WORKSHOP ON INSTITUTIONAL ANALYSIS
DECEMBER 9-15, 2018
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Impact of Wealth Distribution Systems on Individual Trust
Jefferson A. ARAPOC, David Savage, and Morris Altman
University of Newcastle
Trust is an important aspect in the conduct of human affairs. The presence of trust ensures social interactions to run smoothly even without the existence of formal contracts. Without trust, all kinds of dealings are problematic since everyone eyes each other with doubt. Therefore, trust is essential for efficient economic transactions and serves as a major driver of economic growth and development. While the link between trust and growth has been established, the underlying reason for variances in trust at the national are not clear.
While some research in psychology and economics have identified factors that affect an individual’s trusting behavior, these studies have focused on exogenous factors and the individual’s socio-demographics. Thus far, limited studies have explored it in the context of institutions or social mechanisms, even if social mechanisms play a major role in shaping social interaction. One of the ongoing issues in social mechanisms is how a nation’s wealth ‘should’ be distributed. The exploration of how social mechanisms influence human actions, particularly trusting behavior, can offer new insights and extend the research on trust. Thus, the purpose of this research is to investigate how differing wealth distribution systems impact on individual trust, by exploring the role of social systems and mechanisms on trust elicitation in the conduct of economic transactions.
The study will implement a laboratory experiment that will compare the impact of an Equity and Equality based wealth distribution system. A major point of interest is that these two distribution systems have conflicting social agendas that may lead to subjective value judgements of participants. The experiment has two stages: Firstly, whether or not an equal or equitable wealth distribution affects an individual’s perception of fairness, and; secondly, whether or not this impacts the individuals level of trust.
It is the aim of this experiment to add to the limited literature on social systems and mechanisms and their role in shaping o restricting an individual’s level of trust. Furthermore, by understanding how social systems can influence people’s value judgment we can better inform policy-makers in solving social inequalities and inequities in order to achieve better welfare outcomes.
Is There an Optimal Level of Theft?
University of Rhode Island
Do more thieves discourage theft? The Coase theorem says that well-defined property rights and limited parties to a bargain are necessary conditions to achieve economic efficiency. However, economic efficiency may be possible without strong property rights through the presence of additional parties to the bargaining. An experiment tests whether additional parties improve exchange efficiency in the absence of property rights; as well as the impacts of incomplete information on outcomes. Implementing sequential bilateral parties rather than traditional multilateral parties in Coasean Bargaining contexts with an absence of property rights significantly improves efficiency. In bargaining between two parties, efficiency averages 62%. The sequential addition of a third party to a negotiation increases average efficiency to 86%. Incomplete information does not significantly impact economic efficiency. Experimental evidence about the importance of property rights and future directions for research suggest new tools such as liability rules based regimes and contracting to bring to many environmental issues.
Economic Freedom Impact on Corporate Performance:
The Evidence from Russian Public Companies
Anna BYKOVA, Dennis Coates
National Research University Higher School of Economics
The economic growth of any country depends on firm activities leading to the production of new goods and services. Recent studies suggested that the increasing endowment of firm’s resources is not enough for sustainable growth and provided evidence that it is determined by a large set of drivers, including the business environment and institutional development. As was shown by Dawson (1998) institutions can affect economic activity indirectly through an effect on investment or directly through an effect on total factor productivity. One of the crucial elements of the institutional environment is the degree of economic freedom under which companies form and operate.
Despite the increased number of empirical papers about the relationship between economic freedom and a country’s growth at the macro level, there is still little evidence about the role of economic freedom in affecting performance of individual firms. The study of the influence of institutions on firms is of particular importance for developing countries with low level of institutional development.
In this study, we investigate whether general economic freedom or different components of economic freedom drive firm performance. We try to identify several particular areas of economic freedom impact, which could be considered as institutional drivers of performance.
The dataset for the empirical testing of the hypotheses consists of two pats. First, we use data collected by Coates et al. (2017) about Index of Economic Freedom (EFI) for Russian regions developed by authors. Then, EFI data were combined with the panel dataset on 1094 public companies during the 2004–2014 period collected by members of IDLab HSE.
Taking into account the possible endogeneity of EFI as was described in previous papers (Dialga, and Vall´ee, 2015; Dutta and Williamson, 2016), we use the one-year lag for these variables. A panel data fixed effect model with robust standard errors was implemented.
According to the results, we can for operational efficiency subcomponents of EFI reflecting government impact on an economy and labor market freedom could drive firm efficiency.
Non-Market Transaction Costs and Their Effect
on Performance of SMEs in Mongolia
National University of Mongolia
One of the biggest constraints in the SMEs sector development in Mongolia has been access to finance. However, SMEs’ access to finance considerably improved as a result of recent policy measures. At the same time, several studies highlighted the problems related to the general business environment. Substantial amount of resources is spent by businesses for complying with the government regulations. The study sheds some light on the nature and extent of non-market (compliance) transaction costs in the case of Mongolian SMEs.
The purpose of the study is two-fold. First, using the firm-level data, we aim to measure transaction costs faced by SMEs through all of their business operation stages. We identify direct, indirect and informal cost. Direct costs are defined as monetary costs – e.g., costs of permits – borne by businesses in complying with government regulations. Indirect costs include the time spent by the personnel in dealing with government regulations. Informal costs are associated with bribes and ‘informal payments’ made to the government officials. We estimate the size of transaction costs in absolute terms as well as a share in the sales revenue.
Second, we attempt to estimate the effect of various types of transaction costs on performance of firms. We identify all types of non-market compliance costs including registering a business, tax and customs compliance, licensing and permits, access to finance and infrastructure, and contract enforcement. In particular, we attempt to explain how and why different types of non-market transaction costs affect (independently and in combination with each other) the performance of small businesses. We propose to use the level of sales revenue as a measure of performance, as it indicates the scope of a business and its ability to expand. We employ survey methodology in measuring and testing our hypotheses. Total of 1541 SMEs were surveyed in 2015-2016 based on a stratified random sampling method from a frame of all active registered small and medium businesses in Mongolia. An elaborate instrument of 200+ questions was developed using the methodology presented in Benham et al (2004) on measuring compliance costs of registering a new business.
Do “Stationary Bandits” Promote Economic Growth?
Evidence from Warlords in Early Twentieth Century China
Hong Kong University of Science and Technology
Do warlords, as substitutes for the state or “stationary bandits” in the sense of Mancur Olson, promote economic growth? This paper provides evidence on the warlords’ significant positive effect on China’s economic growth in the early twentieth century. By treating the sudden death of Yuan Shikai (1859-1916), “the Father of Warlords”, as a quasi-natural experiment, I find that firms in counties occupied by warlords (i.e., with at least one garrison there) grew faster than counties without such warlords during the succeeding Warlord Era (1916-1927). To exclude potential reverse causality – for example, the possibility that warlords might choose to locate in counties with better economies for taxation - I use the distribution of the New Army garrisons, the national military forces in the previous empire as an instrumental variable. The instrument is highly correlated with the distribution of warlords because those warlords were former commanders of the New Army and they privatized those armies as their personal forces. Nevertheless, determined centrally based on national defense (e.g. rebellion suppression), the distribution of the New Army garrisons was uncorrelated with local economic conditions. The results of my instrumental variable estimation are consistent with the baseline results. The evidence supports the positive effect of warlords, both directly through investment and indirectly through provision of public goods, (e.g., telegraph systems, railways, and hospitals), reduction of the tax burden, and maintenance of social stability. These results are consistent with the Mancur Olson’s argument that a stationary bandit has an encompassing interest to provide a peaceful order and other public goods in exchange for taxation. The heterogeneous effects of warlords are also examined. The empirical results suggest that the positive effect of warlords is weakened in those counties that (1) were more easily attacked by others, causing warlords to become short-sighted and less likely to promote growth, as Olson argued, and (2) had abundant mineral resources that could be easily exploited without the need to promote broader development, consistent with the resource curse argument.
Natural Resource Shock and State Centralization in Southwest China,
Hong Kong University of Science and Technology
State weakness, defined as the absence of state capacity to effectively regulate economic activities, provide public goods, and maintain order and law, is prevalent in underdeveloped societies. To build the state capacity, the prerequisite is that rulers hold central controls over their territories. In most cases, this requires a transformation from indirect rule to a condition in which the state authorities directly govern the populations and activities within their jurisdictions. Nevertheless, not all the rulers want the centralized power, especially when the military burden is enormous. Many governments across societies historically and contemporarily leave large parts of their territories ungoverned by the state authority, or put it differently, governed indirectly by local intermediaries. This raises a crucial question: what lead states willing or able to centralize controls over their territories?
In this paper, I examine a fundamental problem confronting rulers of almost all political regimes: how to project state’s central power over the whole territory, using evidence from Qing China’s southwest frontier (1661-1735). In contrast to China proper, which were wholly subjected to centralized bureaucratic control, the southwest frontier was primarily ruled indirectly through the pre-existing political institutions of native chieftains during the Qing Dynasty. Exploiting a natural experiment design based on the exogenous price shock of Japanese copper, which was the primary source of Chinese mints, this study shows that the rising price of Japanese copper increased the Qing emperors’ incentive to replace the indirect rule of copper-endowed native chiefdoms with the centralized bureaucratic system. My findings supplement the literature on the indirect rule and state building by suggesting that any shocks or interventions which would increase the benefits of the direct rule would boost the state centralization, with positive implications for state capacity.
The Optimal Rotation of Foresters:
Agency, Contract and Governance in Forest Investment Relationships
John D. FOPPERT
Technical University of Munich, Institute of Forest Economics
How can perpetual-lived investors get the most out of their long-term assets when they have to depend on comparatively short-sighted managers? Specifically, institutional investors have found forestland an attractive asset class, but accommodating institutional constraints and managing transaction costs along the value chain has proven difficult. This study aims to define the optimal contract arrangements for governing the relationship between institutional investors and their foresters and forestry fund managers.
Institutional investors enjoy a natural advantage over other market participants when they invest in long-term assets like forestland. Alignment between production periods and investment horizons creates opportunities to capture drivers of returns inaccessible to early-exiting investors. These long-term investment opportunities are, therefore, often not priced-in to market valuations of private assets, leaving patient investors well positioned to generate significant excess returns. Nonetheless, institutional investors in forestland have generally had difficulty preserving that advantage—and thus capturing those excess returns—when their (human) asset managers make decisions and respond to incentives over distinctly less-than-perpetual horizons.
This early-stage research is part of the broader stream of work on investment chain analysis examining the contract arrangements institutional investors employ (or could employ) to maximize risk-adjusted returns. We focus on natural hardwood forests, where quality distribution is significantly wider and measurement costs are substantially higher than in plantation settings. We analyze the roles of financial and institutional constraints, and of trading- and transaction-costs, in shaping investors’ contracting decisions up and down the forestland investment chain.
We begin with case study research inside investment organizations, mapping flows of information along the investment chain as data and decisions are generated and transmitted. These qualitative insights into established (or evolving) best practices, perceived inefficiencies and observed informational barriers all inform an analytical optimal contracting model. Finally, we aim to test that contract design in a more complex environment than theoretical analysis allows. Using ecological process models and simulated price dynamics, we derive the best silvicultural strategy for each actor in the investment chain, given the payoff functions and information sets various contract arrangements imply. The optimal contract minimizes the discrepancy between the strategy investors prefer and managers choose.
Study on Trade Barrier from the Perspective of New Institutional Economics
Huazhong University of Science and Technology
Trade barrier, as a long-time existing phenomenon in market economic, may cause social problems like monopoly and excess profit from the view of both domestic and foreign scholars. Also, it was considered as a result of market economic failure. In new institutional economics, reasonable trade barrier could reduce transaction costs, because it decreases useless competitiveness and increases the trade quality, but unreasonable trade barrier results increase in costs. Where is boundary of the two? Why does the trade barrier exist and what is its meaning? This study will focus on the reason why the trade barrier exists and how it influences the economic development from the perspective of new institutional economics. In theory, to discuss the impact of trade barrier on total social welfare based on transaction cost and the theory of modern property ownership. In empirical test, by taking differences-in-differences, to distinguish the impact of the enterprise with trade barrier and others on regional economic development based on the data from the Chinese listed company and prefecture-level city, and then make heterogeneity analysis, we found: 1. Trade barrier reduce transaction costs in some degree and promote total social welfare. 2. In empirical test, compared to other enterprises, there is a significant increase in promoting regional economic development from enterprise with trade barrier; it suggests that the trade barrier will help to the promotion of regional economic development. 3. In empirical test, taking DID regression of top3 enterprise with trade barrier and other enterprises, the result shows that the trade barrier may prevent regional economic development. It suggests that impact of the degree in trade barrier on regional development presents inverted U style. Totally, this study holds the view that reasonable trade barrier could promote social economic development by reducing transaction costs and clearing ownership structure. But with the deepening in trade barrier, the transaction costs will gradually increase, and prevent the economic development finally.
Types of Bribes and Firm-Size Distribution
National Council of Applied Economics Research
When do different types of bribes occur? Broadly, bribery can be of two types. It is extortionary when the official creates bureaucratic delays and demands a share of firm’s output, reducing output. It may be collusive where firm pays a fixed amount to the official to avoid output-distorting bureaucratic delays. I write down a model of a bureaucrat (B) and two types of firms (F) heterogeneous in productivity. B can charge an extortionary amount at the risk of getting caught. Profit maximizing F can either pay the extortion or pay a lump-sum transfer. In states, where probability of catching a bureaucrat is high (low), extortion amount is low (high) and both types of firms pay extortion (lump-sum) amount. For a range of probabilities of catching a corrupt B, high productivity firm would pay lump sum and low productivity firm would pay extortion, creating higher variance between firm-output. Thus, firm-output variance will be concave in amount of extortion.
I test the results of the model on a dataset I construct using Annual Survey of Industries of India. For extortionary bribes, I use transmission and distribution losses of states in India (Kocchar et al 2006). I find that the variance of plant-level output in an industry of a state is concave in extortionary bribes of the state. Further, the result is robust to inclusion of other controls such as industry and year fixed effects, product and labor market regulations, state-level income and index of development. Thus, this paper explains a new empirical property of firm size distribution in India, over and above the usual suspects of labor regulations (Besley and Burgess 2002), liberalization (Aghion et al 2011), misallocation (Hsieh and Klenow 2007).
Internal Migration of the Creative Class: The Case of the
Emerging Cyber Industry in the Southern Periphery of Israel
Ben Gurion University of the Negev
There is considerable difficulty for medium-sized cities in the Israeli periphery, such as Beersheba – the 'capital city' of the southern periphery of Israel, to cope with the benefits offered by the bigger and more central cities to a young 'technologist'. This leads to difficulties in building the critical mass of knowledge workers necessary to promote the cyber hub the city is attempting to create.
The study focused on the factors that most strongly influence the residential location choice of "technological" young adults, regarding the spatial dimension of core-periphery. This research uniquely focuses on the period of young adulthood, since this is the critical age for migration. The research also links between the internal migration in a spatial context of core-periphery and the creative class theory. The research method integrates databases that include the Social Survey of the Central Bureau of Statistics and data from the Ministry of the Interior. This will be comprehensive information on the positions of the subject before migration. Another aspect of the research deals with enhancing the willingness to migrate to the periphery through the establishment of a homogeneous neighborhood of 'people like me'.
We use a behavioral approach and rely on data that include: a) questionnaires, b) data from the Social Survey. We surveyed two groups of technology oriented Young Adults (1) from the core (2) from the periphery, and a third group which constitutes a representative sample of the general Israeli population to serve as a control group. Our key questions are: What are the residential preferences of Young adults dealing with technology, and which policy measures should be taken to influence the Creative Class to relocate to the periphery and by that generate regional growth. In the current study we conduct in-depth examination of the factors associated with the Creative Class theory in order to get a broader picture about the residential preferences of technologically talented people.
Magnitude of Transaction Costs in Vegetable Markets?
Empirical Findings from India
Vishnu Shankarrao KEDAR
Institute for Social and Economic Change (ISEC), India
The empirical measurement of transaction costs (TCs) has not kept pace with its theoretical developments. The lack of quantification of TCs has been perceived by economists as a major weakness underlying the TC approach. The focus of existing studies has remained limited to manufacturing rather than farming. There has been limited use of institutional economic framework in understanding the market failure attributed mainly to information asymmetry, opportunistic behavior and the presence of higher TCs. This raises the question of whether we can empirically estimate the magnitude of transaction costs across modern agrifood retail chains and how it varies across different farm size holdings?
This paper makes an attempt in developing conceptual framework for quantification of TCs incurred by farmers participating in modern food retail chains growing vegetable crops. The paper tracks variations in costs incurred for information, bargaining, and monitoring across different modern agrifood retail chains in spot markets in India. The study uses stratified random sampling method for selecting 600 farmers cultivating Tomato and Chili crops in Karnataka, in the Southern parts of India. For resolving selection bias, non-parametric propensity score matching estimates have been used in the study.
The study observes that TCs are significantly higher for modern agrifood retail chains as compared to traditional mode of regulated markets called APMCs. TCs accounted for 14.5% share in the total costs for chili and 13.8% for tomato in the modern retail chain whereas in the traditional chain (APMC) the TCs were less than 5% in both the commodities. Looking at the breakup of TCs, monitoring cost accounted for 65% followed by negotiation costs, 28.7% and information costs, 6.3%, respectively. In a relatively perfect market, in the absence of asymmetric information, TCs reduced substantially by around 50%. If government further strengthens the institution of contract between farmers and modern agrifood retail chains, the TCs would decrease by 32%, incurred by farmers due to opportunistic market behavior. Across various sizes of holdings, TCs were found higher among small size holdings as compared to medium and large holding farmers.
Aggregate Productivity Effects of Shifting Gender Roles
Eui Jung LEE
London School of Economics and Political Science
What are the aggregate productivity effects of changing gender roles within marriage? I focus on the change to the culture prescribing the role of the breadwinner to the husband and that of the homemaker to the wife, between 1940 and 2010 in the United States. To answer this question, I develop a general equilibrium model featuring educational, marital and labor force participation (LFP) choice with home production, in which married women’s LFP as well as married men’s home production are circumscribed by traditional norms. Moreover, I model norms to evolve in response to past female LFP, in the spirit of Fernandez (2013) and Fogli and Veldkamp (2011). The model is estimated to match empirical trends in the US census, while also exploiting World War 2 casualties as a temporary exogenous shock affecting female LFP and consequently, gender norms. In the model, less traditional norms alter aggregate productivity by affecting three factors: a) the efficiency in the allocation of time among married couples across home production and market work, b) the number of marriages, which determines the set of individuals subject to norms, and c) human capital accumulation prior to marriage. These effects may be amplified over time through endogenous cultural change. With the estimated model in hand, I try to quantify by how much aggregate output would be higher or lower in the United States in 2010, had it faced the gender norms of 1940. I will then compare this magnitude to the growth effect of removing the gender wage gap.
Do People Strategically Inflate Project Schedules?
Macquarie Graduate School of Management, Sydney
When establishing a schedule of a business project, planners are usually encouraged to estimate the project duration as accurately as possible, in order to reduce the risk of negative consequences of either underestimation or overestimation of the necessary time. While the underestimation leads to schedule overruns, often associated with cost overruns and dissatisfied project customers, the overestimation usually induces opportunity costs of underutilized or misallocated company resources.
However, in practice, incentives other than operational effectiveness may drive the planners’ decision-making when creating a project schedule. For instance, an individual may have incentives to overrepresent the time he needs to complete a project or a project task to reduce work pace and stress under time pressure. In a nutshell, the duration estimate provided by the project planner does not always reflect his true belief of how long the project will probably take. Instead, it may just capture the maximum amount of time that is believed to be still acceptable by the management or project customer. Strategic overestimation and the resulting inefficiencies are, however, difficult to identify in the daily business environment data, because the project team can adjust the working pace according to the loose schedule and ultimately use up the allocated time and other resources anyway. As a result, the project is delivered on time, which seemingly signals accurate estimation, but in fact, it is delivered later than what was potentially achievable.
In this paper, we experimentally investigate the propensity of individuals to overestimate and subsequently overspend the time to complete a task. Specifically, we conjecture that if only accountable for the accuracy of the estimates and in full control over when the task finishes, individuals strategically inflate their duration estimates and then pace their work accordingly in order to finish the task close to the estimate.
We find that when only estimation accuracy incentives are in place, subjects indeed manipulate with their working pace. However, this manipulation is relatively subtle, as it does not come at the expense of inflated duration estimates or significantly longer actual task duration. We conclude that subjects are generally providing their best guesses as estimates and only start to behave strategically when they realize that they have still enough time to complete the task left.
Institutional Analysis of the Influence of the Judge Rapporteur
on the Judgement of the Supreme Administrative Court of Thailand
Prince of Songkla University
Administrative court is rather a new judicial branch of Thailand, established since 1999. Its institutional setting was borrowing from the French Conseil d’état which some modification. One feature that the system has employed from the French system is the “Judge Rapporteur”, who is also a fully independent judge. Institutional comparable of Judge Rapporteur deviant from the “public rapporteur” of French Conseil d’état, as well as the Advocate General within the European Court of Justice.
The Judge Rapporteur is responsible for presenting a legal opinion on the cases assigned to him. The intention behind having the Judge Rapporteur attached is to provide independent and impartial opinions concerning the court’s cases. The opinions of the Judge Rapporteur are advisory but do not binding the court, but they are nonetheless shall be very influential. Thus, de facto, the final judgement of the court is constraint by his opinion. However, his deliberation of the case raises the dilemma of judicial independence.
The judiciary has to be independent not only from the executive and the legislative powers, but also from internal elements within the judiciary itself. By this definition, judicial independence is put into jeopardy. One of the elements that shall preserve the independence of the court is the secrecy of the deliberations but since the setting procedure request the Judge Rapporteur to deliberate his opinion in front of the panel and parties on a hearing day, therefore institutional setting does not fully insulate the court from his influence.
This research is aims to contribute a more comprehensive understanding of the role of the Judge Rapporteur in the makeup of the Supreme Administrative Court of Thailand. The research will measure the influence of the Judge Rapporteur on the judgments of the Supreme Administrative Court of Thailand through an institutional analysis using a data of the last ten years (2010–2017). The findings will suggest the Supreme Administrative Court of Thailand for policy implication and may answer several questions as regards judicial independence and the relevance of the figure of the Judge Rapporteur, providing a grounded basis for future discussions and judicial reform.
House Prices, Land Property Rights, and Fires:
How Can Institutions Contribute to Hidden Violent Solutions in Cities?
Can institutions set houses on fire? Our research investigates how poor enforcement of land property rights combined to rising real estate value can contribute to the use of alternative solutions, such as fires, in land property rights disputes. As house prices increase around invaded lands or buildings, owners seek to claim them back via legal institutions. However, if courts are slow or tend to favor squatters, fires may arise as a solution to weaken invaders, clear the property and put it back on the real estate market. Using data from the firefighters’ department, advertised house prices and court decisions on repossession disputes in São Paulo, Brazil, we intend to empirically assess the effect of increasing real estate prices on house fires mediated by the efficiency and/or ideological inclination of courts – measuring the latter using time to rule a decision and share of rulings in favor of owners. If our main hypothesis is true, one would expect a larger positive effect of prices on fires when courts take longer to decide or are more prone to favor current occupiers, controlling for relevant geographical and economic factors. Our expected contribution is to shed light on how economic gains might motivate hidden violent outcomes, such as fires, if institutions fail to promptly and clearly recognize land property rights to either de facto or de jure owners. This would be an important result to public policy efforts not only in restructuring judicial assessments of land disputes, but also in designing new urban regulation that reduces conflicts.
Institutions, Railways, and Rural Development in India
Vigyan D RATNOO
University of York
The role of institutions in long run development has been the focus of much research, but identifying and measuring the causal impact remains fraught with difficulties. Most studies rely on Instrumental Variable (IV) approaches but these are often unable to conclusively rule out alternative channels of persistence. This paper uses a Geographical Regression Discontinuity (GRD) design on a unique village level data set from colonial India to estimate the impact of different land tenure types on long run rural development.
At the start of the 19th century, the British administrators in India began to grapple with how to administer revenue systems in newly acquired parts of the Madras province. Following official policy at the time, wherever possible, villages were assigned to large landlords whose tax liabilities were fixed in perpetuity. The lack of a requisite landlord class in the province, however, led to the eventual settlement of around two-thirds of the province as a direct contract between the individual cultivators and the government. This historical quirk meant that villages within a few kilometres of each other were assigned completely different property rights. I argue that the legal confusion and resulting over-extraction of revenue and conflict in the landlord villages has had substantial long run effects that are still visible today, two centuries later.
I build a new village level dataset that links historical census data to modern geo-referenced census data. Exploiting this early 19th century historical quirk in the placement of these land tenures in a small, otherwise homogeneous area, this paper is able to show sizable effects on literacy and public good provision persist into the new millennium. The paper also considers the interplay of institutions and infrastructure projects. The historical placement of railway lines is analysed, with results indicating that the full benefit of the railways for development is likely to be conditional on land tenure type.
Institutional Analysis of Energy Securitization:
Oil and Gas Supply Chains in Canada, China, and Russia
National University of Singapore
Energy security has a wide range of interpretations, and no agreement exists on how it can be best defined. The purpose of this study is to expose the process of constructing energy security issues, or securitization, in the governance of oil and gas supply chains. The study enhances securitization theory through the synthesis of insights from international relations, public policy, and institutional analysis.
Methodological and empirical objectives are pursued through exploration of the central research question: how are oil and gas supply chains securitized? Methodologically, it advances a systematic understanding of securitization processes by creating a theoretical framework that enhances securitization theory. Empirically, it contributes thorough accounts of policy-making in the governance of national oil and gas supply chains in Canada, China and Russia. The three case studies follow the framework and verify the theoretical relationships to ultimately improve its explanatory power.
Securitization is conceptualized as a policy process whereby securitizing actors perceive a governed supply chain as threatened and attempt to alter its performance. Securitizing actors and other policy stakeholders operate within the institutional ecosystem, which comprises a constellation of hierarchically nested (embedded institutions, institutional environment, and institutional arrangements) and horizontally interlinked (independent, complementary, or overlapping) elements. All of these elements are integrated into the theoretical framework, and the following observations result from the analysis:
a securitizing actor originating from the institutional environment is much harder to resist than the one originating from the institutional arrangement governing the supply chain;
in the securitization process, policy actors do not need to share a common definition of a threat or have common objectives as long as there is a shared perception that a threat exists;
if the supply chain is governed by complementary institutions, securitization is less likely to progress than in the case of independent or overlapping institutions
The securitization framework captures a multitude of interdependent variables and clarifies the role of institutions in shaping the behavior of policy actors and the performance of oil and gas supply chains. Finally, the framework can be applied to other areas of non-traditional security, such as food, migration, and environment.
The Effect of ILO Conventions on Labor Standards: The Structural Change
Julia E. SAMWER
University of Hamburg
How do labor standards develop in countries after international labor conventions are ratified? Previous studies suggest that despite high ratification rates, the protection of labor rights is not enhanced. Using panel data on both de jure and de facto labor conditions for 132 countries from 1981 to 2011 this question is addressed empirically. The International Labor Organization (ILO) underwent a major structural change in 1998 from a complex set of conventions to a more active promotion of core labor principles. This paper analyzes the effects of the new approach and explores country differences in more detail. I find that the organizational change has overall not improved labor standards, but that ILO conventions can have positive effects in transition countries. The results indicate a statistically significant decrease in the level of labor standards (de jure and de facto) over time after ILO conventions are ratified. The structural change of the ILO did not improve results but rather leads to an aggravation of that effect. These findings confirm that ILO conventions might trigger an adverse effect on labor rights. It emphasizes the assumption that the ILO sacrifices its objectives for high rates of ratification. Countries might willingly enter conventions for mere signaling effects, but with little incentives to change actual labor laws and practices. The results clearly indicate that the responsiveness of a country to ILO conventions differs according to the regime type. ILO conventions can have positive effects especially in transition countries that are neither established democracies nor autocracies. These results hint towards the fact that international treaties can have an effect on domestic labor standards, but only if the country wants to use them for internal purposes. The limited and partially adverse impact of conventions on labor rights might question the future role of the ILO, but also points to a general weakness of international human rights treaties.
Inclusive and Extractive Institutions: Cross-Country Assessment
Saint Petersburg State University
Institutions are one of the factors of economic development and, consequently, a growth of people’s welfare. According to Acemoglu D. and Robinson J. theory of inclusive and extractive institutions the former encourage economic development and growth in many countries and the latter, on the other hand, prevent them. However, the assumptions made by Acemoglu D. and Robinson J. have some weaknesses which are discussed in this paper.
By analyzing the institutional environment of developed and developing countries, this paper seeks to clarify inclusive and extractive institutions as well as their quantitative assessment and analysis, in order to identify potential relations between countries’ institutional environment and main indicators of economic development.
For that aim, a methodology is proposed in the research for evaluating political and economic institutions based on expert assessments from the Global Competitiveness Report. This paper assesses the institutions of countries divided into 3 groups based on the Acemoglu D. and Robinson J. theory: 1) countries with prevailing inclusive political and economic institutions, 2) countries having mostly extractive political institutions, partially inclusive economic institutions and highly centralized state power and 3) countries having mostly extractive political and economic institutions and weak state power.
This paper estimates institutions of 31 countries and applies a correlation analysis confirming a linear connection between political and economic institutions themselves and between these institutions and such economic development indicators as country’s income level, GDP, and economic growth. Even though the correlation does not imply causation, the findings of this study could help us to get a more accurate picture of how institutional environment and economic development are linked and become a possible basis for solving the problems of unbalanced development that has affected many countries.
Political Turnover and Primary Land Market in China
Xiang SHAO, Zhigang Tao, Hongjie Yuan
Using land transaction data and hand-collected provincial official data in China, the paper studies how the political turnover affects the land transfer in China. We find that when an official is assigned as the new Party Secretary of the province, larger shares of industrial land in the newly-served province are purchased by firms from previously-served province. Although provincial Party Secretary appointment is quite random, we conduct two placebo tests to eliminate biases from potential confounding factors: we find no significant result using secondary land transaction; we find the larger land transaction deals from previous province are conducted with non-English auction. Both placebo tests provide evidence that our main results are driven by political influence. In addition, we show that our result can be best explained by the career concerns rather than corruption. We find no significant result with residential and commercial land transactions, which are more lucrative. Transaction from officials’ previous province do not exhibit lower price. Moreover, we find larger effect of our main result for party secretaries who have more promotion potential.
The Role of the Judiciary in Providing Standards of Evidence in Antitrust: The Experience of Russia
National Research University Higher School of Economics
The process of antitrust law implementation includes several stages and agents involved in making a final decision on a particular precedent. The system is highly influenced by the efficiency of legal and economic proceeding during the judicial discussion. In fact, one of the key factors of the antitrust enforcement quality is the efficiency of judges in antitrust cases. It is generally agreed that “efficiency of judges” is measured by such indicators as cases’ appeals and time spent on case consideration.
This paper investigates the factors, affecting the efficiency of judges in antitrust cases. Using a unique dataset of the appeals of infringement decisions from 2008-2015 this paper empirically examines the determinants influencing the quality of judicial antitrust enforcement in antitrust investigations against Russian companies.
The study revealed that the Russian judicial system, traditionally referring to institutionally transitional countries, has a number of features. It is important to take into account not only the generally accepted beliefs about the lack of economic knowledge or independence of judges in relation to state bodies, but the fact that the results observed can also be explained by the peculiarities of transitional justice, including continuous improvement of competition law. Also, we need to emphasize the special importance of judges’ specialization in the practice of dealing with antitrust law violation cases from the point of their specifics, which requires a comprehensive economic expert assessment, while thinking about improvement of the quality of the institutional environment for the legal regulation of antitrust policy.
The evidence supports the conclusion that explanation of decision-making of judges is complex, but refutes the widespread belief in the inability of judges to promote rule of law in transition economies.
Are Large Scale Land Acquisitions in Nigeria a Case of Land Grabbing?
University of Turin and University of Ghent
Initiated by Comprehensive Africa Agriculture Development Programme and governed National Agricultural Investment Plans, New Green Revolution lead to large scale land acquisition (LSLA) across Africa. This process has been accompanied by numerous policy measures aimed at cutting costs of transaction and use of legal system such as liberalisation of access to farmland, enabling local governors to rent land, promotion of certified seeds and implementation of tax reforms.
In this paper I use balance checks and difference-in-differences strategy on World Bank LSMS-ISA panel data to study the conditions of attraction and five year effects of occurrence of LSLA in Nigeria from 2008 to 2010. Commentators disagree whether this type of emergence of exclusive alienable property rights in environments of customary law commons arrangements is solely attracted by rise of land value over transaction cost threshold or it is related additional institutional conditions such as registries, access to finance, enforceability of laws and coherence with informal customary rules. They in turn do not agree if the process leads to establishment a stronger land tenure system for surrounding farmers, increasing their use of technology and time spent working wage or investors collude with local political elites to disregard existing rights of traditional farmers and thus lead to negative spill over effects.
Initial findings draw a more complex picture according to which LSLAs occur in locations with slightly better quality of land but lower access to finance. While they exert a significant positive effect on value and area of fields of plots of surrounding the location of LSLA, they also lead to surge in formalization of rights to sell the same plots by multiple users. LSLAs significantly decrease time spent by local population in work for wage and increase its counterpart related to non-agricultural household work which might be connected to their significant effect on use of technology and fall of prices of a number of staple foods. In all this, above mentioned institutional conditions do not codetermine the effects of LSLAs significantly, but at the same time these effects are only significant if we control for those conditions.
The Balance of Power Among Economic Elites
and the Establishment of Power-Sharing Institutions
What is the effect of intra-elite competition on the establishment of political power-sharing institutions? Recent work on the creation of institutions suggests that the composition of elites has consequences for the design of legal frameworks, tax regimes, and electoral systems. We contribute to this literature by explaining variation in the establishment of political power-sharing institutions, particularly horizontal and vertical accountability mechanisms. Different from previous elite-based arguments, we propose that it is not the mere presence of competition among elite groups, but the balance of power between them, that explains the establishment of political accountability mechanisms. We use an original measurement on geological resource diversity as an instrument for intra-elite balance of power, as proxied by levels of market concentration, to estimate the latter’s effect on institutional design. Our cross-national analysis shows that where geological resources are more diverse, competition between similarly powerful groups within the economic elite is more likely to emerge, leading ultimately to the establishment of accountability mechanisms that allow elite groups to protect their diverging interests. We illustrate the inter-temporal dynamics of our argument through two historical case studies.
Archetypical Barriers to Climate Change Adaptation and Forest Management in Central Asia: Insights from an Experimental Study
Xiaoxi WANG and Uland Kasymov
Humboldt University of Berlin
and Potsdam Institute for Climate Impact Research
The study investigates individual and collective decisions of forest resource users in the context of adaptation to climate change and implementation of the Joint Forest Management reform in Tajikistan. The authors combine the novel methodological approach “Archetype analysis in sustainability research” with a framed field experiment to support policy-relevant research that explicitly addresses institutional choice and cooperation in adaptation to climate change in the forest management context. The authors hypothesize a set of archetypical barriers to climate change adaptation relevant for the study context, and test them in an experimental setting by evaluating the relationships between key diagnostic and outcome attributes of the socio-ecological system. The role of endogenous rules, communication, transaction costs, as well as environmental and institutional uncertainties in forest use are analysed and discussed in order to validate and refine the archetype clusters “Coordination gap among users” and “Uncertainty”. The experiment results indicate that the rotation rule and quota rule have significant impact in reducing timber harvest, compared with the random rule. By controlling individual characteristics, the study finds that environmental uncertainties have significant and positive effect on timber harvest, while rotation rule and the random rule are able to mitigate the environmental uncertainties.
Optimism and Pessimism in Bargaining and Contests
University of California – Irvine
Some empirical patterns in conflict situations like legal disputes cannot be explained by risk attitudes in outcomes alone. Therefore, I use the rank dependent expected utility model that combines risk aversion (or neutral) in outcomes with non-linear weighting functions on probabilities to capture the effect of risk-seeking in probabilities, which is interpreted as optimism. I obtain several stylized patterns noted in the legal literature, including the Priest-Klein hypothesis, the filing of negative expected value suits, and the rejection of reasonable settlement offers. My model shows that optimism enhances one's bargaining power. However, at the same time, optimism may cause one to prefer costly contests with low winning probabilities over more favorable settlements. When efforts are endogenized using a contest success function, my model provides an alternative explanation to the 50\% plaintiff winning rate in litigations -- if litigation winning rate is largely determined by efforts, when two legal decision-makers have similar degrees of optimism, they will choose to expend similar effort in litigation, resulting in a 50\% odds of winning for each. My model further shows that an over-optimistic party's best response effort in contests is low, even when their winning probability can increase with higher effort. All these are consistent with risk-seeking preferences in probabilities. On the other hand, when faced with an optimistic opponent, a party who is risk-neutral in both outcomes and probabilities may find litigation more favorable than settlement. Finally, I find that one's best response efforts in both winner-take-all contests and in settlements are highest when the individual is moderately optimistic, and such efforts decrease quickly as their attitude diverges to either direction.