action empirical evidence shows that a higher level of competition more buses that consume biodiesel and a lower adjustment costs increase significantly the probability of sell biodiesel at service stations these results show how the promotion of competition and public procurement of vehicles can improve the commercialization of biofuels

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