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The Emerging Legal Framework for Private Sector Development in Viet Nam's Transitional Economy

A major objective of Viet Nam's transition to a market economy has been to reactivate the private sector in a mixed economy. Several new laws have been introduced in the past five years to implement this policy and to create an enabling environment for the private sector. Thuyet reviews some of the more important laws and regulations that affect Viet Nam's private sector activities, including laws on real property, intellectual property, companies, domestic investment, foreign investment, ban...

Fiscal Responsibility Legislation And Fiscal Adjustment: The Case Of Brazilian Local Governments

This paper discusses trends in fiscal adjustment in Brazil since the 1990s, with particular emphasis on the strengthening of institutions for fiscal policymaking, and its effect on local government finances and their ability to invest in infrastructure building and upgrading. Although fiscal adjustment, which is ongoing, has taken a toll on the government's ability to finance much-needed infrastructure investment, it is not the only culprit. A lack of budget flexibility, against a backdrop of...

Hungary's Bankruptcy Experience, 1992-93

Hungarv adopted a tough new bankruptcy law in late 1991 that took effect on January 1, 1992. It required managers of firms with arrears over 90 days to any creditor to file for either reorganization or liquidation within eight days (the so-called "automatic trigger") and provided a rather sympathetic framework in which to do so. The result: Since January 1992, more than 25,000 cases have been filed - far beyond lawmakers' expectations. Both positive and negative views about the law have beeni...

Trade, Inequality, and the Political Economy of Institutions

We analyze the relationship between international trade and the quality of economic institutions, such as contract enforcement, rule of law, or property rights. The literature on institutions has argued, both empirically and theoretically, that larger firms care less about good institutions and that higher inequality leads to worse institutions. Recent literature on international trade enables us to analyze economies with heterogeneous firms, and argues that trade opening leads to a reallocat...

Legal Knowledge And Economic Development: The Case Of Land Rights In Uganda

Mixed evidence on the impact of formal title in much of Africa is often used to question the relevance of dealing with land policy issues in this continent. We use data from Uganda to assess the impact of a disaggregated set of rights on investment, productivity, and land values and to test the hypothesis that individuals? lack of knowledge of the new law reduces their tenure security. Results point towards strong and positive effects of greater tenure security and transferability. Use of exo...

Do Minimum Wages in Latin America and the Caribbean Matter? Evidence from 19 Countries

Despite the existence of minimum wage legislation in most Latin American countries, there is little empirical evidence demonstrating its impact on the distribution of wages. In this study, cross-country data for 19 Latin American and Caribbean (LAC) countries is analyzed to gain an understanding of if and how minimum wages affect wage distributions in LAC countries. Although there is no single minimum wage institution in the LAC region, we find regional trends. Minimum wages affect the wage d...

Tariff Retaliation versus Financial Compensation in the Enforcement of International Trade Agreements

We analyze whether financial compensation is preferable to the current system of dispute settlement in theWorld Trade Organization that permits member countries to impose retaliatory tariffs in response to trade violations committed by other members. We show that monetary fines are more efficient than tariffs in terms of granting compensation to injured parties when there are violations in equilibrium. However, fines suffer from an enforcement problem since they must be paid by the violating ...

Promoting Access to Primary Equity Markets. A Legal and Regulatory Approach

This paper examines legal and regulatory measures that can be taken to promote access to the primary market in emerging market economies. While capital market development depends on many factors including, primarily, a favorable macroeconomic environment, an appropriately designed and effective legal and regulatory framework can help to encourage market growth and to increase access to finance for all companies, including small-and-medium size enterprises. In this paper we identify the basic ...

Infrastructure and Public Utilities Privatization in Developing Countries

The paper analyzes governments' tradeoff between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consumers. In developing countries, tight budget constraints imply that privatization may be optimal for low profitability segments. For highly prof...

Tight Money in a Post-Crisis Defense of the Exchange Rate: What Have We Learned?

Critics of the tight monetary policies pursued by some of the countries hurt by the 1997 Asian financial crisis have questioned the presumption that tight money can help sustain the value of a currency. The issue is actually an empirical one because theory does not unambiguously predict the effect of tight money on the exchange rate under the circumstances faced by the crisis countries. This article reviews the empirical research and shows that the evidence does not yet support strong stateme...

Resolution of Failed Banks by Deposit Insurers Cross-Country Evidence

There is a wide cross-country variation in the institutional structure of bank failure resolution, including the role of the deposit insurer. We use quantitative analysis for 57 countries and discussion of specific country cases to illustrate this variation. Using data for over 1,700 banks across 57 countries, we show that banks in countries where the deposit insurer has the responsibility of intervening failed banks and the power to revoke membership in the deposit insurance scheme are more ...

Managing the Effects of Tax Expenditures on National Budgets

Tax expenditures, in the form of tax provisions, are government expenditures. They are conceptually and functionally distinct from those tax provisions whose purpose is to raise revenue. Tax expenditure programs are comparable to entitlement programs. Therefore, tax expenditures must be analyzed in spending terms and integrated into the budgetary process to ensure fiscal accountability. In addition, tax expenditures must be audited for performance and the information must be published (with c...

Financial System Structure in Colombia: A Proposal for a Reform Agenda

The objective of this policy paper is to identify and propose high-level legal and regulatory reforms to Colombia's financial system structure that would enhance efficiency and/or mitigate risks. Five specific and four general reforms are proposed and evaluated based on their compatibility with the aforementioned objectives, ease of implementation, impact, and consistency with international practice. Potential implications for supervision and competition, as well as likely criteria for develo...

Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services

Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services. The structures and processes established within an Instiution Offering Islamic financial Services (IIFS) for monitoring and evaluating Shariah compliance rely essentially on arrangements internal to the firm. By being incorporated in the institutional structure, a Shariah Supervisory Board (SSB) has the advantage of being close to the market. Competent, independent, and empowered to approve new Sh...

Access to Financial Services in Zambia

Despite the deep financial sector reforms undertaken in Zambia in the early 1990s, the expected benefits of establishing a market-based banking system have not materialized yet. In 2005, the banking system continued to be small and under-developed. Credit to private sector by banks represented only 8% of GDP in 2005, which is slightly lower than the level registered in 1990. As in the early 1990s, only large corporations and a few small and medium enterprises have access to credit in 2006. Mo...

Foreign Bank Participation and Crises in Developing Countries

This paper describes the recent trends in foreign bank ownership in developing countries, summarizes the existing evidence on the causes and implications of foreign bank presence, and re-examines the link between banking crises and foreign bank participation. Using data on the share of banking sector assets held by foreign banks in over 100 developing countries during 1995-2002, the results show that countries that experienced a banking crisis tended to have higher levels of foreign bank ...

Beyond legal origin and checks and balances: Political credibility, citizen information and financial sector development

The existing literature emphasizes and contrasts the role of political checks and balances and legal origin in determining the pace of financial sector development. This paper expands substantially on one aspect of this debate: the fact that government actions that promote financial sector development, whether prudent financial regulation or secure property and contract rights, are public goods and sensitive to political incentives to provide public goods. Tests of hypotheses emanating from t...

A Survey of Securities Laws and Enforcement

We examine the theoretical and empirical literature pertaining to securities laws and their enforcement by regulators and courts to establish what is known and what is yet unclear. Recent empirical research in the field has established that law matters. Mandatory disclosure requirements, insider trading laws, safeguards against self dealing transactions, adequate regulatory powers and simple laws that are easily enforced aid in the development of capital markets. The debate is now focused...

Corruption and Decentralized Public Governance

This paper examines the conceptual and empirical basis of corruption and governance and concludes that decentralized local governance is conducive to reduced corruption in the long run. This is because localization helps to break the monopoly of power at the national level by bringing decision making closer to people. Localization strengthens government accountability to citizens by involving citizens in monitoring government performance and demanding corrective actions. Localization as a ...

Takeover Laws and Financial Development

The issue of "an appropriate" legal framework, especially in the case of the takeover market, has been poorly studied in the case of emerging markets, yet it is of immediate relevance and practical policymaker interest. The study makes a first attempt to analyze takeover regulations in a comparative context across 50 countries. It proposes a methodology to create a detailed index on the most salient features of capital market laws, and illustrates the approach on the case of takeover legislat...

Regional Approaches to Better Standards Systems

Developing countries face an increasing need to upgrade the standards of their domestic markets and of their exports. This paper examines different approaches available to them for upgrading their standards and conformity assessment procedures. It focuses particularly on those followed within the context of regional trade agreements (RTAs), as these are yielding promising results. Based on interviews performed in Latin America and on previous literature, the paper draws common features of a R...

Oil and the Propensity to Armed Struggle in the Niger Delta Region of Nigeria

This paper attempts to explain the determinants of the propensity to armed struggle and the probability of participation by individuals in the Niger Delta region of Nigeria using primary data from a sample of 1,337 individuals drawn from 18 communities in the region. Nineteen variables are used to capture factors that reflect motives and opportunity for rebellion and a logit regression model is used to estimate the propensity to armed struggle in the population. About 36 percent of the sample...

The Legal and Regulatory Framework for Environmental Impact Assessments

Environmental impact assessment, or EIA as it is known, is a procedure for evaluating the impact proposed activities may have on the environment. In recent years, significant strides have been made to build a legal foundation for EIAs in Sub-Saharan Africa. Whereas EIAs typically used to be carried out only to meet requirements of foreign donors, they are now mandated in 22 Sub-Saharan countries as an important element of domestic environmental law and policy. This publication traces the deve...

Intellectual Property Rights, Licensing, and Innovation

There is considerable debate in the economics literature about whether a decision by developing countries to strengthen their protection of intellectual property rights (IPRs) will increase or reduce their access to modern technologies invented by developed countries. This access can be achieved through technology transfer of various kinds, including foreign direct investment and licensing, the latter of which is the focus of this paper. To the extent that inventing firms choose to act more m...

Implementing a WTO Agreement on Trade Facilitation: What Makes Sense?

Contrary to the prevailing view that the Doha negotiations have achieved little, we find that on trade facilitation much progress has been made. This is particularly true in regard to action by development banks and bilateral development agencies to meet client demand for assistance in reform. Active private sector participation has been an important factor driving change. Many agencies have been involved in this work; we find that their roles have been consistent with their comparative advan...

The Creation Of The Rule Of Law And The Legitimacy Of Property Rights: The Political and Economic Consequences of a Corrupt Privatization

How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? We investigate the demand for the rule of law in post-Communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets cannot be fully protected under a change in the legal regime towards rule of law, and that the number of agents with control rights over assets is large. We show that a demand for broadly beneficial legal reform may...

Conscription and Crime

The initiation in criminal activities is, typically, a young phenomenon. The study of the determinants of entry into criminal activities should pay attention to major events affecting youth. In many countries, one of these important events is mandatory participation in military service. The objective of this study is to estimate the causal relationship between mandatory participation in military service and crime. We exploit the random assignment through a draft lottery of young men to conscr...

Trade and Harmonization: If your institutions are good, does it matter if they are different?

Good institutional quality (function) and similar institutional design (form) can promote international trade by reducing transactions costs. We evaluate the relative importance of function versus form in a gravity model, using an indicator of different legal systems as a proxy for differences in form together with indicators of overall institutional quality. We find that good institutions promote trade much more than similar legal systems and have much more explanatory power. This effec...

Turkey's Evolving Trade Integration into Pan-European Markets

This is an empirical paper seeking to identify the mode of Turkey's integration into global markets in general and pan-European markets in particular as revealed in its trade performance. The analysis provides empirical support to the following observations. First, thanks to steady expansion of trade in goods and services since the mid-1980s, Turkey has become highly integrated into the world economy. Second, Turkey's export performance in 1996-2004 in EU markets bears strong similarities to ...

What Determines Protection of Property Rights? An Analysis of Direct and Indirect Effects

Using cross-country data, this paper evaluates historical determinants of protection of property rights. We examine four historical theories that focus on conceptually distinct causal variables believed to shape institutions: legal origin, endowments, ethnic diversity and religion. There is only one realization of the data with relatively few observations, which have by now been well explored in the literature. Given the correlations between the explanatory variables, it is difficult to fashi...

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