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WP429: Capability Theory, Employee Voice & Corporate Restructuring: Evidence from UK Case Studies
Simon Deakin and Aristea Koukiadaki
We examine the relationship between capability for voice and corporate restructuring through an empirical study of the operation of the UK’s Information and Consultation (I&C) Regulations of 2004. These Regulations, implementing an EU Directive, introduced elements of the continental European codetermination model into UK law, while allowing for flexibility and experimentation in forms of employee representation. Although the absence of a preferred role for trade unions in the establishment of I&C arrangements limited the scope for interaction with existing structures of collective bargaining, there is evidence that unions were able to use the new arrangements to extend their influence in some contexts. We also report evidence of deliberation mitigating the impact of restructurings on workforce morale and contributing to a longer-term perspective on skills in some firms. We conclude that the I&C model has unfulfilled potential in the UK context.
WP428: Indian Labour Law & Its Impact on Unemployment, 1970-2006: A Leximetric Study
Simon Deakin and Prabirjit Sarkar
We analyse a recently developed leximetric dataset on Indian labour law over the period 1970 to 2006. Indian labour law is seen to be highly protective of workers’ interests by international standards, particularly in the area of dismissal regulation. We undertake a time-series econometric analysis to estimate the impact of the strengthening of labour laws on unemployment and industrial output in the formal economy. We find no evidence that pro-worker labour legislation leads to unemployment or industrial stagnation. Rather, pro-worker labour laws are associated with low unemployment, with the direction of causality running from unemployment and output to labour regulation.
WP427: Science & Technology Studies: Exploring the Knowledge Base
Ben R Martin, Paul Nightingale and Alfredo Yegros-Yegros
Science and Technology Studies (STS) is one of a number of new research fields to emerge over the last four or five decades. This paper attempts to identify its core academic contributions using the methodology developed by Fagerberg et al. (2011) in their parallel study of Innovation Studies. The paper uses the references cited by the authors of chapters in a number of authoritative ‘handbooks’, based on the assumption that those authors will collectively have been reasonably comprehensive in identifying the core contributions to the field. The study analyses the publications most highly cited by the handbook authors, in particular examining their content and what they reveal about the various phases in the development of STS. The second part of the study analyses the ‘users’ of the STS core contributions who have cited these contributions in their own work, exploring their research fields, journals, and geographical location. The paper concludes with some comparisons between STS and the fields of Innovation Studies and Entrepreneurship, in particular with regard to the role of ‘institution builders’ in helping to develop a new research field.
WP426: Gender Inequality & Reflexive Law: The Potential of Different Regulatory Mechanisms for Making Employment Rights Effective
Simon Deakin, Colm McLaughlin and Dominic Heesang Chai
We review the different regulatory mechanisms which have been used in the UK context to promote gender equality in employment over the past decade, including legal enforcement based on claimant-led litigation, collective bargaining, pay audits, and shareholder pressure. Evidence is drawn from case studies examining the effects of these different mechanisms on organisations in the public and private sectors, and from econometric analysis of the impact of stock market pressures on firms’ human resource practices. We argue that there is scope for reflexive solutions to improve the effectiveness in practice of UK equality law, by inducing efficient disclosure by employers, setting default rules, and encouraging bargaining in the shadow of the law.
WP425: Open Innovation, the Haldane Principle & the New Production of Knowledge: Science Policy & University-Industry Links in the UK after the Financial Crisis
Alan Hughes
This paper analyses science policy resource allocation in the light of a comparison of the open innovation and Mode 2 new production of knowledge conceptual frameworks. It provides a brief historical review of the evolution of science funding and the application of the Haldane principle in the UK. The core of the paper analyses academic and business attitudes to university-industry links using two recent large scale surveys and argues that there is a largely false dichotomy drawn between applied and basic research. University-industry links are already extensive and encompass a wide range of interactions than those captured by the usual debate over science engineering and narrow conceptions of commercialisation based on patenting and spin-outs.
WP424: Legal Evolution: Integrating Economic & Systemic Approaches
Simon Deakin
This paper explores the scope for synthesis between economic and systemic approaches to the understanding of legal evolution. The evolutionary and epistemic branches of game theory predict that stable norms will emerge when agents share common beliefs concerning future states of the world. Systems theory see the legal order as a social system which reproduces itself by recursive acts of legal communication, thereby giving rise to self-reference and operational closure. At the same time, the legal system is cognitively open, that is to say, indirectly influenced by other social systems in its environment. This gives rise to the possibility of coevolution of law and the economy. It will be argued that systems theory, by developing the idea of law as an adaptive system with cognitive properties, provides a missing link in the evolutionary theory of norms. Recent game theoretical models imply that common knowledge is not entirely endogenous to agents’ interactions, but depends to a certain extent on emergent normative structures. These include the public representations of common knowledge which are provided by the legal system. The paper will explore the implications of this idea, argue for an integrated economic and systemic analysis of legal evolution, and consider some of the theoretical and methodological implications of such a step.
WP423: An End to Consensus? The Selective Impact of Corporate Law Reform on Financial Development
Simon Deakin, Prabirjit Sarkar and Ajit Singh
Legal origins theory suggests that law reform, strengthening shareholder and creditor rights, should enhance financial development. We use recently created datasets measuring legal change over time in a sample of 25 developing, developed and transition countries to test this claim. We find that increases in shareholder protection contribute to stock market growth in the common law world and in developing countries, but not in the civil law world. We also find evidence of reverse causation, with financial development triggering legal changes in the developing world. We consider a number of reasons for the selective impact of law reform, focusing on the endogeneity of the legal system to its economic context, and on resulting complementarities between legal and financial institutions.
WP422: Anglo-Saxon Capitalism in Crisis? Models of Liberal Capitalism & the Preconditions for Financial Stability
Sue Konzelman and Marc Fovargue-Davies
The return to economic liberalism in the Anglo-Saxon world was motivated by the apparent failure of Keynesian economic management to control the stagflation of the 1970s and early 1980s. In this context, the theories of economic liberalism, championed by Friederich von Hayek, Milton Friedman and the Chicago School economists, provided an alternative. However, the divergent experience of the US, UK, Canada and Australia reveals two distinct ‘varieties’ of economic liberalism: the ‘neo-classical’ incarnation, which describes American and British liberal capitalism, and the more ‘balanced’ economic liberalism that evolved in Canada and Australia. In large part, these were a product of the way that liberal economic theory was understood and translated into policy, which in turn shaped the evolving relationship between the state and the private sector and the relative position of the financial sector within the broader economic system. Together, these determined the nature and extent of financial market regulation and the system’s relative stability during the 2008 crisis.
WP421: Financial Globalisation & Human Development
Ajit Singh
This paper is concerned essentially with the question, how does financial globalisation affect welfare? Orthodox theory suggests that because of greater risk-sharing between countries that financial liberalisation entails, there should be no welfare losses. Greater risk sharing should lead to greater smoothing of consumption and/or growth trajectories for developing countries. Yet there is widespread evidence of crises following liberalisation. Apart from these international macro-economic issues, it is argued here that financial globalisation changes the very nature of capitalism from managerial to finance capitalism. This profoundly affects at the micro-economic level corporate governance, corporate finance and income distribution. Both macro- and micro-economic factors outlined here influence human development.
WP420: Equality Law & the Limits of the ‘Business Case’ for Addressing Gender Inequalities
Colm McLaughlin and Simon Deakin
The ‘business case’ for gender equality rests on the claim that organisations can improve their competitiveness through improved diversity management, in particular by reducing turnover and training costs and minimising reputational and litigation risks arising from potentially discriminatory behaviour. It is also argued that through the mechanism of socially responsible investment (SRI), shareholders can put pressure on the management of listed companies to take gender issues more seriously. We assess these claims through an empirical study which draws on interviews with institutional investors engaged in SRI and with managers in a range of organisations in both the private and public sector. We find that organisations are increasingly responding to the argument that persistent gender inequalities represent a form of mismanagement of human resources, with negative implications for the delivery of services, in the public sector, and for the efficiency of the firm, in the private sector. Shareholder engagement, however, has so far had very little impact in this area. We discuss regulatory reforms, including tighter rules on firm-level disclosure of gender policies and practices, which could address these issues.
WP419: Global Imbalances, Under-Consumption & Over-Borrowing: The State of the World Economy & Future Policies
Francis Cripps, Alex Izurieta and Ajit Singh
This paper addresses the question of whether growth convergence can be sustained in the global economy without compromising welfare and without causing major crises. It employs a simplified stock-flow analytical framework to examine the proposition that the pace and pattern of global growth is conditioned by ‘under-consumption’ in some regions of the world and ‘over-borrowing’ in other regions. A baseline projection using the Cambridge-Alphametrics model (CAM) illustrates consequences of resumed global imbalances after the 2008-2009 crisis. An alternative scenario exemplifies the case in which China and India shift towards internal income redistribution and domestic demand orientated policies and suggests that this will not be sufficient to correct global imbalances or induce improved growth rates in other developing regions. Finally a more ambitious development perspective is simulated. Such a scenario requires internationally-coordinated policy efforts, with greater role for governments in the management of demand, income distribution and environmental sustainability, as well as measures to reduce instability of exchange rate and commodity markets.
WP418: Comparative Advantage, Industrial Policy & the World Bank: Back to First Principles
Ajit Singh
This paper provides a critical analysis of the World Bank’s new thinking on industrial policy. After outlining the changing perspectives on industrial policy put forward by the World Bank over the last three decades, we argue that the bank’s economists have taken one step forward (the approval for the enhanced role of the state) but also one if not two steps backward (by strong encouragement to countries to seek their current comparative advantage in pursuing industrial policy). We argue that a critical analysis of the World Bank’s policy stance on industrial policy as on other main issues is essential because of the institution’s hegemony in policy analysis of economic development as well as its conditionality, which may now well include what this paper regards as its inappropriate industrial policy. The analysis in the paper combines classical contributions on international trade and the world economy, relevant economic history, as well as Krugman’s comments on these issues in terms of modern economic analysis. The paper concludes with reflections on the appropriate industrial policy for developing countries that the World Bank should support.