Constitutions and commitment: the evolution of institutions governing public choice in seventeenth-century England

North, Douglass C.; Weingast, Barry R.

doi:10.1017/cbo9781139174633.012

Cited by 493 publications

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“…In our analysis, the comparative statics involve discontinuous jumps-as transaction efficiency improves, the general equilibrium structure may jump from autarky to partial division of labor and then to complete division of labor. This result is consistent with historical evidence documented in North (1958) and North and Weingast (1989), and is supported by empirical studies by Barro (1997), Easton and Walker (1997), Frye and Shleifer (1997), Gallup and Sachs (1998), and Sachs andWarner (1995, 1997).…”

Section: Resultssupporting

confidence: 91%

An Inframarginal Analysis of the Ricardian Model

Cheng¹,

Sachs

Yang

2000

Rev International Economics

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This paper shows that a 2 ¥ 2 Ricardian model has a unique general equilibrium, and the comparative statics of the equilibrium involve discontinuous jumps. If partial division of labor occurs in equilibrium, the country producing both goods would impose a tariff, whereas the country producing a single good would prefer unilateral free trade. If complete division of labor occurs in equilibrium, both countries would negotiate to achieve free trade. In a model with three countries, the country which does not have a comparative advantage relative to the other two countries, and/or which has low transaction efficiency, may be excluded from trade.

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Section: Resultssupporting

confidence: 91%

An Inframarginal Analysis of the Ricardian Model

Cheng¹,

Sachs

Yang

2000

Rev International Economics

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“…Institutions are "rules, enforcement characteristics of rules, and norms of behavior that structure repeated human interaction. " North 1989. Property rights protection as an institutional feature should not be equated with written rules, but should reflect the enforcement characteristics of rules and norms of behaviors.…”

Section: Positive Effect Of Democratic Institutionsmentioning

confidence: 99%

Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries

Li¹,

Resnick²

2003

Int Org

771

680

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Increasing economic globalization and the diffusion of political democracy are arguably the two most important characteristics of contemporary international political economy. As a salient dimension of globalization, foreign direct investment (FDI) inflows have grown faster than world income since the 1960s, multinational enterprises (MNEs) now account for about 70 percent of world trade, and the sales of their foreign affiliates have exceeded total global exports. 1 Foreign production capital has dispersed to almost all developing countries since the 1980s, and the number of foreign affiliates located in developing economies has reached 129,771, compared with 93,628 in the developed world. 2 Paralleling this economic structural change is the spread of liberal or representative democracy. A growing number of less-developed countries (LDCs) have experienced increased political participation, open competition for elected office, and expanding civil society. The proportion of democratic and partially democratic countries rose from about 31 percent in 1975 to about 73 percent in 1995. 3 The flood of FDI and the diffusion of democratic governance have come to an inevitable encounter. While the effect of FDI on democracy has long attracted both scholarly attention and public interest, 4 the effect of democracy on FDI is surprisingly understudied and poorly understood. Explaining the effect of democratic institutions on FDI, however, has clear significance for both theory and policy. ManyWe thank

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“…on Trade Related Investment Measures~TRIMs! addresses only trade-related aspects of FDI and, unlike most BITs, the WTO does not afford investors direct access to disputesettlement procedures+ Furthermore, unlike the Energy Charter Treaty, BITs' coverage is not limited to a particular sector or industry+ While private contracts offer a potential alternative to BITs for managing government-MNE relationships, a contract is far more limited in scope because it governs only those activities pertain-6+ See Li and Resnick 2003;andLi 2006+ 7+ See Jensen 2003;Moran 1999;andStasavage 2002+ 8+ See Vernon 1971;andMoran 1985+ 9+ See Büthe andMilner 2008;Li 2009;Kobrin 1984;Henisz 2000;and Moran 1985+ 10+ While risks of adverse policy changes vary across sectors and states, all firms face some risk because of the illiquid nature of their investment+ See Kobrin 1980;andLi 2009+ 11+ See, for example, Koremenos, Lipson, andSnidal 2001;North and Weingast 1989;andSnidal 2000+ 12+ See Büthe andMilner 2009;andKerner 2009+ 13+ See UNCTAD 2009;and Kerner 2009+ ing to a single investment relationship, and direct investor-government contracts are uncommon for smaller-scale investments or projects undertaken by small-and medium-sized firms, which make up the majority of MNEs operating in the world today+ 14 The high institutional profile of BITs in the area of FDI is reflected in the growing number of studies that have sought to establish their effects on investment flows, and while these effects continue to be debated, several recent, methodologically sophisticated studies have found that BITs do significantly increase investment+ 15 BITs contain several design features that help make governments' commitments to afford investors a favorable investment environment more credible+ First, they contain a series of obligations of favorable treatment to foreign investors including, among others, commitments to treat foreign investors from their treaty partners in a fair, equitable, and nondiscriminatory manner, and to pay appropriate compensation in cases of expropriation+ Crucially, these obligations are highly legalized, that is, they are legally binding to a high degree+ 16 The high legalization of obligations undertaken in treaty commitments is important because it increases their credibility by raising the costs and difficu...…”

Section: Bits and National Treatment: Credibility Versus Autonomymentioning

confidence: 99%

Thinking Ahead: Government Time Horizons and the Legalization of International Investment Agreements

Blake

2013

Int Org

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International institutions help governments make credible commitments to other state and nonstate actors by raising the costs of commitment violation+ However, in doing so these institutions generate sovereignty costs for national governments by constraining the autonomy they have to develop and implement policy+ Governments respond to this trade-off between the credibility of commitments and policy autonomy differently depending on their time horizons and this shapes their preferences over the design of credibility-enhancing institutions+ Governments with long time horizons expect to govern in the future, anticipate that conditions may shift over time, and therefore seek institutional designs that will afford them greater freedom to modify policies in response to changing economic and political conditions+ Governments with shorter time horizons, on the other hand, do not anticipate being in power long into the future and therefore are less concerned about maintaining greater room to manipulate policy+ I develop this argument in the context of bilateral investment treaties~BITs!, focusing in particular on the legalization of obligation in national treatment commitments+ I test the argument using an original data set of the design of national treatment obligations in a random sample of 342 BITs+ I find that net importers of FDI with longer time horizons are more likely to build in greater policy autonomy in their BITs by scaling back the legalization of their national treatment obligations and that this relationship is robust to controlling for selection into investment treaties+ A strong body of research exists following the rational design approach that links the design of institutions to the structure of the problems they are created to solve+ 1 One of the most common of these problems is governments' inability to make credible commitments to other states and nonstate actors when their incentives to abide For helpful comments and suggestions, I am grateful to

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Constitutions and commitment: the evolution of institutions governing public choice in seventeenth-century England

Cited by 493 publications

References 0 publications

An Inframarginal Analysis of the Ricardian Model

An Inframarginal Analysis of the Ricardian Model

Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries

Thinking Ahead: Government Time Horizons and the Legalization of International Investment Agreements

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