Deterrence and constrained enforcement: Alternative regimes to deal with bribery

This study embeds transaction cost analysis into a Law and Economics model to produce general recommendations on how to deter bribery. Governments may deter bribery either by high penalties and risks of detection, potentially supported by leniency given to those who report their infraction (deterrence regime). Another local optimum is achieved if the government amplifies the risk of opportunism, aggravating the difficulties of enforcing a bribe transaction. This involves a low probability of detection and allowing offenders to keep their ill-gotten gains. If bribes are paid upfront bribe taking will face only mild punishment (constrained enforcement regime). --Bribery,Corruption,Leniency,Enforcement,Deterrence,Opportunism,Reporting,Whistle-blowing,Nullity

Corporate ‘excesses’ and financial market dynamics

The recent corporate failures in the US and in Europe have considerably damaged investors’ confidence in the functioning of financial markets and the ability of the regulatory framework to safeguard their interest and prevent fraud. These episodes demonstrate that market failures exist, which can undermine the effectiveness of market discipline to ensure the appropriate allocation of capital. Specifically the paper considers four particular features of financial markets that may have given rise to market failures: (a) perverse incentives/conflict of interests, (b) destabilising trading/investment strategies, (c) lack of disclosure/transparency and (d) concentrated versus fragmented ownership structures. The paper reviews the theoretical arguments and empirical evidence related to these four possible types of market failures, illustrating these with evidence drawn from the most recent corporate scandals. The last part of the paper is devoted to the policy responses both in the US and in Europe to prevent these failures.

Regulator audit framework

Summary: The framework set out in this paper provides guidance for auditing the performance of regulators in regard to the compliance costs they impose on business and other regulated entities. It complements other frameworks that are used to assess the performance of regulators in regard to their efficiency and effectiveness, and processes for ex ante assessment of the impact of proposed regulations. The framework should be applied within institutional arrangements that establish the authority, resources, and mechanisms to hold regulators to account. For audits to improve regulator performance in this regard they need to: develop an audit plan in consultation with business and other stakeholders. This document should set out how the regulator will reduce compliance costs (good practice indicators), and how their achievement of this objective will be assessed (metrics) reward good performance and sanction poor performance comply with, and report against, the high level principles for good performance be public documents, with the audit plans and reports made available on the regulator\u27s website. In order for the audits to be undertaken in an effective and efficient way they should: focus on the principles and particular areas of regulator behaviour that have the greatest effect on the cost of compliance for businesses they regulate — these will differ across regulators select good practice indicators that best reflect regulator behaviour that minimises compliance costs while still achieving the objectives of the regulation provide metrics at the highest level possible to demonstrate the satisfaction of the principle or indicator, utilising data and information from existing sources where available require auditors to \u27triangulate\u27 information in forming a view of the satisfactory achievement of a principle be included as a separate module in external audits that examine broader areas of performance of the regulator and regulation. As part of the broader system that promotes regulation reform and reduces regulatory burden, oversight is needed to: ensure that audit plans are prepared and that both plans and audit reports are published coordinate the development of audit plans and audits to minimise the costs to business of participating in the process, and prioritise resources to where the potential for improvement is greatest facilitate feedback on the quality of the regulations and need for reform publish a report card facilitating comparison of the performance of regulators and lessons on approaches that have worked well in reducing compliance costs

Rethinking Governance: Empirical Lessons Challenge Orthodoxy

In this discussion draft, linking research findings with concrete operational challenges, we review key issues in worldwide governance, and present recent empirical evidence. Focusing on defining and unbundling key governance components, such as rule of law, voice and accountability, corruption control, and state capture, we then provide evidence which suggests a sobering picture: on average, there appears to be scant progress worldwide in recent times in improving rule of law and governance, in controlling corruption, and in improving institutional quality -- although there is clearly variance across countries. Further, recent empirical research points to the private sector as influencing public governance, thereby challenging traditional notions of the functioning of politicians, public policy and the public sector, and on the conventional determinants of the investment climate. We posit that the interplay between the elite’s vested interests and the political dynamics within a country, in turn affecting governance and corruption, has often been under-emphasized in program design. These argue for revisiting conventional approaches to promote institutional reform. In particular, we challenge the notion that passing laws by fiat, creating new public institutions, or embarking on anti-corruption 'campaigns', can be very effective, and question the value of traditional public sector management and conventional legal/judiciary reform approaches for many emerging economies. We argue instead that sharper focus on external accountability is required, focusing on: transparency mechanisms and empirically-based monitoring tools (including e*governance), as well as participatory 'voice' and incentive-driven approaches for prevention. These need to feature more prominently in providing checks and balances on traditional public institutions, in empowering non-traditional stakeholders, and in ameliorating state capture and mitigating the very ‘unequal influence' playing field in many countries. In turn, this necessitates probing deeper into the private-public governance nexus, which inter alia leads to focusing on concrete measures to address the challenges of political contestability, political financing reform, and transparency in parliaments, the judiciary and the executive. Recommendations on governance strategies for the next phase are suggested, including on the role of the international community.governance, empirical analysis, corruption, rule of law, accountability, state capture, public policy, public sector management, transparency, indicators

Financial Economists, Financial Interests and Dark Corners of the Meltdown: It’s Time to Set Ethical Standards for the Economics Profession

Epstein and Carrick-Hagenbarth analyze the conflict of interest that exists when academic financial economists, acting in their roles as presumed objective experts in the media and academia on topics, such as financial regulation, fail to report their private financial affiliations. The authors analyze the linkages between academia, private financial institutions and public institutions of nineteen academic financial economists who are members of two groups who have put forth proposals on financial reform.<span> </span>In addition, they review media writings and appearances, as well as the academic papers of these economists between 2005 and 2009, to determine the portion of the time these economists identified their affiliations with private or public financial institutions when writing about or commenting on financial policy issues. The vast majority of the time, these economists did not identify these affiliations and possible conflicts of interest. In light of these and related findings the authors call for an economists’ code of ethics which would require academic economists to identify these connections in appropriate contexts.Professional Ethics, Financial Regulation, Academic Economists, Codes of Ethics, conflicts of interest

Empowerment or Engagement? Digital Health Technologies for Mental Healthcare

We argue that while digital health technologies (e.g. artificial intelligence, smartphones, and virtual reality) present significant opportunities for improving the delivery of healthcare, key concepts that are used to evaluate and understand their impact can obscure significant ethical issues related to patient engagement and experience. Specifically, we focus on the concept of empowerment and ask whether it is adequate for addressing some significant ethical concerns that relate to digital health technologies for mental healthcare. We frame these concerns using five key ethical principles for AI ethics (i.e. autonomy, beneficence, non-maleficence, justice, and explicability), which have their roots in the bioethical literature, in order to critically evaluate the role that digital health technologies will have in the future of digital healthcare

The political economy of development aid as main source of foreign finance for poor African countries: loss of policy space and possible alternatives from East Asia

This paper discusses the political economy of development aid flows to poor countries in Sub-Saharan Africa and the potential role of China to generate opportunities for a recovery of policy space in these countries. We argue that the loss of policy space in many poor SSA countries is associated with donor-recipient relations in aid flows over the past two decades. The influential role of Western donor agencies and the growing marginalisation of SSA countries from international capital flows have left scarce policy space to their governments for more innovative trade, agricultural and industrial policies. The recent New Aid Agenda and the concomitant Western aid harmonization through budget support are likely enhance donors’ influence on policy making and to exacerbate this process despite claims of greater ‘ownership’. Learning from East Asian success stories has been hampered by the unequal bargaining power of SSA governments vis-à-vis their ‘development partners’. More recently, China has started to become an increasingly important player for some SSA countries and Chinese FDI and aid flows are already s significant reality there. Typically these ‘new’ relations may be seen with suspicion by Western ‘development’ partners, but we argue that this (and the cooperation of other Asian governments in a South-South cooperation framework) may be a significant opportunity for some SSA countries to regain part of the policy space lost in the 1980s and 1990s