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January 22, 2010 | History

Economics and politics of alternative institutional reforms 1 edition

Economics and politics of alternative institutional reforms
Francesco Caselli

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Economics and politics of alternative institutional reforms
Francesco Caselli, Nicola Gennaioli.

Published 2007 by National Bureau of Economic Research in Cambridge, MA .
Written in English.

About the Book

"We compare the economic consequences and political feasibility of reforms aimed at reducing barriers to entry (deregulation) and improving contractual enforcement (legal reform). Deregulation fosters entry, thereby increasing the number of firms (entrepreneurship) and the average quality of management (meritocracy). Legal reform also reduces financial constraints on entry, but in addition it facilitates transfers of control of incumbent firms, from untalented to talented managers. Since when incumbent firms are better run entry by new firms is less profitable, in general equilibrium legal reform may improve meritocracy at the expense of entrepreneurship. As a result, legal reform encounters less political opposition than deregulation, as it preserves incumbents' rents, while at the same time allowing the less efficient among them to transfer control and capture (part of) the resulting efficiency gains. Using this insight, we show that there may be dynamic complementarities in the reform path, whereby reformers can skillfully use legal reform in the short run to create a constituency supporting future deregulations. Generally speaking, our model suggests that "Coasian" reforms improving the scope of private contracting are likely to mobilize greater political support because -- rather than undermining the rents of incumbents -- they allow for an endogenous compensation of losers. Some preliminary empirical evidence supports the view that the market for control of incumbent firms plays an important role in an industry's response to legal reform"--National Bureau of Economic Research web site.

Edition Notes

Title from PDF file as viewed on 3/22/2007.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.

NBER working paper series -- working paper 12833, Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12833.


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History Created December 11, 2009 · 2 revisions Download catalog record: RDF / JSON

January 22, 2010 Edited by WorkBot add more information to works
December 11, 2009 Created by WorkBot add works page