Third-party Enforcement Research Articles

Constructing regulatory regimes for sustainable development: commitment to resolve, clarity, and reasonableness

ABSTRACT To be effective, a regulatory regime for sustainable development must demonstrate to the regulated entities its resolve to attain regulatory goals while avoiding an arbitrary exercise of authority. Yet many developing countries lack the robust political-administrative institutions to construct and maintain such regimes. The environmental reform in Guangdong, China, shows how, with underdeveloped formal political-administrative institutions, the regulatory regime must demonstrate commitment acts, including transparent enforcement, compliance benchmarking, expectation pacing, and third-party enforcement. These acts help, over time, to maintain enterprises’ perceptions of the regulatory regime’s resolve, clarity, and reasonableness. By analyzing primary data from extensive fieldwork and survey observations conducted at two separate times, we show that enterprises are more likely to adopt environmental management measures if they perceive higher regulatory resolve, clarity, and reasonableness. Their assurance needs vary at different stages of regime development. Establishing clear expectations matters at an earlier stage when regulatory goals are new and expectations relatively lax. Yet, as expectations become more stringent, maintaining reasonableness becomes essential. In both stages, a perception of resoluteness in enforcement matters.

Strangers’ property

Abstract Why are impartial institutions such as formalized property rights so important for the emergence of impersonal trade? Previous literature has stressed the role of such institutions in providing third-party enforcement to shield strangers from locals’ opportunism. We document the existence of a second mechanism based on the role of formalized property rights in inducing respect for the property of strangers, regardless of enforcement. Ten years after the randomized introduction of formal property rights across rural Benin, we conducted a taking-dictator-game experiment in which participants could appropriate the endowment of an anonymous stranger from a different village. Even if enforcement institutions are absent and peer effects are silenced by design, participants from villages where the reform was implemented took significantly less than those in control villages. We further give consideration to several possible transmission channels and discuss their plausibility (JEL: D02, D91, K11, K42).

G20 and Sustainable Development

G20 has aligned its own development agenda with both global priorities, and the development needs and targets of G20 members. The G20 has an existing framework to coordinate on developmental issues through interactions of specialised ministers from its members. With the adoption of the SDGs, their roles and responsibilities were aligned with the global agenda. The Thus, the G20 provided a common platform for countries to undertake collective actions and learn from each other in making individual progress towards fulfilling the SDGs. In some cases, the G20 process of reviewing individual progress involves self-assessment by countries rather than a third-party enforcement mechanism. While some progress has been made by the G20 members in achieving the goals, both individually and through their collective actions and commitments, no country is on-track to achieve the SDG targets. Of all G20 countries, India ranks the lowest on the SDG index.

Enforcement of work health and safety laws in services for people with disabilities: issues for policymakers and regulators

This article builds on an earlier study of more than two decades of Australian work health and safety prosecutions and enforceable undertakings involving services for people with disabilities that identified lessons for disability service providers. Through a cross case thematic analysis of the 27 cases in the earlier study, we identify systemic work health and safety issues that are beyond the control of individual organisations. We identify seven issues for policymakers and regulators to consider in stewarding the evolution of work health and safety law and practice and which might be pursued by advocacy organisations in seeking change. First, regulators should not ignore work health and safety crimes against people with disabilities. Second, work health and safety interventions should emphasise the prevention of challenging behaviours not just their control. Third, a quadripartite approach - including the voices of people supported - should be adopted in work health and safety policy and legislation. Fourth, there needs to be greater awareness of the scope for third-party advocacy and third-party enforcement. Fifth, funders should at times bear the work health and safety consequences of their decisions. Sixth, legislation should allow beneficial arrangements for supporting people with very complex needs. Seventh, governments should have full legal liability for their criminal acts; the degree of liability of not-for-profits should continue to be decided on a case-by-case basis.

Conflict and social control among cannabis growers

AimsIllegal drug markets are often assumed to be violent and predatory due to the absence of third-party enforcement. While cannabis markets are generally considered to be relatively more peaceful, there has been little investigation of the levels of conflict and victimization among small-scale cannabis growers, particularly under different cannabis policy and enforcement settings. This paper explores prevalence and predictors of conflict and social control among small-scale cannabis growers. MethodsThe data were obtained from an online convenience survey of small-scale cannabis growers from 13 countries (Austria, Canada, Denmark, Finland, France, Germany, Israel, New Zealand, Portugal, Switzerland, United Kingdom, United States, and Uruguay) from August 2020 to September 2021 (N = 5667). Key measures collected included the types of victimization due to cannabis growing, the perpetrators of these predatory actions, reasons for the conflict, and the grower's response to being victimized. Multivariate logistic regression models were used to identify predictors of different types of victimization and social control responses among cannabis cultivators. ResultsMost growers (76 %) never directly experienced violence or other victimization related to their cannabis cultivation. However, about one-quarter of growers had been victimized at some point, mostly involving theft, with physical violence rare. Growing outdoors, growing with others, growing more plants, and being a more seasoned grower increased the risk of victimization. Growers who were motivated by profit were more susceptible to theft. Surprisingly, growers in legal recreational jurisdictions experienced greater levels of theft and violent victimization than growers in illegal jurisdictions. Nonviolent social control responses predominated among the growers, mostly characterized by toleration but also avoidance and negotiation. ConclusionWhile most growers reported no victimization, a substantial minority did so, largely theft rather than violence, and typically did not report employing retaliatory violence. Social control responses were mostly nonviolent. These findings varied under different cannabis policy and enforcement environments. Cannabis legalization does not eliminate opportunities for theft and violence related to cannabis cultivation.

Reputation or court: Individualism, collectivism, and the choice of enforcement mechanism in exchange

Courts and reputation-based enforcement mechanisms are often employed to mitigate the problem of cheating in trade relationships. The choice between these two enforcement mechanisms is closely associated with individualistic/collectivistic cultural dispositions. Nevertheless, the selection of enforcement mechanism and how it relates to the reliability of third-party enforcement remains understudied. I designed a laboratory experiment in which the options for a safe local trade and a risky yet more profitable long-distance trade are available. When conducting Long-distance trade, subjects could employ a formal or an informal enforcement mechanism to oversee the trade relationships. I examined the subjects' choice of enforcement mechanism while controlling for their cultural disposition. Results suggest that those subjects with an individualistic disposition employ the court system (i.e., formal enforcement) more often than their collectivist counterparts when the court system is reliable. A belief elicitation task revealed that those with individualistic cultural orientation perceive new trade partners as more cooperative than their collectivist counterparts when trades are registered in a strong court.

The role of third parties in the enforcement of the Foreign Subsidies Regulation: complaints, participation, judicial review and private enforcement

This article analyses the role of third parties in the enforcement of the Foreign Subsidy Regulation (FSR). It focuses on competitors, customers, and suppliers – market participants directly affected by distortive foreign subsidies – as a special form of third parties. Third parties might have a vested interest in the enforcement of the FSR against subsidy beneficiaries because they could be affected by the distortive effects of foreign subsidies. Third parties may also be of value in the FSR enforcement through detection, involvement in Commission procedures, or through private enforcement measures. Consequently, the article investigates complaints, participation in Commission FSR proceedings, judicial review, and private enforcement in national courts. It draws some conclusions and comparisons with third party enforcement in other areas of EU law, notably EU State aid, competition, merger control and trade law, but it works out the unique approach for third party enforcement of the FSR. Despite the FSR’s gap-filling function, it deviates significantly from third party enforcement in other areas of EU law, as it only provides limited options for such third-party enforcement.

Does flexibility promote the implementation of civil war cease-fire agreements?

Abstract Transition from war to peace often leads to new challenges. Conflict scholars suggest that these challenges lead groups to be unable to commit credibly and suggest mechanisms for decreasing the fear of being the victim, and increasing the costs, of reneging. However, international law and international political economy scholars debate the utility of making agreements flexible. This paper argues that provisions intended to increase the flexibility of agreements are detrimental to implementation because they operate under the assumption that groups are in a repeated game, and because they can lead to an even more severe commitment problem. Using a newly collected dataset on civil war cease-fire agreements, duration analyses suggest agreements with more flexibility-enhancing provisions exhibit a higher likelihood of violations. Although provisions calling for third-party enforcement – a mechanism for reducing fear and increasing costs – seem to decrease the likelihood of violations, this effect disappears when flexibility-enhancing provisions are considered.

Emergence of specialized third-party enforcement

The question of how cooperation evolves and is maintained among nonkin is central to the biological, social, and behavioral sciences. Previous research has focused on explaining how cooperation in social dilemmas can be maintained by direct and indirect reciprocity among the participants of the social dilemma. However, in complex human societies, both modern and ancient, cooperation is frequently maintained by means of specialized third-party enforcement. We provide an evolutionary-game-theoretic model that explains how specialized third-party enforcement of cooperation (specialized reciprocity) can emerge. A population consists of producers and enforcers. First, producers engage in a joint undertaking represented by a prisoner's dilemma. They are paired randomly and receive no information about their partner's history, which precludes direct and indirect reciprocity. Then, enforcers tax producers and may punish their clients. Finally, the enforcers are randomly paired and may try to grab resources from each other. In order to sustain producer cooperation, enforcers must punish defecting producers, but punishing is costly to enforcers. We show that the threat of potential intraenforcer conflict can incentivize enforcers to engage in costly punishment of producers, provided they are sufficiently informed to maintain a reputation system. That is, the "guards" are guarded by the guards themselves. We demonstrate the key mechanisms analytically and corroborate our results with numerical simulations.

Trust intermediary in a cryptomarket for illegal drugs

Abstract Cooperation without third-party enforcement is particularly puzzling in illicit online markets given the anonymity of online exchanges in the ‘dark web’ and the asymmetry of information between buyers and sellers. Most of the literature investigates the effects of reputation systems on sales. Less is known about the role of (semi)institutionalized solutions to trust problems, such as the escrow service, which deposits payments for online purchases with the market platform and releases them only upon confirmation of the item delivery by a customer. We study the effect of such a trust intermediary on sales in a cryptomarket for illegal drugs. Using a large dataset of illegal online transactions, we estimate two sets of fixed effects models predicting the sellers’ choice to offer the trust intermediary and examine the effects of such a choice on sales. Our results indicate that the trust intermediary reduces online drug sales. We explain this finding by showing suggestive evidence that escrow may crowd out traders’ trust and reciprocity. Our findings have implications for theories of the role of institutions in online markets and offer policy recommendations for law enforcement agencies.

Under the Law: Wanted: American educator

A recent series of bills subject educators to fines, or even jail time, for conduct lawmakers find acceptable, such as assisting transgender students with gender transition, offering potentially “harmful” material in school libraries, or teaching “critical race theory.” These laws enable private citizens to sue educators who engage in these activities for damages, essentially acting as “bounty hunters” who enforce the law when the state cannot. Robert Kim discusses the precedents behind such third-party enforcement and considers whether educators’ fears of rampant litigation are overblown.

Understanding Bargaining Behavior during Civil War: How Third-party Enforcement Affects Groups’ Bargaining Offers

ABSTRACT This paper provides a new approach to studying the behavior of groups engaged in civil war termination bargaining by focusing on the commitment problem. Extending the basic Rubinstein bargaining model, the model presented here has the added feature of a reneging option for the stronger group after an agreement is reached. This leads to the prediction that when groups expect the absence of an enforcement mechanism, the stronger group makes a larger concession, while the weaker group makes a more demanding offer, than would be expected according to the relative power dynamic between groups. On the other hand, when groups expect that a third-party peace operator will enforce an agreement, groups’ offers more closely reflect their relative power situation. To illustrate the causal process of groups’ bargaining behavior, five bargaining attempts during Sierra Leone’s civil wars from 1991 to 2002 are examined.

Children across societies enforce conventional norms but in culturally variable ways

Individuals in all societies conform to their cultural group's conventional norms, from how to dress on certain occasions to how to play certain games. It is an open question, however, whether individuals in all societies actively enforce the group's conventional norms when others break them. We investigated third-party enforcement of conventional norms in 5- to 8-y-old children (n = 376) from eight diverse small-scale and large-scale societies. Children learned the rules for playing a new sorting game and then, observed a peer who was apparently breaking them. Across societies, observer children intervened frequently to correct their misguided peer (i.e., more frequently than when the peer was following the rules). However, both the magnitude and the style of interventions varied across societies. Detailed analyses of children's interactions revealed societal differences in children's verbal protest styles as well as in their use of actions, gestures, and nonverbal expressions to intervene. Observers' interventions predicted whether their peer adopted the observer's sorting rule. Enforcement of conventional norms appears to be an early emerging human universal that comes to be expressed in culturally variable ways.

The Credible Commitment Problem in the Third-Party Mediation of the Mindanao Peace Process, 1975–2014

Abstract Negotiated settlements of civil wars are challenging since incompatibilities take a long time to resolve. Many scholars have approached this puzzle by identifying information asymmetry and commitment problems as critical deterrents to resolution. Similarly, this article argues that third-party mediation could improve or worsen the parties’ credible commitment problems, as illustrated in the Mindanao peace process mediation that spanned almost four decades. Following a contingency framework in analyzing third-party mediation, this article analyzes existing reports, statements, and peace process agreements using a process tracing methodology. The article argues that the success of a peace process could be attributed to how mediation resolves the parties’ credible commitment problems, which are evident in three aspects of the peace process: getting the parties to negotiate, the use of mediator leverage, and the promise of third-party monitoring and enforcement.

The future of financial fraud

Is financial fraud becoming a bigger or smaller problem over time? Current empirical approaches to this question generate mixed inferences. As an alternative, I use two theoretical constructs that isolate several factors that motivate fraud, and use them to consider the impact of technological and wealth changes over time. Some changes, such as an increase in anonymity in some financial transactions, facilitate new fraud innovations and increase the possibility of fraud. The COVID-19 pandemic and resulting economic shutdown has fostered major disruptions in relative demands and organizational capital that also increase the likelihood of fraud over the next few years. Viewed over a longer time scale, however, the majority of technological and wealth changes seem likely to increase the use and effectiveness of reputational capital, third-party enforcement, and ethical motivations as fraud deterrents. I predict that, on net, these changes will drive a long-term decrease in the incidence of fraud.

Selling international law enforcement: Elite justifications and public values

International law enforcement is an understudied but indispensable factor for maintaining the international order. We study the effectiveness of elite justifications in building coalitions supporting the enforcement of violations of the law against territorial seizures. Using survey experiments fielded in the USA and Australia, we find that the effectiveness of two common justifications for enforcement—the illegality of a country’s actions, and the consequences of those actions for international order—increase support for enforcement and do so independently of two key public values: ideology and interpersonal norm enforcement. These results imply elites can build a broad coalition of support by using multiple justifications. Our results, however, highlight the tepidness of public support, suggesting limits to elite rhetoric. This study contributes to the scholarship on international law by showing how the public, typically considered a mechanism for generating compliance within states, can impede or facilitate third-party enforcement of the law between states.

Shareholder Stewardship Enforcement

One of the central problems of shareholder stewardship around the world is rendering institutional investors good monitors of their investee companies and improving their accountability to both companies and their own beneficiaries and clients. The co-existence of soft norms (stewardship codes or principles) as well as semi-hard and hard law rules across the globe raises important questions about the future of shareholder stewardship frameworks and their enforcement. In this paper, we investigate this problem focusing on the availability (or not) of strategies to enforce shareholder stewardship. We adopt a broad approach to enforcement mechanisms in the area of shareholder stewardship and set out a simple conceptual taxonomy based on three dimensions. The proposed taxonomy takes into account the nature of the norm enforcer and distinguishes between self-enforcement and third-party enforcement. In the latter we consider public, quasi-public, private, market and social norm-enforcers. These actors may or not be the standard setters of the relevant norms. We then distinguish between formal – in the sense of either (quasi)judicial proceedings or membership/adherence sanctions within stewardship networks – and informal enforcement mechanisms. Finally, we take into account the temporal dimension of enforcement and distinguish between ex ante (monitoring and deterrence) and as ex post compliance. Our starting point is that, for market actors to be able to absorb bottom-up or, most importantly, top-down regulation, flexibility in adapting to best shareholder stewardship practices is needed. Indeed, examining the enforcement mode of shareholder stewardship across 25 countries we confirm that informal enforcement by market actors is the preferred option. Looking forward, we sketch the broad contours of an optimal shareholder stewardship enforcement framework based on our proposed taxonomy. We caution against administrative sanctions and support instead a facilitating role for public and quasi-public actors in two distinct ways. First, public and quasi-public actors can facilitate shareholder stewardship enforcement via membership/adherence sanctions taking place within stewardship networks (such as public tiering) or informal mechanisms (including public information diffusion through annual reports and guidelines, public reputational mechanisms, such as ‘name and shame’, and private dialogue). Secondly, where ultimate investors have suffered damages from deficient disclosure of engagement policies, we support the introduction of a facilitating system of civil claims initiated by public or quasi-public authorities that can serve both restorative-compensatory objectives and public interests. We also advance the importance of promoting and refining enforcement by market and social actors. Our proposed enforcement framework is not intended to be applied in a uniform fashion around the world. Rather its multi-actor, multi-modal and temporally continuous fashion can adjust to any national or supranational framework.

The Future of Financial Fraud

Is financial fraud becoming a bigger or smaller problem over time? Current empirical approaches to this question generate mixed inferences. As an alternative, I use two theoretical constructs that isolate several factors that motivate fraud, and use them to consider the impact of technological and wealth changes over time. Some changes, such as an increase in anonymity in some financial transactions, facilitate new fraud innovations and increase the possibility of fraud. The COVID-19 pandemic and resulting economic shutdown has fostered major disruptions in relative demands and organizational capital that also increase the likelihood of fraud over the next few years. Viewed over a longer time scale, however, the majority of technological and wealth changes seem likely to increase the use and effectiveness of reputational capital, third-party enforcement, and ethical motivations as fraud deterrents. I predict that, on net, these changes will drive a long-term decrease in the incidence of fraud.

Informal Institutions and the Regulation of Smuggling in North Africa

Contemporary writing on North African borderlands invokes the idea of a general, unregulated porosity through which small-scale informal traders of food or textiles move alongside drug smugglers and terrorists. I challenge that conception, demonstrating that the vast majority of smuggling activity is in fact highly regulated through a dense network of informal institutions that determine the costs, quantity, and types of goods that can pass through certain nodes, typically segmenting licit from illicit goods.While informal, the institutions regulating this trade are largely impersonal and contain third-party enforcement, hence providing a direct empirical challenge to common characterisations of informal institutions in political science. I argue that revisiting the characteristics associated with informal institutions, and understanding them as contingent on their political environment, can provide a new starting point for studying institutions, the politics of informality, state capacity, and the regulation of illegal economies.

Diversity, Institutions, and Economic Outcomes: Post-WWII Displacement in Poland

How does an increase in cultural diversity affect state–society interactions? Do institutional differences between heterogeneous and homogeneous communities influence economic activity? I argue that heterogeneity not only impedes informal cooperation but also increases demand for third-party enforcement provided by the state. Over time, the greater willingness of heterogeneous communities to engage with state institutions facilitates the accumulation of state capacity and, in common-interest states, promotes private economic activity. I test this argument using original data on post-WWII population transfers in Poland. I find that homogeneous migrant communities were initially more successful in providing local public goods through informal enforcement, while heterogeneous migrant communities relied on the state for the provision of public goods. Economically similar during state socialism, heterogeneous communities collected higher tax revenues and registered higher incomes and entrepreneurship rates following the transition to the market. These findings challenge the predominant view of diversity as harmful to economic development.