American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Articles The Economics and Law of Sovereign Debt and Default UgoPanizzaUNCTAD and Graduate Institute, Geneva FedericoSturzeneggerU Torcuato di Tella and Banco Ciudad JerominZettelmeyerIMF and European Bank for Reconstruction and Development 651 98 This paper surveys the recent literature on sovereign debt and relates it to the evolution of the legal principles underlying the sovereign debt market and the experience of the most recent debt crises and defaults. It finds limited support for theories that explain the feasibility of sovereign debt based on either external sanctions or exclusion from the international capital market and more support for explanations that emphasize domestic costs of default. The paper concludes that there remains a case for establishing institutions that reduce the cost of default but the design of such institutions is not a trivial task. http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.651 10.1257/jel.47.3.651 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Articles The Effects of Privatization and Ownership in Transition Economies SaulEstrinLondon School of Economics and IZA, Bonn JanHanousekCharles U Prague and CERGE-EI EvzenKocendaCharles U Prague and CERGE-EI JanSvejnarU MI and CERGE-EI 699 728 In this paper, we evaluate what we have learned to date about the effects of privatization from the experiences during the last fifteen to twenty years in the postcommunist (transition) economies and, where relevant, China. We distinguish separately the impact of privatization on efficiency, profitability, revenues, and other indicators and distinguish between studies on the basis of their econometric methodology in order to focus attention on more credible results. The effect of privatization is mostly positive in Central Europe, but quantitatively smaller than that to foreign owners and greater in the later than earlier transition period. In the Commonwealth of Independent States, privatization to foreign owners yields a positive or insignificant effect while privatization to domestic owners generates a negative or insignificant effect. The available papers on China find diverse results, with the effect of nonstate ownership on total factor productivity being mostly positive but sometimes insignificant or negative. http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.699 10.1257/jel.47.3.699 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Articles Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead AntonioEstacheECARES, Free U Brussels LiamWren-LewisU Oxford 729 70 The efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction. However, recent reforms aimed at improving the performance of these sectors have had limited success. Evidence suggests that, in many instances, this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries. This article surveys more recent theoretical work focusing on problems with regulation in these countries. At the heart of the survey is the work of Jean-Jacques Laffont, who, in the last decade of his life, set about developing a theoretical framework for regulation in developing countries. We consider the implications of his work, which focused on the key institutional limitations faced in developing countries. We then discuss where experience suggests that there are important omissions from this modeling, bringing in extensions and alternative approaches pursued by other authors. We conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak. Overall, we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries. http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.729 10.1257/jel.47.3.729 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Articles A Review of Edward Luce's In Spite of the Gods: The Strange Rise of Modern India LantPritchettHarvard U 771 80 India poses a development puzzle on a grand scale. Sixty years of electoral democracy, thirty years of rapid growth, and a number of world class institutions (such as the Institutes of Technology or Election Commission) have led to talk of India as a superpower in a league with the United States and China. Yet, on many fronts, India's indicators of human well-being (e.g., malnutrition, immunization) are at, or below, those of much poorer sub-Saharan African countries. Measures of the administrative capacity of the state on basics like attendance, performance, and corruption reveal a potentially "flailing state" whose brilliantly formulated policies are disconnected from realities on the ground. This review essay of Ed Luce's In Spite of the Gods attempts to articulate the puzzle that is modern India and pose questions about the development trajectory of a country whose fortunes will shape our century. http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.771 10.1257/jel.47.3.771 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Articles Finance and Politics: A Review Essay Based on Kenneth Dam's Analysis of Legal Traditions in The Law-Growth Nexus Mark J.RoeHarvard U Jordan I.SiegelHarvard U 781 800 Strong financial markets are widely thought to propel economic development, with many in finance seeing legal tradition as fundamental to protecting investors sufficiently for finance to flourish. Kenneth Dam finds that the legal tradition view inaccurately portrays how legal systems work, how laws developed historically, and how government power is allocated in the various legal traditions. Yet, after probing the legal origins' literature for inaccuracies, Dam does not deeply develop an alternative hypothesis to explain the world's differences in financial development. Nor does he challenge the origins core data, which could be origins' trump card. Hence, his analysis will not convince many economists, despite that his legal learning suggests conceptual and factual difficulties for the legal origins explanations. Yet, a dense political economy explanation is already out there and the origins-based data has unexplored weaknesses consistent with Dam's contentions. Knowing if the origins view is truly fundamental, flawed, or secondary is vital for financial development policy making because policymakers who believe it will pick policies that imitate what they think to be the core institutions of the preferred legal tradition. But if they have mistaken views, as Dam indicates they might, as to what the legal traditions' institutions really are and which types of laws are effective, or what is really most important to financial development, they will make policy mistakes -- potentially serious ones. http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.781 10.1257/jel.47.3.781 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Journal Article Book Reviews 801 60 http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.801 10.1257/jel.47.3.801 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Journal Article Front Matter 647 650 http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.647 10.1257/jel.47.3.647 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Journal Article Annotated Listing of New Books 861 963 http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.861 10.1257/jel.47.3.861 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 47 3 September 2009 http://www.aeaweb.org/issue.php?journal=JEL&volume=47&issue=3 Journal Article JEL Classification System 964 977 http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.964 10.1257/jel.47.3.964