Table Of Content

UNIVERSITY OF TORONTO FACULTY LAW of to 'T CM 'T O s o to N. ” LAW, INSTITUTIONS AND DEVELOPMENT VOLUME 1 Professor Michael Trebilcock Professor Mariana Mota Prado Winter 2011 BORA LASKIN LAW LBRARlf DEC 1 5 2010 FACULTY OF LAWW RSITY OF TORiOONNTTOO j LAW, INSTITUTIONS AND DEVELOPMENT VOLUME 1 Professor Michael Trebilcock Professor Mariana Mota Prado Winter 2011 Digitized by the Internet Archive in 2018 with funding from University of Toronto https://archive.org/details/lawinstitutionsd01treb_6 LAW, INSTITUTIONS AND DEVELOPMENT Winter 2011 Professor Michael Trebilcock Professor Mariana Mota Prado Table of Contents for Volume 1 CHAPTER 1: THE ENDS AND MEANS OF DEVELOPMENT.1 I. INTRODUCTION.1 II. MEASURING DEVELOPMENT.2 III. CONCEIVING THE ENDS OF DEVELOPMENT. 7 IV. THE MEANS OF DEVELOPMENT..15 V. UNTVERSALISM VERSUS RELATIVISM.16 VI. CONCLUSION.22 CHAPTER 2: NON-INSTITUTIONAL TFBEORIES OF DEVELOPMENT.24 I. THEORIES OF ECONOMIC DEVELOPMENT.25 1.1 Linear stages of growth theory.26 1.2 Structural Change Models.28 1.3 Dependency Theories.30 1.4 The Neo-Classical Counter-Revolution.32 1.5 Endogenous Growth Theory. 35 II. CULTURAL THEORIES OF DEVELOPMENT.38 2.1. Culture and Development.39 2.2 Culture as an End and a Means of Development.46 2.3 Culture and Institutions.48 III. GEOGRAPHIC THEORIES OF DEVELOPMENT...49 3.1 Why geography matters?. 50 3.2 Geography and Institutions. 54 IV. CONCLUSION. 57 CHAPTER 3: INSTITUTIONAL THEORIES OF DEVELOPMENT.59 I. INTRODUCTION.59 II. THE DEFINITION OF “INSTITUTIONS”.61 III. DO INSTITUTIONS MATTER?. 62 IV. WHY DO INSTITUTIONS MATTER?.68 V. WHICH INSTITUTIONS MATTER?.69 VI. WHY ARE SOME COUNTRIES AFFLICTED WITH PERSISTENTLY BAD INSTITUTIONS?.71 VII. WHAT CAN COUNTRIES WITH BAD INSTITUTIONS DO TO ACQUIRE BETTER INSTITUTIONS?.72 CHAPTER 4: PATH DEPENDENCE, DEVELOPMENT AND THE DYNAMICS OF INSTITUTIONAL REFORM.74 I. INTRODUCTION.74 II. PATH DEPENDENCE IN ECONOMICS: SELF-REINFORCING MECHANISMS AND SWITCHING COSTS.75 III. PATH DEPENDENCE IN POLITICAL SCIENCE: CRITICAL JUNCTURES.81 IV. USING PATH DEPENDENCE IN INSTITUTIONAL REFORMS.85 4.1 Reforms During Normal Times: Acknowledging Self-Reinforcing Mechanisms and Institutional Interdependencies.86 4.2 Reforms During Abnormal Times: Dealing with Switching Costs.88 V. CONCLUSION.91 CHAPTER 5: THE RULE OF LAW AND DEVELOPMENT.98 I. INTRODUCTION.98 II. THE DEFINITION OF LAW, LEGAL INSTITUTIONS, AND THE RULE OF LAW 100 III. THE RELATIONSHIP BETWEEN THE RULE OF LAW AND DEVELOPMENT 102 IV. REASONS FOR THE CHRONICALLY POOR QUALITY OF THE RULE OF LAW AND RELATED LEGAL INSTITUTIONS IN SOME COUNTRIES.106 V. A BRIEF REVIEW OF RULE OF LAW REFORM EXPERIENCE.118 VI. IDENTIFYING FEASIBLE REFORM STRATEGIES.126 VII. THE ROLE OF EXTERNAL ACTORS IN PROMOTING RULE OF LAW REFORM IN DEVELOPING COUNTRIES.130 VIII. CONCLUSION.135 CHAPTER 6: POLITICAL REGIMES, ETHNIC CONFLICT, AND DEVELOPMENT.138 I. INTRODUCTION.138 II. POLITICAL REGIMES AND DEVELOPMENT. 139 2.1 Some Elements of Consensus: Markets and Democracy.140 2.2 Defining Democracy. 142 2.3 The Case for Democracy.144 2.4 The Case Against Democracy. 147 2.5 The Empirical Evidence.149 2.6 Challenges to reforming political institutions.153 II. POLITICAL REGIMES AND ETHNIC CONFLICT.157 3.1 Ethnic Affiliations. 159 3.2 Ethnic Tension and Rivalry.161 3.3 Factors that Trigger and Sustain Conflict.164 3.4 Possible Solutions.166 IV. CONCLUSION.171 CHAPTER 7: BUREAUCRACY AND DEVELOPMENT.173 I. INTRODUCTION.173 II. MEASURING BUREAUCRATIC PERFORMANCE.174 III. REFORMING BUREAUCRACIES.176 IV. SPECIALIZED ADMINISTRATIVE AGENCIES.184 V. CONCLUSION.192 CHAPTER 8: CORRUPTION AND DEVELOPMENT.194 I. INTRODUCTION.194 II. WHAT IS CORRUPTION?.195 2.1 Defining Corruption.195 2.2 Measuring Corruption.197 III. CONSEQUENCES OF CORRUPTION IN DEVELOPING COUNTRIES.201 IV. CAUSES OF CORRUPTION IN DEVELOPING COUNTRIES.207 V. CURES: ASSESSING THE PROSPECTS FOR ANTI-CORRUPTION REFORMS.209 VI. CONCLUSION.216 CHAPTER 9: THE PROPERTY RIGHTS-CONTRACT RIGHTS-DEVELOPMENT NEXUS .219 A PROPERTY RIGHTS.219 I. INTRODUCTION.219 n. THE BENEFITS AND NECESSITY OF A FORMAL PROPERTY RIGHTS REGIME 221 2.1 The Benefits of Secure Property Arrangements.221 2.2 The Necessity of a Formal Property Rights Regime.226 2.3 Informal Mechanisms for Securing the Benefits of Private Property.229 2.4 The Empirical Evidence.234 2.5 Gender and Property Rights.240 III. CONCLUSION.246 B. CONTRACT RIGHTS.251 I. INTRODUCTION.251 II. EMPIRICAL EVIDENCE.254 III. CONCLUSION.259 CHAPTER 10: PRIVATE SECTOR, FINANCING AND DEVELOPMENT.263 I. INTRODUCTION.263 II. FINANCIAL DEVELOPMENT.267 2.1 Why does the Financial System matter?.268 2.2 Why do developing countries have weak financial sectors?.270 2.3 The challenges of providing financial services in developing countries.273 III. INSTITUTIONS AND FINANCIAL DEVELOPMENT.276 3.1 Legal institutions and Financial Development.278 3.2 Sectoral Regulation and Governmental Intervention in the Financial Sector.282 3.3 Central Banks and Macroeconomic Stability.285 IV. POLICY PROPOSALS TO PROMOTE FINANCIAL DEVELOPMENT.287 4.1 Banks: Should they be small, large, or both?.289 4.2 Regional or Local Stock Markets: do developing countries need them?.292 4.3 Microfinance: an effective innovation?.293 V. LIMITS AND OBSTACLES TO FINANCIAL DEVELOPMENT.296 VI. FINANCIAL GLOBALIZATION AND DEVELOPMENT.300 6.1 The Benefits and Risks of Capital Flow Liberalization...300 6.2 Capital Flow Liberalization and the Financial Crisis of 2007.302 VII. CONCLUSION.304 CHAPTER 11: PRIVATIZATION AND DEVELOPMENT.306 I. INTRODUCTION.306 II. STATE-OWNED ENTERPRISES AND DEVELOPMENT.307 2.1 Rationales for State-Owned Enterprises.307 2.2 The Costs of poor SOE Performance.309 2.2.1 The Ownership Effect.311 2.2.2 The Competition Effect.313 III. PRIVATIZATION.314 3.1 Understanding Privatization.314 3.2 Theory versus Practice: SOEs versus Privatization.316 3.2.1 Relative sectoral performance.317 3.2.2 Pre- and post-privatization relative performance.318 3.3 Prerequisites for Effective Privatization.321 3.3.1 Economic prerequisites.321 3.3.2 Political Prerequisites.324 3.4 Case Study: Privatization of State-Owned Banks.325 3.5 Types of Privatization.329 3.5.1 Post-Soviet Privatization: Privatization through Restitution and Voucher Privatization.330 3.5.2 Management Buy-Outs (MBOs).331 3.5.3 Privatization through the sale of state property.332 3.5.4 Partial Privatization.333 3.6 Alternative to Privatization Reforms.334 3.6.1 Management Contracts.334 3.6.2 Performance Contracts.336 3.6.3 Increased Competition.338 3.7 Approaches to Privatization: Shock Therapy versus Gradualism.339 IV. PRIVATE PROVISION OF PUBLIC INFRASTRUCTURE SERVICES (PUBLIC- PRIVATE PARTNERSHIPS - PPP).341 4.1 The innovative aspects of PPPs. 343 4.2 Types of Public-Private Partnerships.346 4.3 PPPs and the Developing World.349 4.3.1 Historical Context.349 4.3.2 Challenges in designing a successful PPP project.350 V. CONCLUSION.355 CHAPTER 12: INTERNATIONAL TRADE AND DEVELOPMENT.359 I. INTRODUCTION.359 II. TRADE AND DEVELOPMENT.361 2.1 Trade Policy and Development: An Historical Perspective.361 2.2 Special and Differential Treatment: An Assessment.368 2.3 Institutional Challenges.375 CHAPTER 13: FOREIGN DIRECT INVESTMENT (FDI).379 I. HISTORICAL PERSPECTIVES ON FDI.381 II. CAN FDI ENHANCE A COUNTRY’S DEVELOPMENT PROSPECTS?.384 2.1 Which Institutions Matter?.385 2.2 FDI in the Natural Resources Sector.388 III. WHAT KINDS OF INSTITUTIONS DOES A COUNTRY NEED TO ATTRACT FDI? .392 IV. COULD AND SHOULD DEVELOPING COUNTRIES BYPASS DYSFUNCTIONAL DOMESTIC INSTITUTIONS TO ATTRACT FDI?.396 4.1 Investor-friendly policies.397 4.2 Bilateral Investment Treaties (BITs), Choice of Forum, Choice of Law and Arbitration Clauses.401 V. CONCLUSION.411 CHAPTER 14: FOREIGN AID AND DEVELOPMENT.414 I. INTRODUCTION.414 II. WHY DO DEVELOPED COUNTRIES GIVE AID?.417 III. IS THE CURRENT AMOUNT OF FOREIGN AID ENOUGH?.420 IV. WHICH COUNTRIES SHOULD RECEIVE AID?.423 V. HOW SHOULD AID BE COORDINATED?.424 VI. SHOULD AID BE CONDITIONAL AND ON WHAT?.427 VII. WHAT ENDS SHOULD AID ATTEMPT TO SERVE?.430 VIII. CONCLUSION.431 * * * 433