Strong Property Rights Research Articles

Institutional failure or market failure?

We investigate the effect of the power of creditors, property rights protection, and institutional quality, on bank profits using a panel of 498 banks from 46 countries. Results show that better institutions and stronger property rights protection reduce bank profits, while stronger power of creditors drives up bank profits significantly. Results imply that better institutions and enhanced property rights protection lead to greater flow of credit allowing firms and investors to undertake more profitable ventures. By extension, stronger creditor rights erect steeper barriers to external finance for firms and investors. National indicators of economic freedoms may be more important to lowering the spread than strict creditor rights. Seemingly, credit markets fail when economic institutions fail or when governments intervene into these markets in ways that impede the safety and soundness of financial transactions and private contracting.

Norms of Equality Implicit in Capitalism

Most discussions of capitalism and equality investigate how well capitalist societies conform to some normative notion of equality justified on a basis unrelated to capitalism. By contrast, this paper inquires into what norms of equality are implicit in capitalism itself, which I take to be a system of strong property rights, broad freedom of contract, and minimal economic regulation. After considering how norms of equality can be implicit in conceptual schemes not expressly including such norms, I first argue that, since the legal rules defining capitalism create rights without regard to the parties’ social status, class, race, and similar factors, there is a certain norm of equality implicit in these rules. Often derided as a merely formal equality, such a norm is, in fact, of tremendous practical benefit. Assuming that the legal rules defining capitalism are justified by their being Kaldor-Hicks (KH) efficient, I next argue that the KH-justification for capitalism implies an even stronger norm of equal...

English

English

Does Immigration Impact Economic Freedom?

The economics literature generally finds a positive, but small, gain in income to native‐born populations from immigrants and potentially large gains in world incomes. But immigrants can also impact a recipient nation’s institutions. A growing empirical literature supports the importance of strong private property rights, a rule of law, and an environment of economic freedom for promoting long run prosperity. Comparatively little work has tried to explain economic freedom as a dependent variable. This paper empirically examines how immigration impacts a region’s policies and institutions. We find small but positive increases in institutional quality as a result of immigration.

Value of analyst recommendations

Purpose – The purpose of this paper is to document performance of analysts’ recommendations in the Middle East and North Africa (MENA) region during the period between 1999 and 2010. Design/methodology/approach – This paper uses post-announcement market-adjusted returns as a measure of performance and computes returns for different holding periods. Significant positive (negative) returns following buy (sell) recommendation will indicate value relevance of these recommendations. Findings – The authors show that analysts’ buy recommendations have significant information in them, while their sell recommendations contain no significant information. Significant positive returns are reported following analysts’ buy recommendations and insignificant returns following their sell recommendations. Furthermore, it is also shown that these results hold true only in markets where institutions are relatively strong (common law countries and countries with stronger property rights) and for firms which have lower agency conflicts (firms that pay dividends and have concentrated ownership). For markets where institutions are relatively weak and for firms which have greater agency conflicts, these results show no value in analysts’ recommendations. Practical implications – These results imply that investors should not blindly follow analyst recommendations while making their investment decisions in the MENA region. Originality/value – This paper makes detailed analysis of analyst recommendations in previously unexplored MENA region. Some conditions under which analyst recommendation have no value and some conditions under which they have partial value have also been identified.

Género, Estado Civil Y La Acumulación De Activos En El Ecuador: Una Mirada A La Violencia Patrimonial

Although women in Ecuador have relatively strong property rights, these are not always honored, resulting in their experiencing patrimonial violence. This is one of the reasons that, according to our national household assets survey, the value of women’s assets on average is less than that of men. Nonetheless, there are major differences in the average value of wealth attained depending on a person’s marital status (being much higher among those who are married in comparison to living in a consensual union) and in the size of the gender wealth gap (being greatest among those who are married, widowed or separated).Drawing upon the results of our qualitative field work in three provinces, we illustrate how these gender wealth gaps by marital status may be the result of patrimonial violence.

Was Weber Right? The Role of Urban Autonomy in Europe's Rise

Do strong property rights institutions always help, or might they sometimes actually hinder development? Since Max Weber and before, scholars have claimed that the presence of politically autonomous cities, controlled by merchant oligarchies guaranteeing property rights, helped lead to Europe's rise. Yet others suggest that autonomous cities were a hindrance to growth because rule by merchant guilds resulted in restrictions that stifled innovation and trade. I present new evidence and a new interpretation that reconcile the two views of city autonomy. I show that politically autonomous cities initially had higher population growth rates than nonautonomous cities, but over time this situation reversed itself. My evidence also suggests why autonomous cities eventually disappeared as a form of political organization. Instead of military weakness, it may have been their political institutions that condemned them to become obsolete.

Finance and Property Rights: Exploring Other Directions

There is a consensus that stronger property rights advance financial development. We provide evidence that the reverse hypothesis is also true. We isolate the structural component in the finance–property rights relationship using an instrument for financial development (private credit) based on an index of exposure to foreign crises, in addition to generalized method of moments approaches for panel data. Our results suggest a one standard deviation increase in private credit from its average in 2005 translates into a 0.5‐ to 1.0‐point increase in property rights. To contextualize this, the difference in property rights between Israel and Uruguay, two countries separated by about one standard deviation in the volume of private credit, was 0.67 points.

Globalization and Income Convergence

The income convergence literature suggests that poor countries can catch-up to rich ones conditional on sharing certain characteristics with rich countries. Good institutions such as strong property rights and rule-of-law are key amongst those characteristics. From a policy perspective this is disheartening because economists have little understanding of how to transplant those institutions to developing countries. Worse, good informal institutions seem to be a necessary condition for formal institutions to “stick”. However, to the extent that good institutions can arise as a “spontaneous order” from individuals interacting with one another, allowing for an “open society” may be an effective development policy. To evaluate this proposition we explore whether or not increased globalization fosters income convergence. Based on a panel of up to 184 countries covering the years 1970 to 2009 we conclude that it does. In particular, the social dimension (as opposed to the economic or political dimensions) of globalization is robustly related to income convergence.

Does Immigration Impact Institutions?

The economics literature generally finds a positive, but small, gain in income to native-born populations from immigrants and potentially large gains in world incomes. But immigrants can also impact a recipient nation's institutions. A growing empirical literature supports the importance of strong private property rights, a rule of law, and an environment of economic freedom for promoting long run prosperity. Comparatively little work has tried to explain economic freedom as a dependent variable. This paper empirically examines how immigration impacts a region's policies and institutions. We find small but positive increases in institutional quality as a result of immigration.

Do Elections Delay Regulatory Action?

This paper investigates whether elections delay regulatory action against failing financial institutions in a country with strong institutions and property rights. Exploiting the cross-sectional and time-series heterogeneity in the exogenous electoral cycles of U.S. insurance regulators and governors, we find causal evidence that regulators delay interventions before elections. The extent of the delay is larger before competitive elections and when the regulatory task is assigned to a politician (elected regulator) rather than a bureaucrat (appointed regulator). Regulatory governance mechanisms that constrain the discretion of regulators reduce the politicization of regulatory supervision. The delays induced by elections substantially increase the ultimate costs of failure.

Dimensioning the elephant: an empirical analysis of the IPv4 number market

Purpose – This article aims to quantify the emerging transfer market for internet protocol (IPv4) numbers and provides an initial assessment of factors and policies impacting those transactions. Design/methodology/approach – The research draws on Regional Internet Registry records and conducts basic analysis of stocks, flows and proportions to assess the nature of this emerging market for IP number blocks and explore some of its implications for internet governance. Findings – There is a thriving and growing market for IPv4 number blocks. The market is improving the efficiency of IPv4 address allocation by moving numbers from unused or under-utilized holders to organizations that need them more. Buyers willingly pay for number blocks they could get for free in order to benefit from more liberal needs assessments and stronger property rights. Research limitations/implications – Information about prices is not available and some transfers may take place through leasing arrangements, which are not covered by this paper. Future research should continue to investigate the transfer market, including activity skirting or occurring outside the current RIR policy environment. Practical implications – RIRs should liberalize needs assessments and remove other sources of friction to the transfer market. Originality/value – No known prior assessment of the transfer market has been conducted. The research has value for policymakers and industry decision makers.

Responsibilised Resilience? Reworking Neoliberal Social Policy Texts

Responsibilised Resilience? Reworking Neoliberal Social Policy Texts

Entrepreneurship, Social Capital, and Institutions: Social and Commercial Entrepreneurship across Nations

We model and test the relationship between social and commercial entrepreneurship drawing on social capital theory. We propose that the country prevalence rate of social entrepreneurship is an indicator of constructible nation–level social capital and enhances the likelihood of individual commercial entry. We further posit that both social and commercial entrepreneurial entry is facilitated by certain formal institutions, namely strong property rights and (low) government activism, albeit the latter impacts each of these types of entrepreneurship differently. We apply bivariate discrete choice multilevel modeling to population–representative samples in 47 countries and find support for these hypotheses.

When is There a Strong Transfer Risk from the Sovereigns to the Corporates? -- Property Rights Gaps and CDS Spreads

When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one reason for why international investment in private companies has to take into account the sovereign risk. But the likelihood of a transfer from the sovereign risk to corporate default risks may be mitigated by legal institutions that provide strong property rights protection. Using a novel credit default swaps (CDS) dataset covering both government and corporate entities across 30 countries, this paper studies both the average strength of the transfer risks and the role of institutions in mitigating such risks. We find that (1) sovereign risk on average has a statistically and economically significant influence on corporate credit risks. All else equal, a 100 basis points increase in the sovereign CDS spread leads to an increase in corporate CDS spreads by 71 basis points. (2) The sovereign-corporate relation varies across corporations, with state-owned companies exhibiting a stronger relation. (3) However, strong property rights institutions tend to weaken the connection. In contrast, contracting institutions (protection of creditor rights or minority shareholder rights) do not appear to matter much in this context

Economic Freedom and Economic Performance in Latin America: A Panel Data Analysis

AbstractThis paper performs panel regressions of output per worker, capital intensity, human capital, and total factor productivity in Latin America on measures of economic freedom in five policy areas. Results show that a smaller government raises output per worker in Latin America but not in the OECD. Stronger property rights and a tighter monetary policy also raise output per worker, but greater freedom to trade internationally does not, despite doing so in the OECD. Deregulation lowers output per worker in both Latin America and the OECD. Finally, a tighter monetary policy raises total factor productivity (TFP) but reduces capital intensity in Latin America, while deregulation raises capital intensity but lowers TFP in both sets of countries.

Skipulag fiskveiða og sköpun arðs: Hver eru tengslin?

Hér er þess freistað að varpa ljósi á það hagræna samhengi sem skapar arð í fiskveiðum og útskýra um leið hugtök sem þar koma við sögu. Hugtökin renta og auðlindarenta hafa mjög verið notuð í þessu sambandi. Saga hugtakanna er rakin stuttlega og sá fjölbreytilegi skilningur sem fræðimenn hafa lagt í þau, og hin ýmsu afbrigði rentuhugtaksins skýrgreind. Þá er stuttlega fjallað um hagnað og tengsl hans við rentu. Megináhersla er á að útskýra hvers vegna rangt sé að álykta að tilvist svokallaðrar auðlindarentu hafi alfarið með ástand auðlindar að gera eða aðgerðir stjórnvalda til takmörkunar. Skipulag fiskveiða sem byggir á eignarrétti er mikilvægasta forsenda þess að skapa arð af fiskveiðum og raunar auðlindanýtingu yfirleitt. Nægjanlega sterkar eignarréttur þarf að vera til staðar svo unnt sé að forðast svokallaðan „harmleik almenninga.“ Þá er jafnframt rökstutt að tilvist auðlindarentu byggi fyrst og fremst á hæfileikum þeirra er veljast til að starfa í sjávarútveginum, á hugviti og framtaksemi þeirra, og þeim hvata sem þeir hafa til að hámarka það virði sem hægt er að búa úr afurðum af nýtingu fiskistofna.

Exchange Efficiency with Weak Property Rights

We show that the first welfare theorem obtains independently of the strength of property rights protection. In an exchange setting, a large class of legal rules (what we call generalized liability rules) are exchange-efficient. Included in this class are property rules (generalized liability rules with very large damages Ds), standard liability rules (generalized liability rules with Ds that track the owner's valuation), and even rules which afford possessory interests only very weak protection (generalized liability rules with very small Ds). This result corrects a previous misconception in the literature, and yields the provocative conclusion that strong property rights are not required for exchange efficiency.

Regulatory Arbitrage and International Bank Flows

ABSTRACTWe study whether cross‐country differences in regulations have affected international bank flows. We find strong evidence that banks have transferred funds to markets with fewer regulations. This form of regulatory arbitrage suggests there may be a destructive “race to the bottom” in global regulations, which restricts domestic regulators’ ability to limit bank risk‐taking. However, we also find that the links between regulation differences and bank flows are significantly stronger if the recipient country is a developed country with strong property rights and creditor rights. This suggests that, while differences in regulations have important influences, without a strong institutional environment, lax regulations are not enough to encourage massive capital flows.

A Tale of Two Lochners: The Untold History of Substantive Due Process and the Idea of Fundamental Rights

To say that the Supreme Court’s decision in Lochner v. New York is infamous is an understatement. Scholars remember Lochner for its strong right to contract and laissez-faire ideals—at least that is the conventional account of the case. Whether one concludes that Lochner leads to the judicial activism of Roe v. Wade, or foreshadows strong property rights, the standard account depends upon an important assumption: that the Lochner era’s conception of fundamental rights parallels that of today. From that assumption, it appears to follow that Lochner symbolizes the grave political dangers of substantive due