Simon Deakin, Sarah Fraser Butlin, Colm McLaughlin and Aleksandra Polanska
We present a socio-legal case study of the recent equal pay litigation wave in Britain, which saw an unprecedented increase in the number of claims, triggered in part by the entry of no-win, no-fee law firms into this part of the legal services market. Although the rise in litigation led to greater adversarialism in pay bargaining, litigation and collective bargaining mostly operated as complementary mechanisms in advancing an equality agenda. Litigation may be a more potent agent for social change than some recent analyses, which stress the limits of the law in the face of organisational pressures to canalise and diffuse human rights, have suggested.
Dominic Chai, Simon Deakin, Prabirjit Sarkar and Ajit Singh
The persistence of abnormal profits can be interpreted as evidence of the presence of firms which are successful over time in capturing rents from product or process innovation. Using a large sample of manufacturing firms in 18 developed and developing countries, we estimate the impact of laws governing shareholder rights on the persistence of firm-level profits. We find that higher shareholder protection reduces the persistence of profits in common law countries and increases it in civil law countries. Because shareholder protection is higher, on average, in common law countries, this finding is consistent with the view that increases in legally mandated or encouraged shareholder protection beyond a certain point have a negative impact on firm-level innovation.
Ding Chen and Simon Deakin
We propose a theoretical framework for understanding the evolution of the rule of law state, which is conceived as the equilibrium of a societal game in which actors accept the legitimacy of publicly enunciated legal rules. A meta-norm of respect for the sovereign legal power of the state is not self-forming on the basis of private conduct, but requires the coevolution of impersonal market exchange with effective state capacity to constitute and regulate markets. A functioning legal system must acquire the means not just to control private power but to constrain other organs of government. The emergence of such a 'self-limiting state' is an historical process which, while complementary to a market order, is also contingent and path-dependent, and is not preordained. Illustrating our argument with empirical cases drawn from the contemporary experience of middle income countries, we argue that alternatives to the rule of law state, including interpersonal trust, closed networks and authoritarian political control, can only achieve limited scale and scope effects, and are prone to high deadweight costs arising from corruption and the capture of the public sphere by private interests. We also discuss the potential of transplants of legal rules and institutions to catalyse the transition to impersonal trade based on the rule of law, and present evidence, from time-series econometric analysis, that the diffusion of shareholder protection laws has the potential to support financial development in emerging markets. Evolution towards the rule of law state is, we conclude, one possible developmental path for middle income countries.
Zoe Adams and Simon Deakin
It has become widely assumed that the standard employment relationship (SER) is in irreversible decline in industrialised societies. However, non-standard and precarious work relationships often complement the SER via labour market transitions, and are not displacing it as the focal point of labour market regulation. The coordination and risk management functions of the SER continue to be relevant in market economies, and the SER is adjusting to new conditions. The SER has a complex and evolving relationship to gender and to social stratification. In the European context where the SER originated and achieved its clearest legal expression, institutional solutions to precariousness and inequality are being developed, the most innovative of which avoid simple deregulation in favour of integrated policy responses involving a range of complementary regulatory mechanisms.
Thomas Piketty's Capital documents long-term trends in income and wealth in advanced economies. It also provides a theoretical framework for analysing the past and projecting the future. Piketty argues that the ratio of wealth to national income is on an upward trend and that this is responsible for the rising income share of wealth-owners. This paper accepts Piketty's main empirical findings, but questions his interpretation. The rising income share of wealth-owners is not due to the over-accumulation of capital, as he claims, but just the opposite. There has been too little real investment. The paper also considers the long-term dynamics of Piketty's model and explores the effect of modifying his assumptions about savings behaviour. Finally, it considers the implications of rising asset prices, which are documented by Piketty but are not adequately taken into account in his theoretical analysis or projection of future trends.
We are living through extraordinary times. During the first 12 years of the new millennium, unusually, developing countries (DCs) expanded faster than advanced countries (ACs). IMF suggests that the improvement in DCs during this crisis is due to their ability to absorb shocks. In the most recent period, there has been a reduction in growth rates in most middle-income countries (MICs) as well as in advanced countries. The paper's second part examines the epic story of South Korean industrialisation. A fundamental argument here is that developing countries have much to learn from each other. This brief presentation ends on an important point that the South-South cooperation is not intended to replace North-South cooperation but rather to supplement it.
This paper explores the relationship between globalisation, competition, competition policy and competitiveness. It is important to note that although these notions are related, they are conceptually different. This paper contributes by providing a theoretical framework for the main issues which arise in the modern discussion of competition and competition policies in economic development. It also contributes by its extensive treatment of the international dimensions of the subject. Importantly, this paper puts economic development at the centre stage for competition and related policies. It provides a proposal for the establishment of a development-oriented international competition authority. This authority would attempt to limit growth by merger by large multinationals under its purview. They would be allowed to merge provided they divest themselves of a subsidiary of equal value. This would mean that multinationals would not be prohibited to grow by mergers, but they could expand through organic growth or greenfield investment. It would also not stop them from taking over other firms subject to divestiture as outlined. A large body of research on mergers indicates that mega-mergers have the potential of increasing market dominance and reducing contestability. Discouraging such mergers would therefore enhance global contestability, competition, and economic efficiency, while at the same time being distributionally more equitable.
Michael Kitson and Jonathan Michie
This paper considers the evolution of the manufacturing sector in the UK since 1870. It analyses the contribution of manufacturing to national income, employment and trade. From 1870 to 1960, manufacturing played a key role in the development of the economy, undergirding success in other sectors of the economy and securing rising living standards. The subsequent fifty years, from 1960, have witnessed a relative decline of the UK manufacturing sector - relative to other sectors of the economy, and relative to the manufacturing sectors in other countries. The paper considers the thesis that the relative decline of manufacturing is a natural outcome of the development of advanced economies, and the counter-arguments suggesting that decline of UK manufacturing reflected economic weaknesses and structural imbalances. We argue that in the case of the UK, the relative decline of manufacturing has indeed reflected deep-rooted structural problems. In particular there has been a chronic failure to invest in manufacturing, with the UK economy and investment being instead skewed towards short-term returns and the interests of the 'City'. A stronger manufacturing sector would help to rebalance the UK economy away from an over-reliance on the banking sector and would help rebalance the UK economy and society in regional terms. To achieve such a rebalancing requires active government policies to help increase investment in education, skills and innovation.
This paper, based on the V.V. Giri Memorial Lecture for 2013, argues that labour law should be seen as a developmental institution, capable of promoting both equality and efficiency, and hence inclusive development. Labour law rules, precisely because they redress the inequality of bargaining power inherent in the employment relationship, may promote economic efficiency, since they counteract the effects of contractual incompleteness, while mitigating labour market risks. The World Bank view that laws designed to help workers often harm them is neither theoretically well informed nor empirically supported. There is a need for new thinking to escape the intellectual rigidities currently afflicting labour law.
This paper analyses the links between financial market structures, governance systems and investment behaviour in the UK focusing in particular on investment in R&D. It assesses the extent to which business decision taking in the UK is as a consequence affected by 'short-termism'. Taken together, the qualitative and quantitative literature reviewed in this report provide substantial evidence for both absolute short-termism in UK financial markets and relatively higher short-termist attitudes compared to other countries. This would imply a bias against long-term innovation intensive investment in manufacturing in the UK liberal market economy.
Ajit Singh and Gurmail Singh
The extraordinary growth of the East Asian economies during the last 50 years has drawn attention of the economists worldwide. This paper provides a commentary on this epic story. This paper explores the reasons for the extraordinary growth and analysis specific changes which have occurred in income inequality and labour market institutions during this time span. One main conclusion of the paper that contrary to commonly held belief that the globalisation and nature of technological progress has been the main cause of increased income inequality in the period after East Asian crises. We conclude that country specific factors were at least as important, if not more so, in this respect. Analysis shows that in addition to varying pattern of income inequality which has not been observed by other commentators have also been major changes in labour market indicators, including unionisation and collective bargaining, employment protection, and minimum and real wages. The last part of the paper discusses policy implications.