Jerg Gutmann

Turning Cheap Talk into Economic Growth: On the Relationship Between Property Rights and Judicial Independence

Among economists, the view that precisely defined and reliably enforced property rights are generally conducive to economic growth has been quasi-unanimous. But recently, some authors have argued that the relationship is more complex than previously acknowledged: property rights reforms might, for example, not per se lead to increases in observed growth rates. This paper contributes to the debate by emphasizing that the mere promise of secure property rights is unlikely to have any effects unless accompanied by some commitment to enforce these rights that is perceived as credible by private actors. An independent judiciary is interpreted as a tool that permits governments to make credible commitments to abide by the law. We provide empirical evidence for a positive growth effect of constitutional property rights, once the judicial system is independent enough to guarantee their enforcement.

The Rule of Law and Constitutionalism in Muslim Countries

Recently, several Muslim countries have ratified new constitutions. In this paper, we ask two questions: first, whether Muslim influence has a discernible impact on the content of such constitutions and, second, whether it has an impact on constitutional reality. More precisely, we are interested in the consequences of Islam for institutions securing the rule of law, while taking competing socioeconomic, geographic, and historical explanations explicitly into account. To this end, we construct a new Islamic State Index to measure the influence that Islam has on a society and its political and legal system. We find that Muslim influence is in conflict with the independence of the judiciary and nondiscriminatory legal institutions with respect to gender. Yet, parliamentary power as well as the protection of property rights and religious minorities are not significantly more constrained in Islamic states after we control for alternative explanations. Competing explanations such as the size of oil rents fare rather poorly in explaining differences in important aspects of the rule of law. Copyright Springer Science+Business Media New York 2015

On the Wrong Side of the Law - Causes and Consequences of a Corrupt Judiciary

Empirical research on the determinants of corruption has made substantial progress over the last decade. To date, the consequences of different structures of the legal enforcement institutions have, however, only played a marginal role. This contribution deals with both the determinants of corruption in the judiciary and the consequences of judicial organization for corruption at large. Regarding the latter, it is shown that the actual independence of the judiciary as well as that of prosecution agencies is correlated with lower levels of corruption. This is also true for a third indicator that measures the degree to which judges are held accountable for their decisions (“judicial accountability”). Furthermore, independence and accountability function as complements in preventing corruption – judicial accountability without independence appears to be ineffective, whereas judicial or prosecutorial independence alone can even have adverse effects.

Lending a Hand to the Invisible Hand? Assessing the Effects of Newly Enacted Competition Laws

Far more than 100 countries have adopted competition laws. Their macro-economic consequences, however, are rarely dealt with. The few available studies inquiring into the macro-economic effects of competition laws mostly rely on subjective indicators and employ an inadequate instrumental variable approach. This paper adds to the literature by relying on objective macro-economic indicators and on a differences-in-differences approach. We find robust evidence that competition laws do enhance economic growth. In low-income countries this effect can be traced back to an increase in investment levels. Competition laws have, however, no significant effect on total factor productivity or foreign direct investment. Finally, corruption appears to be declining after the introduction of competition laws in low-income countries.

The Rule of Law: Measurement and Deep Roots

This paper does three things. First, based on a limited number of theoretically established dimensions, it proposes a new de facto indicator for the rule of law. It is the first such indicator to take the quality of legal norms explicitly into account. Second, using this indicator we shed new light on the relationship between the rule of law and the political system of a country. Presidential governments tend to score significantly lower on the rule of law indicator than parliamentary ones. Many presidential democracies are even outperformed by dictatorships. The observation that political systems hardly predetermine the rule of law level raises the question why the authority of law differs across societies in its capacity to constrain the behavior of public officials. Third, because of this question, we investigate the roots of the rule of law. As theory on this specific question is scarce and the rule of law is closely associated with income levels, we draw on a topical literature that deals with the fundamental causes of economic development. Our findings suggest that specific determinants of long-run development operate via the rule of law, whereas others are not related to the rule of law at all. Our empirical evidence does, however, support not only the “primacy of institutions” view, but also the important role that human capital, which European settlers brought to their colonies, played in historical economic development.

Believe, But Verify? The Effect of Market Structure on Corruption in Religious Organizations: Believe, But Verify?

This first cross�?country analysis of the causes of corruption in religious organizations provides evidence in support of policy recommendations by Adam Smith. He argued that clergy are best constrained by competition among religious groups. Their appointment and promotion should, however, be regulated by the state. Both factors are shown to confine corruption. In contrast, David Humes approach of supporting state religion and limiting entry into the religious market is not a promising strategy for mitigating religious corruption. More generally, these results suggest that the private sector may indeed be shielded from sprawling corruption as long as markets are sufficiently competitive.

Determinants of Constitutionally Safeguarded Judicial Review – Insights Based on a New Indicator

Many observers have noted that constitutional review spread rather fast after World War II. It has also been noted that the continental (or Austrian) model of constitutional review was spreading relatively faster than the U.S. American one. Various conjectures regarding possible causes for the spread of constitutional review have been discussed.This paper makes constitutional review comparable across countries by drawing on four variables and a composite indicator of constitutional review. It thus allows us to empirically test the various hypotheses regarding the diffusion of constitutional review. The variables have been coded on an annual basis for 100 countries over the period from 1950 until 2005. The data are used as dependent variables. We are, hence, interested in identifying the determinants of both the original choice of constitutional review and its change over time. This implies that both very stable variables such as geography and history are analyzed as well as more contemporaneous ones as constitutional choices made simultaneously with the choice of constitutional review.This paper is part of a larger project that makes many more aspects of judicial independence comparable across time and space. This not only allows more precise statements regarding determinants of judicial independence but also regarding its (economic) effects.

Sanctioned to Death? The Impact of Economic Sanctions on Life Expectancy and Its Gender Gap

We empirically analyze the effect of UN and US economic sanctions on life expectancy and its gender gap in target countries. Our sample covers 98 less developed and newly industrialized countries over the period 1977–2012. We employ a matching approach to account for the endogeneity of sanctions. Our results indicate that an average episode of UN sanctions reduces life expectancy by about 1.2–1.4 years. The corresponding decrease of 0.4–0.5 years under an average episode of US sanctions is significantly smaller. In addition, we find evidence that women are affected more severely by the imposition of sanctions. Sanctions not being “gender-blind” indicates that they disproportionately affect (the life expectancy of) the more vulnerable members of society. We also detect effect heterogeneity, as the reduction in life expectancy accumulates over time and countries with a better political environment are less heavily affected by economic sanctions. Finally, we provide some evidence that an increase in child mortality and Cholera deaths as well as a decrease in public spending on health care are transmission channels through which UN sanctions adversely affect life expectancy in the targeted countries.

The Heterogeneous Effects of Natural Disasters on Human Rights

We create a novel panel dataset of countries’ de facto human rights practices in four categories – basic human rights, civil & political rights, economic rights, and emancipatory rights. Next, we use this dataset to study the human rights consequences of natural disasters and find negative effects on emancipatory rights. There is no clear evidence for a negative effect on basic human rights or civil & political rights. In contrast, economic rights even appear to improve in the wake of a natural disaster. The timing of the effects differs across human rights dimensions, but we find no differences between high- and low-income countries or between autocratic and democratic regimes. Overall, our findings suggest that it is not only important to distinguish different dimensions of human rights, but also that comparing the effects of an event on different rights dimensions can be very insightful.

Why Adopt a Federal Constitution? And Why Decentralize? – Determinants Based on a New Dataset

Measurement of both federalism and decentralization has been contentious. We introduce three new indicators reflecting important aspects of both federalism and decentralization. The three new indicators are the result of principal component analysis. When we try to identify their main determinants, it turns out that the only explanatory variable that is significantly correlated with all three is the geographical size of a country. Other variables, such as the size of the population, linguistic fractionalization, or the level of democracy, only help to explain variation of one component. We interpret this as evidence that it is important to distinguish between federalism and decentralization, if one is interested in ascertaining their causes and consequences. We further test for the first time the effect of spatial inequality in a country on the adoption of federalism or decentralization and we find that it correlates significantly with constitutional federalism. This suggests that economically heterogeneous states are more likely to adopt a federal constitution.