Strong Rule Of Law Research Articles

Copyright's impact on data mining in academic research

With the proliferation of digital data, data mining (DM)—in the sense of the discovery of valuable structures in large sets of data—is expected to increase the productivity of many types of research. This paper discusses how copyright affects DM by academic researchers. In some territories, academic DM is lawful if researchers have lawful access to input works. In other territories such as the European Union, lawful DM additionally requires specific consent by rights holders. Based on bibliometric data and quasi‐experimental research designs, we show that where academic DM requires specific rights holder consent: (1) DM publications make up a significantly lower share of total research output, and (2) stronger rule of law is associated with less DM research. To our knowledge, this study is the first to empirically document an adverse effect of intellectual property (IP) on innovation under particular circumstances. There is strong evidence that copyright exceptions or limitations promote the adoption of DM research.

Political ideology, cooperation and national parochialism across 42 nations.

Political ideology has been hypothesized to be associated with cooperation and national parochialism (i.e. greater cooperation with members of one's nation), with liberals thought to have more cooperation with strangers and less national parochialism, compared to conservatives. However, previous findings are limited to few-and predominantly western-nations. Here, we present a large-scale cross-societal experiment that can test hypotheses on the relation between political ideology, cooperation and national parochialism around the globe. To do so, we recruited 18 411 participants from 42 nations. Participants made decisions in a prisoner's dilemma game, and we manipulated the nationality of their interaction partner (national ingroup member, national outgroup member or unidentified stranger). We found that liberals, compared to conservatives, displayed slightly greater cooperation, trust in others and greater identification with the world as a whole. Conservatives, however, identified more strongly with their own nation and displayed slightly greater national parochialism in cooperation. Importantly, the association between political ideology and behaviour was significant in nations characterized by higher wealth, stronger rule of law and better government effectiveness. We discuss the implications of these findings for understanding the association between political ideology and cooperation. This article is part of the theme issue 'The political brain: neurocognitive and computational mechanisms'.

Corruption and Development - Why Does Corruption Still Affect Growth?

This paper investigates the relationship between corruption and development. By a study of the determinants of the phenomenon as well as its implications on growth, this paper address the corruption challenge faced by governments and policymakers. Based on the theoretical framework of the political economy of development, I argue that even though the causality is not entirely clear, it is however without debate to say that development is necessarily linked with anti-corruption initiatives. If some counterexamples still exist, it is remarkable to see that the vast majority of developed countries did fight corruption at some point. Still, the path to fight corruption is blurry. It is unlikely for a developing country to get rid of the phenomenon on its own, without external help. Finally, according to the classical studies on the quality of institutions, this paper concludes that a strong rule of law and government effectiveness are among the key factors able to fight a corrupt system.

Corruption, Rule of Law and Democracy: Concepts, Boundaries and Oxymora

Despite heightened attention to corruption, multiple reform efforts, and democratization in the past few decades, corruption remains stubbornly per¬sistent throughout the world. Much of the research on corruption highlights an inverse relationship linking corruption to the rule of law and to democracy. But rather than concentrate on the relationships among these critical variables, this research note focuses its attention on the intense debates in the literature over how to define these key concepts and the competing definitions. Analysis differentiates thin and thick definitions of each of the three concepts, highlights their shared emphasis on limiting state power and their use of vague criteria to demarcate the conceptual boundaries. Amid intense debate, all three essentially ground their li¬mits on state power on rather vague notions of justice, equality, or the common or public good. The main argument here is that in many cases this results in a con¬ceptual overlap and blurred boundaries. Depending on the definition employed, corruption can be seen as conceptually embedded within the notion of the rule of law which, in turn, is encompassed within our understanding of democracy. At one level, these common conceptual components potentially fashion tautologies and oxymora, complicating questions about the theoretical relationships among them: is it even possible for a country to have high levels of corruption and strong rule of law? Or high levels of corruption and yet still be considered democratic? At an empirical level, the conceptual overlap complicates the examination of such theoretical linkages because of endogeneity potential. I illustrate this pro¬blem briefly by noting how in some cases the indices of democracy encompass measures of the rule of law or corruption, and vice versa. The essay concludes by highlighting how disaggregating the concepts raises other interesting questions and analytical challenges.

Predatory Rulers, Credible Commitment and Tax Compliance: How War Does Not Make the State Under Weak Rule of Law

This paper explores an underappreciated factor which can be necessary for warfare to strengthen fiscal capacity. It argues that in contexts with lower respect for the rule of law and worse private property rights, rulers' predatory behavior should incline wealth holders to shelter their wealth and therefore tax compliance should be lower. This will make it unlikely that during armed warfare, when rulers engage in more predatory behavior such as confiscation, there will be any property or income to be taxed and hence states will be unlikely to invest in fiscal capacity. Under stronger rule of law and better private property rights, the constraints on the rulers' predatory behavior should provide higher security for wealth holders and they should be less likely to shelter wealth, bringing higher tax compliance. Such compliance makes it more likely that states can increase fiscal revenues during war and therefore will be more likely to invest in fiscal capacity. These expectations are tested with an original dataset of Ottoman waqfs in modern-day Greece between 1600 and 1912 in addition to annual Ottoman fiscal revenue data. Results indicate that wars increase wealth sheltering under lower rule of law, while it does not under higher rule of law. Furthermore, while wars do not increase fiscal revenues under lower rule of law, they increase fiscal revenues under higher rule of law.

An empirical examination of the impact of country‐level corporate governance on profitability of Indian banks

AbstractThe main aim of the present study is to examine the impact of country‐level corporate governance on the profitability of Indian banks using a sample of 61 banks that is, 42 private and 19 public banks. The study employs descriptive statistics, correlation analysis, regression analysis of two‐way variable intercept random effect model, and robustness checks including robust regression, Generalized Methods of Moments, and Panel Correction Standard Error. The results reveal that country‐level corporate governance has a significant impact on the profitability of Indian banks. Private banks demonstrate better performance over public banks and the effect of country‐level governance on the profitability of private banks is positive and it is better than public banks. Further, the results show that demonetisation has a significant negative impact on the profitability of Indian banks as measured by Return on Assets and Return on Equity, but it also has a significant positive effect in the case of Net Interest Margin. The findings of the current study have considerable implications for regulators, policymakers, bankers, analysts, and academicians. Regulations and several policy measures could be introduced to improve the profitability of Indian banks. To promote greater transparency, better accountability, strong rule of law, and corporate governance, corruption must be eliminated to enhance higher profitability of Indian banks. This paper presents novel evidence linking country‐level corporate governance to the profitability of banks in the context of India, as an emerging economy. Therefore, it bridges an existing gap in the body of literature on the profitability of banks in India.

Reduction in greenhouse gas emissions from national climate legislation

The international response to climate change has been inadequate, but not zero. There are 1,800 climate change laws worldwide. We use panel data on legislative activity in 133 countries over the period 1999–2016 to identify statistically the short-term and long-term impact of climate legislation. Each new law reduces annual carbon dioxide (CO2) emissions per unit of gross domestic product by 0.78% nationally in the short term (during the first three years) and by 1.79% in the long term (beyond three years). The results are driven by parliamentary acts and by countries with a strong rule of law. In 2016, current climate laws were associated with an annual reduction in global CO2 emissions of 5.9 GtCO2, more than the US CO2 output that year. Cumulative CO2 emissions savings from 1999 to 2016 amount to 38 GtCO2, or one year’s worth of global CO2 output. The impact on other greenhouse gases is much lower. Climate change laws are shown to reduce national CO2 emissions by 0.78% in their first three years and 1.79% in the longer term. These reductions add up to 38 GtCO2 of avoided emissions for 1999–2016—equal to a year of CO2 emissions.

The impact of financial development, IFRS, and rule of LAW on foreign investments: A cross-country analysis

The purpose of this study is to examine the effects of financial development, International Financial Reporting Standards (IFRS), and rule of law on foreign investments in 51 advanced and developing countries over the period from 1997 to 2017. The study is motivated by the argument that the lack of portfolio investments results mainly from asymmetric information that can be mitigated by providing reliable and relevant information based on IFRS and a strong rule of law. Using country-level data obtained from the IMF, World Development Indicators, and World Governance Indicators websites, it was found that financial development, IFRS, and rule of law are important for foreign investments. Although empirical analyses indicate that financial development, IFRS and rule of law have individually a significant positive effect on foreign direct investments relative to total investments, this positive effect is mitigated for interactions of these variables, suggesting that international investors would prefer portfolio rather than direct investments in financially developed countries adopting IFRS and an effective rule of law. The findings are important for stakeholders who are interested in financial development, IFRS, rule of law and their impacts on foreign investments.

Expropriations of Private Property for Economic ‘Development’ in the United States: Re-Thinking the Titling and Rule of Law Solutions to Land Grabs in the Global South

Mainstream discourses tend to treat land dispossession as a ‘developing’ country problem that arises due to weak/corrupt legal systems and inadequate property institutions. This article unsettles such discourses by examining expropriations for economic ‘development’ in the United States —a country typically deemed to have strong property institutions and a strong rule of law. Drawing on various examples, I propose that expropriation in the us is neither rigorously conditional nor particularly exceptional. While most ‘takings’ laws are supposed to restrict the State’s power, this restriction hinges on the definition of public use, purpose, necessity, or interest. And in many countries, including the us, these concepts are now defined broadly and vaguely so as to include private for-profit projects. Ultimately, the contents, interpretation, and application of the law are subject to social and political struggles; this point is habitually overlooked in the rule of law ‘solutions’ to land grabbing—. For these reasons, titling/registration programs and policies aimed at strengthening the rule of law, even if successful, are likely to transform rather than ‘solve’ dispossession in the global South.

Resource rents, subsoil wealth and democracy: diagnosing the relationship: 1970-2014

The paper has two goals. The first is to establish if institutions are likely to manage resource revenue effectively and contribute to economic development in countries with greater resource abundance (RA); the second is to estimate a model to explain the mechanisms of the resource curse (RC) during the energy and commodity booms of 1970-2014. Four results explain how the RA harnesses economic development, 1) how natural capital and subsoil wealth levels are associated to a healthier democracy mitigating the RC; 2) how resource rents are negatively associated to institutional quality via stronger rule of law; 3) how economic growth is associated to resource abundance and 4) how excessive resource dependence translates into a negative GDP growth rate but not always. In the short run and across the world the fall in the GDP growth rate is associated to large scale extraction and export of resources. Policy responses are suggested.

DOES ECONOMIC FREEDOM MATTER TO FOREIGN DIRECT INVESTMENT IN SUB-SAHARAN AFRICA?

This paper examines whether economic freedom matters to inward Foreign Direct Investment in Sub-Saharan Africa. A key contribution of this study is that it uses disaggregated measures of economic freedom from the Heritage Foundation and the Fraser Institute to unveil which components of economic freedom matter for inward FDI in a sample of 40 SSA countries during the 1997-2016 period. The estimation is done using panel data models with fixed and random effects. The results indicate that higher overall economic freedom is a key determinant of inward FDI in SSA. However, there is clear evidence that it is regulatory efficiency (business, labor and monetary freedom), fiscal freedom (low tax burden), market openness, market size, trade openness, and strong telecommunications infrastructure that are the key factors in attracting FDI in SSA. While monetary freedom (price stability) is important, financial freedom (banking and financial sector independence) or investment freedom seem less critical. Results on trade freedom suggest that SSA tends to attract tariff-jumping and efficiency-seeking FDI. There is no consistent evidence that stronger rule of law and property rights really matter for inward FDI in SSA. It appears that FDI tends to flow to SSA countries that have lax property rights protection.Keywords: Foreign Direct Investment, Economic Freedom, Sub-Saharan AfricaJEL Classifications: C33, F21, O43, N27DOI: https://doi.org/10.32479/ijefi.9597

Fiscal transparency, legal system and perception of the control on corruption: empirical evidence from panel data

This study analyzes the effects of fiscal transparency and legal aspects on the perception of the control on corruption. Our argument is that fiscal transparency can reduce information asymmetry and, thus, the existing discretionary power of public officials, politicians and legislators. In addition, we also argue that fiscal transparency and a strong legal system might be able to increase the expected cost of corruption and, consequently, the deterrent effect against corruption, once it increases the probability of corrupt officials, politicians and legislators being caught, representing important aspects able to increase the perception of the control on corruption. Based on a sample of 82 countries for the period 2006–2014 and using panel data methodology, our study provides important practical implications in terms of anti-corruption policy guidelines since the results indicate that more transparent fiscal practices bring beneficial effects in terms of corruption perception. Moreover, the findings indicate that the effect of rule of law on the perception of the control on corruption becomes greater as fiscal transparency increases (the marginal effect of rule of law on this perception increases with fiscal transparency improvements). The findings also reveal that a strong legal system (represented by a strong rule of law, integrity of the legal system and impartial and effective courts that guarantee law enforcement) increases the perception of the control on corruption.

Political Ideology, Cooperation, and National Parochialism Across 42 Nations

Political ideology has been hypothesized to be associated with cooperation and national parochialism (i.e., greater cooperation with members of one’s nation), with liberals thought to have more cooperation with strangers and less national parochialism, compared to conservatives. However, previous findings are limited to few – and predominantly western – nations. Here, we present a large-scale cross-societal experiment that can test hypotheses on the relation between political ideology, cooperation, and national parochialism around the globe. To do so, we recruited 18,411 participants from 42 nations. Participants made decisions in a prisoner’s dilemma game, and we manipulated the nationality of their interaction partner (national ingroup member, national outgroup member, or unidentified stranger). We found that liberals, compared to conservatives, displayed slightly greater cooperation, trust in others, and greater identification with the world as a whole. Conservatives, however, identified more strongly with their own nation and displayed slightly greater national parochialism in cooperation. Importantly, the association between political ideology and behavior was significant in nations characterized by higher wealth, stronger rule of law, and better government effectiveness. We discuss the implications of these findings for understanding the association between political ideology and cooperation.

Extractive Industries and Investor–State Arbitration: Enforcing Home Standards Abroad

Extractive industries can bring much-needed jobs to remote locations in developing countries. At the same time, there are too many examples where extractive projects bring environmental degradation and human rights violations. Some research has pointed out that the difference between an extractive project that brings positive spillovers for communities and one that destroys communities and poisons the environment is a strong rule of law. However, developing countries often lack strong legal institutions and have high levels of corruption. Furthermore, remote locations are usually the last safe haven for vulnerable populations stricken by poverty. This essay argues that, given these circumstances, home states have a responsibility to do more to control their outward investors, particularly regarding extractive industries. The essay concentrates mostly on Canadian mining companies given the plurality of conflicts involving them and a developing country. The essay will also analyze current efforts at the home state level to rein-in the conduct of extractive industries abroad and advise where they may fall short.

Chief executive officers' dispositional optimism, host country's rule of law, and foreign market equity mode choice of Ghanaian small and medium‐sized enterprises

AbstractDespite a growing interest in the influence of managerial characteristics on firms' strategic decision‐making process, scholarly knowledge is limited with regard to how and when psychological attributes of executives affect firms' foreign entry mode decision. Building on behavioral decision‐making theory, we address this gap by investigating the effect of chief executive officers' (CEOs') optimism on firms' foreign market equity mode choice. In addition, we examine the moderating influence of the host country's rule of law on this relationship. Using primary data from 227 small and medium‐sized enterprises (SMEs) in Ghana, we found that increases in the levels of CEOs' optimism are related to the increases in preference for equity entry mode. This relationship is amplified when CEOs perceive the host country to have stronger rule of law. The findings have theoretical, managerial, and policy implications for SMEs' foreign market entry mode strategy.

Real Effects of PCAOB International Inspections

ABSTRACT This paper examines the effect of the Public Company Accounting Oversight Board (PCAOB) international inspection program on companies' financing and investing decisions. Difference-in-differences regression estimates suggest that companies respond to their auditor receiving a “deficiency-free” inspection report by issuing additional external capital amounting to 1.4 percent of assets and increasing investment by 0.5 percent of assets. These effects are larger for (1) financially constrained companies and (2) companies located in countries where there is no regulator or the regulator does not conduct inspections. Further, the effect on financing decisions is stronger in countries with (1) low corruption, (2) strong rule of law, and (3) high regulatory quality. Descriptive evidence suggests that inspections increase the use of financial covenants in debt contracts, which is likely one of the mechanisms through which inspections generate real effects. This paper documents the value of PCAOB inspections in mitigating financing frictions for non-U.S. companies. JEL Classifications: D8; D25; G15; G31; G38; M4; M41; M42. Data Availability: Data are available from the public sources cited in the text.

The Effect of Military Spending on Economic Growth in the Presence of Arms Trade: A Global Analysis

Military spending is not considered a productive activity that can contribute positively to GDP, however It effect indirectly through decreasing the risk and provide stability, moreover since its considered a major expenditure in many countries, it could indirectly affect the economy by increasing income level as well as production of military goods and service. This study explored the fact whether economy grows with the rise of military spending or vice versa. The research work comprises of various independent variables including military spending, and explored their effect of on economic growth and per capita income over 85 countries for the last 20 years i.e. from 1998 to 2017. To determine the defense-economic growth relationship, we employed GMM technique. Models suggested that the impact of defense expenditure (DE) on economic growth is negative since left less money to invest in other areas like infrastructure, health, education and production of routine goods. One notable change depicted in the interaction effect of military spending and arms exports, it have a positive and significant effect, showing a positive complementarities between the two. This shows that military spending itself have a negative effect but if it is complemented by arms exports, that spending turns favorable for GDP in both the models. Hence in most refined model, it is clearly evident that arms exports were not only good for GDP level and growth, but it would also make the military spending in favorable to economy. Hence, results imply that for developed countries, military spending in the presence of arms export is an effective foreign policy tool to securing economic growth and maintaining political stability and strong rule of law.

Local sourcing in developing countries: The role of foreign direct investments and global value chains

Abstract The local sourcing of intermediate products is one the main channels for foreign direct investment (FDI) spillovers. This paper investigates whether and how participation and positioning in the global value chains (GVCs) of host countries is associated to local sourcing by foreign investors. Matching two firm-level data sets on 19 Sub-Saharan African countries and Vietnam to country-sector level measures of GVC involvement, we find that more intense GVC participation and upstream specialization are associated to a higher share of inputs sourced locally by foreign investors. These effects are larger in countries with stronger rule of law and better education.

Assessing mutual trust among EU members: evidence from the European Arrest Warrant

ABSTRACTInternational cooperation on criminal justice requires mutual trust: a belief that the partner's legal system functions adequately and adheres to fundamental norms. The European Union builds its judicial-cooperation efforts on a presumption of mutual trust: EU members are assumed to trust each other's justice system since they share a commitment to human rights and the rule of law. Skeptics argue, however, that such trust does not really exist given the wide variation in legal standards and practices across Europe. Yet such skepticism has not been supported by systematic evidence. This article seeks to offer such evidence and to quantify the impact of the lack of mutual trust. It does so by examining the record of British and Irish participation in the European Arrest Warrant: a fast-track process of surrender of fugitives between Member States. We find that judicial authorities in Britain and Ireland deviate from the mutual-trust presumption: they accord a more favorable treatment to Member States with a stronger rule of law or a better human-rights record – and this considerably affects the rate of surrenders. This finding offers important implications for the EU's justice policy and for understanding cooperation against crime more broadly.

Status Climbing vs. Bridging: Multinational Stakeholder Engagement Strategies

Multinational corporations seeking to overcome the “liability of foreignness” through partnerships with stakeholders in their overseas markets face an important tension in choosing between two alternative strategies. Firms who build relationships with high-status local stakeholders may experience increased cooperation and reduced conflict with other stakeholders. However, the short-term benefits of this status climbing strategy may be difficult to sustain because stakeholders with low-status, particularly those outside the formal political structure, are more likely to increase their conflict as the firm becomes increasingly distant from them. An alternative strategy of bridging structural holes in the host country stakeholder network also faces theoretical limits as access to scarce information and resources is likely to engender conflict with other stakeholders. The status climbing strategy is more attractive where insider connections dominate (i.e., the rule of law is weak) while the bridging strategy is more attractive in countries with stronger rule of law. In other words, we show that as the rule of law strengthens, multinational entrants focus more on what they know rather than whom they know. Our analyses use a hand-coded data set of almost 52,000 media-reported stakeholder interactions that capture the network of relationships among 4,623 stakeholders from 19 gold-mining companies operating 26 mines in 20 countries, and the evolution of these networks from 1993 until 2008.