Download Labour Market - Education

Jaromír Šindel
ECES
The Puzzles of Central and Eastern Europe Transformation and Integration
Transformation: Law and Corruption
ECES, Prague
• Law and Transition Economies
– Importance, how to get new law, judicial
system, enforcement mechanism, ...
– The better protection for investors the higher
investment, ...
• Corruption
– And economy development, causality, ...
The Puzzles of Central and Eastern Europe Transformation and Integration
Topics
ECES, Prague
• Positive relationship between the quality of law environment and
the economic level
The Quality of Law Environment (vertical axis) nad Economic Level (horizontal axis,
GDP per capita in USD in PPP) in 2000 and 2001
ECES, Prague
Source: Kaufmann, Krsay, Zoido-Lobatón (2002) from Žák, M. (2004)
The Puzzles of Central and Eastern Europe Transformation and Integration
Law for Economic Prosperity ?
• Law and finance theory
– Choose the best institutional setting
• Institutional convergence has its limits by
existing PATH DEPENDENCY
ECES, Prague
• Impossible to achieve the best results in
CEE countries due to the path dependency
and the political economy
The Puzzles of Central and Eastern Europe Transformation and Integration
How to get new Law
– different views
• Translation of EU´ law x evolution
– Institutional view
• Path dependency
– Bureaucrats, judges, ...
• Law Hyperthophy
– Interest groups who benefit from the imperfect laws
– Ex-post regulations reacting on particular problems at a
particular time
– No complexity
The Puzzles of Central and Eastern Europe Transformation and Integration
How to get new Law during Transition
ECES, Prague
• Designed legal tradition went bact to the AustriaHungarian Empire and to the system before 1948
• In Czech rep. was the worst position against Hungary and
Poland
– They started implement laws relating private bussiness by the end
of 1980´s
The Puzzles of Central and Eastern Europe Transformation and Integration
How to get new Law during Transition
- the Case of Czech republic
• Why in Czech rep. wasn´t effort to get American/English
Law model?
Source: Hanousek, Kočenda, Lízal (Eds.), CERGE 2004, www.cerge-ei.cz
ECES, Prague
– Inadequacy of underlying institutions
– Russian example (next)
Number of Phrases „with exception of“ and Total Number of Words in the Czech
Income Tax Law
ECES, Prague
Source: CERGE: Czech Republic 2005: Year After. www.cerge-ei.cz
The Puzzles of Central and Eastern Europe Transformation and Integration
Law and Czech rep. ... ?
• Dysfunctional judicial system and enforcement
mechanism
– Incompetence –> high ratio of incorrect decisions
– Long duration of the procedure
– Imprerfect laws
– Lack of adequate equipment, low salaries, low social
status (corruption) – compare with private sector
The Puzzles of Central and Eastern Europe Transformation and Integration
Quality of Law and Inefficient
Enforcement Mechanism
– Example: Russia
Source: Hanousek, Kočenda, Lízal (Eds.), CERGE 2004, p. 49, www.cerge-ei.cz
ECES, Prague
• „US-like bankruptcy law was enacted, including the reorganization
chapter. As the independence of Russian judges is questionable, ...
The reorganization serve as a means of management entrenchment
laeding to violations of creditors´ rights“
Duration of Bankruptcy Proceedings
ECES, Prague
Source: CERGE: Czech Republic 2005: Year After. www.cerge-ei.cz
The Puzzles of Central and Eastern Europe Transformation and Integration
Quality of Law
The Relationship between Public Institution Index (vertical axis) and Economic
Level (GDP per capita in USD in PPP, horizontal axis) in 2000 and 2001
Source: WEF from Žák, M. (2004)
ECES, Prague
Note: Public Institution Index consists of Contracts and Law Subindex
(50 %) and Corruption Subindex (50 %)
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption, Law and Economic Level
• Question about causality
– Corruption leads to lower economic level or
high economic level brings lower corruption ?
• Question of the relationship of the level of
democracy and rent-seeking
ECES, Prague
– Country shifting from autocracy to democratic
regime has higher economic growth than
democratic countries – U-shape curve
– Inverse U-shape curve – relationship between
corruption and the level of democracy
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption
The Relationship between Corruption (rent-seeking) (vertical axis) and the level of
democracy (horizontal axis)
corruption
democracy
ECES, Prague
autocracy
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption and Level of Democracy
The Relationship between Economic Growth (left vertical axis, average growth in
1980-1995),Economic Level (right vertical axis, GDP per capita in USD in PPP) and
Corruption Perception Index (horizontal axis) in 1998-2000
ECES, Prague
Source: Červenka, M., Frait, J. (2002)
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption and Level of Living
• Importance for Foreign Investors
– See next table. Where are the investor´s
preferences? Foreign investors look at
corruption indexes before investing into the
country (two possibilities of explanation)
• Gradual vs. Rapid transformation
– Question of interest group forming. (Olson,
Marcur: The Rise and the Decline of Nations.
1982.)
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption and CEE
• Bad instituions – speed up corruption
ECES, Prague
Corruption Perception Index in 2005
Iceland
9,7
2.
Finland and New Zealand
9,6
11.
Netherlands and U.K.
8,6
16.
Germany
8,2
17.
U.S.A.
7,6
18.
France
7,5
27.
Estonia
6,4
31.
Slovenia
6,1
32.
Botswana, Qatar, Uruguay, Taiwan
5,9
40.
Hungary, Italy, South Korea
4.8
47.
Czech rep., Slovakia, Greece, Namibia
4,3
76.
Poland
3,4
126.
Russia
2,4
Source: Transparency International, www.transparency.org
ECES, Prague
1.
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption and CEE
Corruption Perception Index Development in Czech republic, Poland
and Hungary
ECES, Prague
Source: CERGE: Czech Republic 2005: Year After. www.cerge-ei.cz
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption and CEE
• Gradual vs. Rapid Trasformation
– Question of interest group forming. (Olson,
Marcur: The Rise and the Decline of Nations.
1982.)
– Gradual
• Time for adaptation of old interest groups and rentseekers
– Rapid
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption and CEE
• New interest groups are established.
ECES, Prague
wealth and
influence
NEW
ready for
+
not ready for
instructed
time
ECES, Prague
-
OLD
The Puzzles of Central and Eastern Europe Transformation and Integration
Corruption and CEE
• „good“ and „bad“ corruption
– More than half of Czech citizens believe that
corruption is a serious problem that needs to
be taken care of.
– But 20 % of them admitted to giving a bride to
SPEED UP procedures at their local office.
• Bad insitutions. Theory of bureaucrat – its
importance - official stamp.
• Solutions
ECES, Prague
– to simplify procedures
– Pay for public services (question: Why not private services
or lower taxes?)
The Puzzles of Central and Eastern Europe Transformation and Integration
Speed up Corruption
• From history
– Mafia was the name of group for the creation of
Czechoslovakia during the WW I.
• Slovakia
– Mečiar´s political regime (1993-1998)
• connections of politicans and business
– Russia Influence
– New government
The Puzzles of Central and Eastern Europe Transformation and Integration
Special Case: Mafia
• Restricted area near the capitol - Bratislava
ECES, Prague
– Special Public Prosecution
– Special Law-Court
• Make a project for law
transformation at Cuba and Iraq.
• Goals, solutions, reasons.
The Puzzles of Central and Eastern Europe Transformation and Integration
Lessons for future.
ECES, Prague
• www.worldbank.org/data/wdi2004/index.htm (world development indicators)
• www.imf.org/external/pubs/pubs/statpack.htm (government finance statistics)
• www.imf.org/external/np/sta/bop/bop.htm (balance of payments)
• http://rru.worldbank.org/DoingBusiness/default.aspx (doing business)
• www.heritage.org (the index of economic freedom)
• www.fraseinstitute.ca (economic freedom in the world)
•www.transparency.org (corruption perception index – CPI)
• www.worldbank.org/wbi/governance/pubs/govmatters3.htm (governance indicators)
• http://info.worldbank.org/governance/beeps (the business environ., performance)
• www.opacity-index.com (opacity index, PWCoopers)
The Puzzles of Central and Eastern Europe Transformation and Integration
„Institutional“ websites
• http://hdr.undp.org/reports (human development index)
• http://www02.imd.ch/wcy (world competitiveness yearbook - IMD)
• www.weforum.org (global competitiveness report – global economic forum)
• www.freedomhouse.org (freedom in the world)
• www.beri.com (business environmental risk intelligence)
Source: Žák (2005, s. 559)
ECES, Prague
• www.icrgonline.com/icrgMethods.asp (international country risk guide)