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Abstract: This article discusses two opposed hypotheses to predict the behavior of judges when they have to decide a claim between parties with asymmetrical economic and political power. The first, which has broad acceptance among policy makers in Brazil, is the jurisdictional uncertainty hypothesis (Arida et al, 2005) that suggests that Brazilian judges tend to favor the weak party in the claim as a form of social justice and redistribution of income in favor of the poor. Glaeser et al. (2003) stated the second hypothesis. They suggest that the operation of legal, political and regulatory institutions is subverted by the wealthy and politically powerful for their own benefit, a situation they call King John redistribution. An empirical test was conducted analyzing judicial decisions from 16 Brazilian states, showing that a) judges favor the strongest party, b) a local powerful party has more chance to be favored than a national or foreign big company, a effect we named parochial subversion of justice and c) in Brazilian states where we have more social inequality there is higher probability that a discussed contract clause will not be maintained.
Inequality, Subversion of Justice, Property Rights
Abstract: This article discusses two opposed hypotheses to predict the behavior of judges when they have to decide a claim between parties with asymmetrical economic and political power. The first, which has broad acceptance among policy makers in Brazil, is the jurisdictional uncertainty hypothesis (Arida et al, 2005) that suggests that Brazilian judges tend to favor the weak party in the claim as a form of social justice and redistribution of income in favor of the poor. Glaeser et al (2003) stated the second hypothesis. They suggest that the operation of legal, political and regulatory institutions is subverted by the wealthy and politically powerful for their own benefit, a situation they call King John redistribution. An empirical test was conducted analyzing judicial decisions from 16 Brazilian states, showing that a) judges favor the strongest party, b) a local powerful party has more chance to be favored than a national or foreign big company, a effect we named parochial subversion of justice and c) in Brazilian states where we have more social inequality there is higher probability that a discussed contract clause will not be maintained.
Abstract: This paper discusses some of the foundations of the rule of law and due process of law. It makes a counterpoint to the widespread idea that more formalism leads to more corruption and worse institutions (Djankov et al, 2003). Following these authors, de degree of formalism, as measured by an index they propose, vary according to the legal origin, and the higher formalism index results in less impartial, affordable, honest and quick justice. The paper construct upon this hypothesis, taking into account the proposition that in the presence of great inequality in economic and political resources, the wealthy and the politically powerful will subvert institutions in their own benefit, as proposed by Glaeser, Scheinkman and Shleifer (2003). In such situation the outcome of more formalism will be the opposite of the predicted, and one will face a lesser degree of corruption and better institutions. This concept would be at root of the rules aimed at assuring the due process of law. Departing from the dataset and models used by Djankov et al, the article tests the interaction between the formalism index Djankov et al propose and an inequality index (GINI), resulting in a significant and positive relation between this interaction the quality of the judicial system. The cross-country analysis made stills for several others formalism, corruption and institutional quality indexes. When controlled for endogeneity the results are not so strong due the use of weak instruments (legal origin), both for the article hypothesis and for the Djankov et al hypothesis. At end, some tests are made trying to separate the elements of formalism that are detrimental to subversion of justice from those that are harmful for justice, as a guidance to policy-makers.
Inequality, Growth, Subversion of Institutions, Legal System
Abstract: This article discusses the effects of judicial uncertainty over investments in stock bonds, and the Securities and Exchange Commission of Brazil (CVM) role in assuring certainty to investors. The article goes with an empirical investigation about the certainty provided by specialized commercial courts. In the first part the article propose a model for the analysis of the potential interest conflict between administrators of public traded companies and small stockholders. Departing from canonical models proposed by Holmström and Milgrom (1987), it is shown that the uncertainty in the interpretation of the agreement between administrators and small shareholders not only harm the willingness to invest of the latter, but also would reduce the efforts of the former. The social result in this case would be inefficient. In the second part an empirical test tries to investigate if a court specialized in commercial cases could bring more certainty in judicial appreciation of contracts in stock market. From the analysis of 136 judicial decisions in the State Appeal Court of Rio de Janeiro was observed that fist degree decision of specialized courts stands between 12.5% and 15% less chance of being changed in appeal courts, even when they decide similar cases.
Regulation, Investments, Uncertainty, Legal System
Abstract: This article discusses the theoretical foundations of the concept of jurisdictional uncertainty, which means, the uncertainties associated to the settlement of contracts in the Brazilian jurisdiction, and that manifests itself predominantly as an anti-saver and anti-creditor bias. According to Arida et al (2005), Brazilian judges tend to favor the weak part in the claim, not the just, as a form of social justice and redistribution of income in favor of the poor people. The article shows that there is no point for the judge in deciding against the law to favor the poor. A utility function is discussed, taking into account the advantages the judge could gain from this behavior, outweighed by the penalties such as professional criticism and the reversal by a higher court. As a result, its predicted that the judge will refrain itself from deciding disregarding the original tenor of legislation, and this behavior could favor the wealthy and politically powerful. An empirical test was conducted, analyzing 181 judicial decisions, and the results were supportive to the main ideas, showing that a contract has 45% more of chances of being maintained if it is beneficial to the richer. The judiciary disregards the contract only in the areas that the Legislative decided to protect the weaker part, such as in labor contracts, social security and environment. In areas like financial contracts, commercial law and landlord-tenant relations, the judges do not interfere.
Judicial System, Economic Growth, Judge's Impartiality
Abstract: Recent empirical research has tried to assess the influence of good institutions over economic development (North, 1990). Cross-country analysis has been the traditional approach, however these studies are criticized because of the institutional measures they employ. Indeed, these indexes could be blamed as being not objective and biased. Either the choosing of its components relies in the preferences of the researcher (Dam, 2007), or they are plagued with biases due to the use of attitudinal measures and opinion surveys (Glaeser et al, 2004). This research proposes a new institutional index and calculates it for Brazilian states. Instead of picking variables and assessing their weight arbitrarily, the methodology tries to check the effects of these variables in the likelihood of a contract being maintained by judiciary. The regression analysis of 86 contractual cases in 16 Brazilian states is used to determine the relevant variables and their coefficients, departing from the studies of Ribeiro (2007a). After this calibration, the index is calculated for all 27 Brazilian states. The variables in model are either determinants of judicial independence or proxies for the level of confidence in judiciary independence and seem to circumvent data collection problems in research.
Legal System, Contracts, Economic Development
Abstract: This paper is an attempt to measure different institutional settings, regarding the consumer's rights protection, by the consumer's willingness to pay for the guarantee provided by the retail seller. Since the guarantee rely partially on the reputation and partially on the institutions (namely, the law and the enforcement provided by the courts), one can say that the less is the willingness to pay, less credible is the guarantee promise and hence more weak are the institutions and the reputation mechanisms. A model to comparative institutional analysis proposed here, departing from these arguments, use the hedonic price analysis to isolate the e¤ect of the guarantee over the price charged in one product. Further, an opinion survey tries to connect the results of the regression analysis to institutional environment and reputation mechanisms. Some research lines are proposed at end, and some conclusions about institutional reform are made.
Direitos de Propriedade, Direitos do Consumidor, Desenvolvimento Econômico
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