Saturday, December 8, 2007
Posted by D. Daniel Sokol
Lots of work has impacted the larger field of law and development in the past 10 years, none more so than the LLSV articles. From the econ perspective, the LLSV literature has renewed focus on legal origins and how they may influence law and development. Cross country antitrust law and development work has been sparse (though I have one paper in this field which is a forthcoming book chapter and another paper in working paper form). One new and exciting paper that brings the debate forward is by one of the economists most active in this area- Armando Rodriguez of the University of New Haven Department of Economics in his article Does Legal Tradition Affect Competition Policy Performance?
ABSTRACT: During the early 1990’s, in the early days of the worldwide competition policy boom, Spencer Waller and Joshua Newberg argued that difficulties inherent in grafting common law concepts--- such as antitrust---onto non common law traditions would undermine the administration of competition law in non common law tradition countries. Recent independent survey data on the performance of competition programs in 102 nations shows deplorable differences in performance, lending some weight to the Waller- Newberg thesis. This article tests whether differences in legal tradition contributes to the observed variance in competition agency performance. A careful understanding of the influence of legal tradition and other factors underscoring the relevance, shortcomings and problems of competition policy performance are useful for determining whether competition programs should be at all reproduced elsewhere, whether they should be modified prior to adoption or whether they should be adopted verbatim. Familiarity with performance factors is also useful both for program administration and program sequencing. Comparative examinations of competition programs enable decision-makers to properly allocate resources and to address policy issues. The estimated model is a two-stage least-squares cross-section analysis between competition policy performance and various control variables, including the presence of a common law tradition. Limitations on the availability of control and instrumental variables, reduces the data set from 102 to 82 nations. Succinctly, after accounting for other explanatory variables such as gross domestic product per capita, foreign direct investment, imports, physical size, the level of corruption, and national experience with a modern antitrust law, one can attribute statistical significance to historical legal tradition as established by the Waller-Newberg hypothesis.