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Law enforcement and transition

Law enforcement and transition
Law enforcement and transition
We present a simple model to analyze law enforcement problems in transition economies. Law enforcement implies coordination problems and multiplicity of equilibria due to a law abidance and a fiscal externality. We analyze two institutional mechanisms for solving the coordination problem. A first mechanism, which we call "dualism", follows the scenario of Chinese transition where the government keeps direct control over economic resources and where a liberalized non-state sector follows market rules. The second mechanism we put forward is accession to the European Union. We show that accession to the European Union, even without external borrowing, provides a mechanism to eliminate the "bad" equilibrium, provided the "accessing" country is small enough relative to the European Union. Interestingly, we show that accession without conditionality is better than with conditionality because conditionality creates a coordination problem of its own that partly annihilates the positive effects of expected accession.
law enforcement, transition, mafias, coordination, conditionality
0014-2921
669-685
Verdier, Thierry
87c483ea-f473-408f-9776-d0381cab6454
Roland, Gérard
5031659d-3130-4ab9-9327-ccf55d1e03ad
Verdier, Thierry
87c483ea-f473-408f-9776-d0381cab6454
Roland, Gérard
5031659d-3130-4ab9-9327-ccf55d1e03ad

Verdier, Thierry and Roland, Gérard (2003) Law enforcement and transition. European Economic Review, 47 (4), 669-685. (doi:10.1016/S0014-2921(02)00309-4).

Record type: Article

Abstract

We present a simple model to analyze law enforcement problems in transition economies. Law enforcement implies coordination problems and multiplicity of equilibria due to a law abidance and a fiscal externality. We analyze two institutional mechanisms for solving the coordination problem. A first mechanism, which we call "dualism", follows the scenario of Chinese transition where the government keeps direct control over economic resources and where a liberalized non-state sector follows market rules. The second mechanism we put forward is accession to the European Union. We show that accession to the European Union, even without external borrowing, provides a mechanism to eliminate the "bad" equilibrium, provided the "accessing" country is small enough relative to the European Union. Interestingly, we show that accession without conditionality is better than with conditionality because conditionality creates a coordination problem of its own that partly annihilates the positive effects of expected accession.

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More information

Published date: 2003
Keywords: law enforcement, transition, mafias, coordination, conditionality

Identifiers

Local EPrints ID: 33478
URI: https://eprints.soton.ac.uk/id/eprint/33478
ISSN: 0014-2921
PURE UUID: 4e881616-7a9a-43cb-977e-7d41fab90579

Catalogue record

Date deposited: 16 May 2006
Last modified: 17 Jul 2017 15:52

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