title: Essays in Institutional Economics, with special focus on Muslim-majority countries
title: Aufsätze in Institutionenökonomik, mit speziellem Fokus auf Ländern mit muslimischer Mehrheit
Creators: name: Gouda, Moamen
Publisher: name: Philipps-Universität Marburg
Year: 2014
Subjects: Crime
Institutionenökonomie
Wirtschaft
Law and Economics
Islam
Institutional Economics
Kriminalität
Ökonomische Theorie des Rechts
Religion

description: This thesis is an attempt to gain
      a better understanding of how institutions, whether formal or
      informal, influence individual- and societal-level economic
      choices, especially in the Muslim-majority countries. It
      consists of six research papers that contribute to the
      economic analysis of institutions. The first paper, published
      in the Journal of World Intellectual Property in 2011,
      investigates the relationship between intellectual property
      piracy and religiosity in several Muslim-majority countries.
      The second paper, published in Constitutional Political
      Economy in 2013, focuses on the future of constitutionalism
      in Arab Spring countries by analyzing a unique Islamic
      constitution from a rule of law perspective. Another paper
      published in a collective volume tackles the relationship
      between business ethics and economic systems in
      Muslim-majority countries. The fourth paper is a novel
      application of economic analysis to Islamic criminal law, as
      it analyzes the marginal deterrence in Islamic criminal law
      of theft. The fifth paper, which is currently under second
      round review from Journal of Economics and Statistics,
      empirically investigates the relationship between the
      religiously induced internalized values of individuals in 78
      countries and their specific attitudes toward corruption
      using World Value Survey data. In the sixth and final paper
      of my dissertation, I empirically investigate the long-term
      relationship between the legacy of slavery and contemporary
      violent crime in USA. Paper 1 (with Nora El-Bialy): “Can
      Shari’a be a Deterrent for Intellectual Property Piracy in
      Islamic Countries?” examines the stance of Islamic legal
      traditions (Shari’a) towards intellectual property (IP)
      piracy. Although Muslims may differ on what Shari’a dictates,
      most of them view Shari’a as God’s law and as a main
      ingredient of Islamic belief system. Since piracy rates in
      Muslim-majority countries are considerably high in light of
      existing formal IPR laws, it becomes essential to test if
      Shari’a has any relation with such phenomenon. Our hypothesis
      is that, although Muslim countries have formal institutions
      or laws that protect intellectual property rights (IPR),
      little attention is given to informal institutions, or human
      morals, regarding IPR piracy, which negatively affects the
      enforcement level of IPR laws in these countries. Muslims may
      not be convinced that IPR violations, although illegal, are
      unethical or forbidden by Islamic Shari’a. In order to test
      the level of adherence of Muslims to Shari’a to support our
      hypothesis, we develop a “religious loyalty” index (RLI).
      Comparing adherence of followers of different religions with
      those of Islam, Muslim countries have the highest religiosity
      level, positively affecting obedience level to Shari’a.
      Consequently, an investigation of how Shari’a views IPR
      piracy is conducted. As Islam generally prohibits IPR piracy,
      the study concludes by offering a set of policy
      recommendations that can effectively help in minimizing IPR
      piracy in Muslim countries. Paper 2: “Islamic
      Constitutionalism and Rule of Law: A Constitutional Economics
      Perspective” investigates the relationship between
      constitutionalism from an Islamic perspective and the concept
      of rule of law. Al Azhar, one of the oldest and most
      respected Sunni religious institutions in the world,
      developed an Islamic constitution with the purpose of making
      it “available to any country that wishes to model itself
      after the Islamic Shari’a”. Facing the differences among
      Islamic sects, Al-Azhar’s constitution preamble states that
      “the principles laid down in this constitution agree with
      those shared between the Islamic schools of law to the utmost
      extent possible”. Since its completion in 1978, this Islamic
      constitution received little attention from policy makers in
      Muslim-majority countries as well as legal scholars
      worldwide. Only after the January 25 uprising did Islamic
      political movements in Egypt announce their desire to use
      this constitution as their proposed model for the upcoming
      Egyptian constitution. Having this in mind, this study uses
      this constitution as a model of Islamic constitutionalism,
      whereby its stance regarding rule of law is examined using
      six main principles: (1) separation of powers, (2) clear and
      stable laws, (3) judicial independence and judicial review,
      (4) equal access to justice, (5) the state is bound by the
      law, and (6) protection of basic human rights. I find the
      Al-Azhar’s constitution to be incompatible with essential
      concepts of rule of law. For example, the powers vested in
      the head of the Islamic state are enormous, making the
      executive branch of government far superior to the
      legislative and judicial branches. Women and non- Muslims are
      explicitly discriminated against throughout the constitution.
      Moreover, laws stemming from this constitution are not stable
      since many differences exist among schools of Islamic
      jurisprudence (fiqh). Consequently, we show that
      state-of-the-art Islamic constitutionalism lacks essential
      components needed in any constitution based on rule of law.
      Paper 3 (with Helmut Leipold): “Wirtschaftsethik und
      Wirtschaftssysteme in islamischen Ländern” investigates if
      the Islamic ethics related to business and economics could
      offer a solution to deter future financial crises. For this
      purpose, we investigate the principles of Islamic business
      ethics and Islamic business law. Our analysis shows that the
      principles of Islamic economic ethics resemble the objectives
      of the social market economy model. We further comparatively
      analyze the economic systems of members of the Organization
      of the Islamic Cooperation (OIC). Although Islamic countries
      have heterogeneous economic structures, we perceive that they
      are somewhat homogenous in their lack of democracy and their
      low levels of rule of law. Moreover, the majority of Islamic
      countries can be categorized as rentier states. This is not
      surprising in countries where religion and state are in close
      alliance. The paper concludes that the principles of Islamic
      economic ethics do not offer a specific solution to prevent
      future financial crises. Paper 4: “Stealing more is better?
      An Economic Analysis of Islamic Law of Theft” is the very
      first attempt towards applying economic analysis to Islamic
      criminal law. Islamic criminal law offers two main
      punishments regarding theft; hadd, a fixed penalty that
      requires the amputation of the offender’s right hand under
      certain conditions and ta’zir, a punishment that is left to
      the discretion of the judge and is less severe than hadd.
      Deterrence is one of the main objectives for Islamic criminal
      law. However, from the viewpoint of marginal deterrence and
      multiplier principles, lesser crimes with low social harm are
      punished severely with hadd while crimes with high social
      harm are punished with ta’zir. Moreover, as the probability
      of detection and sanction is less in crimes of high social
      harm, criminals would have better incentive to commit the
      latter type of crimes. This study implies that if Islamic
      criminal law is introduced in Arab Spring countries in its
      current form, crimes of high social cost are likely to become
      more frequent. A call for a modern reinterpretation and
      re-coding of Islamic criminal law of theft is essential for
      any successful attempt to apply Shari’a in Muslim-majority
      countries. Paper 5 (with Sang-Min Park): “Religious Loyalty
      and Acceptance of Corruption” investigates the relationship
      between religiously-induced internalized values of
      individuals and their specific attitudes regarding the
      acceptance of corruption. The dataset on which our study is
      based was collected by the World Values Survey from 164,209
      individuals in 80 countries surveyed during a period of 13
      years. We propose that individual attitudes towards
      corruption and religion are associated given certain societal
      and institutional contexts. Our results show that although
      there is a negative and statistically significant effect of
      religiosity on the acceptance of corruption on the individual
      level, this effect is small. We find that there is a
      threshold value of religiosity below which corruption is more
      easily accepted by individuals. Our interpretation for this
      result is simple: individuals with minimal religiosity are
      generally less constrained by religious norms; specifically,
      religious norms that are opposed to corruption are less
      binding on these individuals, resulting in them having a
      greater propensity to accept corruption. Religiosity,
      therefore, does lower the acceptance of corruption only when
      it exceeds a certain threshold for a specific individual.
      Paper 6: “The Long-Term Effect of Slavery on Violent Crime:
      Evidence from US Counties” is the first to empirically
      investigate the long-term relationship between slavery and
      violence in USA. Although qualitative evidence shows that
      slavery has been a key factor behind the prevalence of
      violence, especially in South USA (Cash, 1941; Franklin,
      1956; Gastil, 1971; Wyatt-Brown, 1986), no empirical evidence
      supports this claim so far. I propose that the proportion of
      slaves in a certain county in 1860 is positively correlated
      with the rate of violent crimes in 2000. As violence was
      extensively used to control slaves for hundreds of years, a
      culture of violence was formed and persisted through time.
      Extending Engermann and Sokoloff’s hypotheses (1997; 2002), I
      empirically examine two hypotheses: (1) slavery has a
      long-term effect on violent crime. (2) Such long-term effect
      is mainly transmitted through inequality. The results show
      that slavery in 1860 is positively associated with violent
      crime in 2000. Testing the second hypothesis, I find that
      land inequality in 1860 has a long-term significant effect on
      contemporary violent crime.
description: This thesis is an attempt to gain a
      better understanding of how institutions, whether formal or
      informal, influence individual- and societal-level economic
      choices, especially in the Muslim-majority countries. It
      consists of six research papers that contribute to the
      economic analysis of institutions. The first paper, published
      in the Journal of World Intellectual Property in 2011,
      investigates the relationship between intellectual property
      piracy and religiosity in several Muslim-majority countries.
      The second paper, published in Constitutional Political
      Economy in 2013, focuses on the future of constitutionalism
      in Arab Spring countries by analyzing a unique Islamic
      constitution from a rule of law perspective. Another paper
      published in a collective volume tackles the relationship
      between business ethics and economic systems in
      Muslim-majority countries. The fourth paper is a novel
      application of economic analysis to Islamic criminal law, as
      it analyzes the marginal deterrence in Islamic criminal law
      of theft. The fifth paper, which is currently under second
      round review from Journal of Economics and Statistics,
      empirically investigates the relationship between the
      religiously induced internalized values of individuals in 78
      countries and their specific attitudes toward corruption
      using World Value Survey data. In the sixth and final paper
      of my dissertation, I empirically investigate the long-term
      relationship between the legacy of slavery and contemporary
      violent crime in USA. Paper 1 (with Nora El-Bialy): “Can
      Shari’a be a Deterrent for Intellectual Property Piracy in
      Islamic Countries?” examines the stance of Islamic legal
      traditions (Shari’a) towards intellectual property (IP)
      piracy. Although Muslims may differ on what Shari’a dictates,
      most of them view Shari’a as God’s law and as a main
      ingredient of Islamic belief system. Since piracy rates in
      Muslim-majority countries are considerably high in light of
      existing formal IPR laws, it becomes essential to test if
      Shari’a has any relation with such phenomenon. Our hypothesis
      is that, although Muslim countries have formal institutions
      or laws that protect intellectual property rights (IPR),
      little attention is given to informal institutions, or human
      morals, regarding IPR piracy, which negatively affects the
      enforcement level of IPR laws in these countries. Muslims may
      not be convinced that IPR violations, although illegal, are
      unethical or forbidden by Islamic Shari’a. In order to test
      the level of adherence of Muslims to Shari’a to support our
      hypothesis, we develop a “religious loyalty” index (RLI).
      Comparing adherence of followers of different religions with
      those of Islam, Muslim countries have the highest religiosity
      level, positively affecting obedience level to Shari’a.
      Consequently, an investigation of how Shari’a views IPR
      piracy is conducted. As Islam generally prohibits IPR piracy,
      the study concludes by offering a set of policy
      recommendations that can effectively help in minimizing IPR
      piracy in Muslim countries. Paper 2: “Islamic
      Constitutionalism and Rule of Law: A Constitutional Economics
      Perspective” investigates the relationship between
      constitutionalism from an Islamic perspective and the concept
      of rule of law. Al Azhar, one of the oldest and most
      respected Sunni religious institutions in the world,
      developed an Islamic constitution with the purpose of making
      it “available to any country that wishes to model itself
      after the Islamic Shari’a”. Facing the differences among
      Islamic sects, Al-Azhar’s constitution preamble states that
      “the principles laid down in this constitution agree with
      those shared between the Islamic schools of law to the utmost
      extent possible”. Since its completion in 1978, this Islamic
      constitution received little attention from policy makers in
      Muslim-majority countries as well as legal scholars
      worldwide. Only after the January 25 uprising did Islamic
      political movements in Egypt announce their desire to use
      this constitution as their proposed model for the upcoming
      Egyptian constitution. Having this in mind, this study uses
      this constitution as a model of Islamic constitutionalism,
      whereby its stance regarding rule of law is examined using
      six main principles: (1) separation of powers, (2) clear and
      stable laws, (3) judicial independence and judicial review,
      (4) equal access to justice, (5) the state is bound by the
      law, and (6) protection of basic human rights. I find the
      Al-Azhar’s constitution to be incompatible with essential
      concepts of rule of law. For example, the powers vested in
      the head of the Islamic state are enormous, making the
      executive branch of government far superior to the
      legislative and judicial branches. Women and non- Muslims are
      explicitly discriminated against throughout the constitution.
      Moreover, laws stemming from this constitution are not stable
      since many differences exist among schools of Islamic
      jurisprudence (fiqh). Consequently, we show that
      state-of-the-art Islamic constitutionalism lacks essential
      components needed in any constitution based on rule of law.
      Paper 3 (with Helmut Leipold): “Wirtschaftsethik und
      Wirtschaftssysteme in islamischen Ländern” investigates if
      the Islamic ethics related to business and economics could
      offer a solution to deter future financial crises. For this
      purpose, we investigate the principles of Islamic business
      ethics and Islamic business law. Our analysis shows that the
      principles of Islamic economic ethics resemble the objectives
      of the social market economy model. We further comparatively
      analyze the economic systems of members of the Organization
      of the Islamic Cooperation (OIC). Although Islamic countries
      have heterogeneous economic structures, we perceive that they
      are somewhat homogenous in their lack of democracy and their
      low levels of rule of law. Moreover, the majority of Islamic
      countries can be categorized as rentier states. This is not
      surprising in countries where religion and state are in close
      alliance. The paper concludes that the principles of Islamic
      economic ethics do not offer a specific solution to prevent
      future financial crises. Paper 4: “Stealing more is better?
      An Economic Analysis of Islamic Law of Theft” is the very
      first attempt towards applying economic analysis to Islamic
      criminal law. Islamic criminal law offers two main
      punishments regarding theft; hadd, a fixed penalty that
      requires the amputation of the offender’s right hand under
      certain conditions and ta’zir, a punishment that is left to
      the discretion of the judge and is less severe than hadd.
      Deterrence is one of the main objectives for Islamic criminal
      law. However, from the viewpoint of marginal deterrence and
      multiplier principles, lesser crimes with low social harm are
      punished severely with hadd while crimes with high social
      harm are punished with ta’zir. Moreover, as the probability
      of detection and sanction is less in crimes of high social
      harm, criminals would have better incentive to commit the
      latter type of crimes. This study implies that if Islamic
      criminal law is introduced in Arab Spring countries in its
      current form, crimes of high social cost are likely to become
      more frequent. A call for a modern reinterpretation and
      re-coding of Islamic criminal law of theft is essential for
      any successful attempt to apply Shari’a in Muslim-majority
      countries. Paper 5 (with Sang-Min Park): “Religious Loyalty
      and Acceptance of Corruption” investigates the relationship
      between religiously-induced internalized values of
      individuals and their specific attitudes regarding the
      acceptance of corruption. The dataset on which our study is
      based was collected by the World Values Survey from 164,209
      individuals in 80 countries surveyed during a period of 13
      years. We propose that individual attitudes towards
      corruption and religion are associated given certain societal
      and institutional contexts. Our results show that although
      there is a negative and statistically significant effect of
      religiosity on the acceptance of corruption on the individual
      level, this effect is small. We find that there is a
      threshold value of religiosity below which corruption is more
      easily accepted by individuals. Our interpretation for this
      result is simple: individuals with minimal religiosity are
      generally less constrained by religious norms; specifically,
      religious norms that are opposed to corruption are less
      binding on these individuals, resulting in them having a
      greater propensity to accept corruption. Religiosity,
      therefore, does lower the acceptance of corruption only when
      it exceeds a certain threshold for a specific individual.
      Paper 6: “The Long-Term Effect of Slavery on Violent Crime:
      Evidence from US Counties” is the first to empirically
      investigate the long-term relationship between slavery and
      violence in USA. Although qualitative evidence shows that
      slavery has been a key factor behind the prevalence of
      violence, especially in South USA (Cash, 1941; Franklin,
      1956; Gastil, 1971; Wyatt-Brown, 1986), no empirical evidence
      supports this claim so far. I propose that the proportion of
      slaves in a certain county in 1860 is positively correlated
      with the rate of violent crimes in 2000. As violence was
      extensively used to control slaves for hundreds of years, a
      culture of violence was formed and persisted through time.
      Extending Engermann and Sokoloff’s hypotheses (1997; 2002), I
      empirically examine two hypotheses: (1) slavery has a
      long-term effect on violent crime. (2) Such long-term effect
      is mainly transmitted through inequality. The results show
      that slavery in 1860 is positively associated with violent
      crime in 2000. Testing the second hypothesis, I find that
      land inequality in 1860 has a long-term significant effect on
      contemporary violent crime.