Inter-Jurisdictional Linkages and the Scope for Interventionist Legal Harmonization

Review of Law and Economics, Vol. 7, No. 2, pp. 405-434, 2011

Posted: 9 Jan 2012

See all articles by Andrzej Baniak

Andrzej Baniak

Central European University (CEU) - Department of Economics

Peter Grajzl

Washington and Lee University - Department of Economics; CESifo

Date Written: January 9, 2012

Abstract

We study the desirability of interventionist harmonization of legal standards across multiple, mutually interdependent jurisdictions which strive to adapt law to their local conditions, as well as to synchronize it with other jurisdictions. In a setting where jurisdictions are privately informed about their local conditions, we contrast the regime of decentralized standard-setting with two means of interventionist harmonization: through centralization and through allocation of lawmaking authority to a particular jurisdiction. Our analysis illuminates the importance of patterns of inter-jurisdictional linkages in delineating the scope for, and the appropriate means of, interventionist harmonization. We find that greater jurisdictional interdependence -- the hallmark of globalization -- does not per se justify interventionist harmonization, unless increased interdependence results in notable asymmetries in the pattern of jurisdictional interdependence. We also show that, in the presence of cross-jurisdictional externalities, harmonization is, contrary to conventional predictions, not desirable when local preferences are homogeneous across jurisdictions.

Keywords: Harmonization, centralization, delegation, cross-jurisdictional externalities, jurisdictional interdependence, globalization

JEL Classification: D02, D82, K40, P50

Suggested Citation

Baniak, Andrzej and Grajzl, Peter, Inter-Jurisdictional Linkages and the Scope for Interventionist Legal Harmonization (January 9, 2012). Review of Law and Economics, Vol. 7, No. 2, pp. 405-434, 2011. Available at SSRN: https://ssrn.com/abstract=1981956

Andrzej Baniak

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary
(36) 1 327-3231 (Phone)
(36) 1 327-3232 (Fax)

Peter Grajzl (Contact Author)

Washington and Lee University - Department of Economics ( email )

Lexington, VA 24450
United States

HOME PAGE: http://home.wlu.edu/~grajzlp/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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