CEU, Economics Department, Spring 2006

Instructor: Prof. Peter Grajzl
Office: #810
Office Hours: By appointment
Course: 2 credits

Course Description

This course presents topics in economic analysis of legal institutions and the law, emphasizing a comparative perspective.
Comparative Institutional Economics 1, taught in the Winter semester, is not a prerequisite for this course.

The course is open to PhD and advanced MA students. Prerequisites include graduate level microeconomic theory and

Class Times

Class time will be divided into twelve 120-minute lectures.

Course Requirements

Grading will be based on a final exam of a take-home, open-book format. Complementary grading arrangements (e.g.
involving student participation, presentations, short paper) may be introduced.

Reading List

The following reading list has more entries than will be covered in the course and thus serves as a guideline to the literature
on particular topics. Additional readings may be added as we go along. Which readings are most pertinent will be indicated
in class. Readings not available on the internet or in the library will be provided.

0. Introduction

Djankov, S., E. Glaeser, R. La Porta, F. Lopez-de-Silanes, and A. Shleifer. 2003. "The New Comparative Economics."
Journal of Comparative Economics, 31:4, 595-619.

1. Law Enforcement and Law Making

Glaeser, E., S. Johnson and A. Shleifer. 2001. "Coase vs. the Coasians: the Regulation and Development of Securities
Markets in the Czech Republic and Poland." Quarterly Journal of Economics, 116:3, 853-899.

Glaeser, Edward and Andrei Shleifer. 2003. "The Rise of the Regulatory State." Journal of Economic Literature, 41,

Xu, Chenggang and Katharina Pistor. 2005. "Enforcement Failure Under Incomplete Law: Theory and Evidence from
Financial Market Regulation." Working paper.

Shavell, Steven. 1984. "A Model of the Optimal Use of Liability and Safety Regulation." Rand Journal of Economics, 15:2.

Garoupa, Nuno and Fernando Gomez-Pomar. 2004. "Punish Once or Punish Twice: A Theory of the Use of Criminal
Sanctions in Addition to Regulatory Penalties." American Law and Economics Review, 6:2, 410-433.

Banner, Stuart. 1998. "The Origin of the New York Stock Exchange, 1791-1860" Journal of Legal Studies, 27, 113-140.

Shavell, Steven. 2000. "The Economic Theory of Public Enforcement of Law." Journal of Economic Literature, 38:1, 45-76.

Hay, Jonathan and Andrei Shleifer. 1996. "Private Enforcement of Public Laws: A Theory of Legal Reform." American
Economic Review, 88:2, 398-403.

2. Legal Origin

Glaeser, Edward and Andrei Shleifer. 2002. "Legal Origins." Quarterly Journal of Economics, 117, 1193-1230.

Glaeser, E., R. La Porta, F. Lopez-de-Silanes, and A. Shleifer. 1998. "Law and Finance." Journal of Political Economy,
106, 1113-1155.

Zingales, L. and R. Rajan. 2003. "The Great Reversals: The Politics of Financial Development in the 20th Century."
Journal of Financial Economics, 69:1, 5-50.

Beck, Thorsten, Asli Demirguc-Kunt and Ross Levine. 2003. "Law and Finance: Why Does Legal Origin Matter?"
Journal of Comparative Economics, 31: 653-675.

La Porta, Rafael, Florencio Lopez-de-Silanes and Andrei Shleifer. 2004. "Judicial Checks and Balances." Journal
of Political Economy, 112:2, 445-470.

3. Legal Transplants

Berkowitz, Daniel, Katharina Pistor and Jean-Francois Richard. 2003. "The Transplant Effect." American Journal of
Comparative Law, 51:1, 163-204.

Kahn-Freund, Otto. 1974. "On Uses and Misuses of Comparative Law". Modern Law Review, 37:1, 1-27.

Kanda, Hideki and Curtis J. Milhaupt. 2003. "Re-examining Legal Transplants: The Director's Fiduciary Duty in Japanese
Corporate Law." American Journal of Comparative Law, 51.

Miller, Jonathan M. 2003. "A Typology of Legal Transplants: Using Sociology, Legal History and Argentine Examples to
Explain the Transplant Process." American Journal of Comparative Law, 51, 839-885.

Mukand, Sharun W. and Dani Rodrik. 2005. "In Search of the Holy Grail: Policy Convergence, Experimentation, and
Economic Performance." American Economic Review, 95:1, 374-383.

Posner, Richard. 1998. "Creating a Legal Framework for Economic Development." World Bank Research Observer,
13:1, 1-11.

4. Legal Harmonization and Legal Competition

Van den Bergh, R. 2000. "Towards an Institutional Legal Framework for Regulatory Competition in Europe."
Kyklos, 435-466.

Wagner, Gerhard. 2002. "The Economics of Harmonization: The Case of Contract Law." Common Market Law
Review, 39, 995-1023.

Smits, Jan M. 2005. "Diversity of Contract Law and the European Internal Market." Working paper.

Carbonara, Emanuela and Francesco Parisi. 2005. "Economics of Legal Harmonization". Working paper.

Garoupa, Nuno and Anthony Ogus. 2006. "A Strategic Interpretation of Legal Transplants." Journal of Legal
Studies, 35:2.

Casella, Alessandra and Jonathan S. Feinstein. 2002. "Public Goods in Trade: On the Formation of Markets
and Jurisdictions." International Economic Review, 43, 437-462.

Crettez, Bertrand and Regis Deloche. 2006. "On the Unification of Legal Rules in the European Union." European
Journal of Law and Economics, 21, 203-214.

Bar-Gill, Oren, Michal Barzuza and Lucian Bebchuk. 2006. "The Market for Corporate Law." Journal of Institutional
and Theoretical Economics, 162:1, 134-160.

5. Law and Social Norms

Posner, Richard. 1997. "Social Norms and the Law: An Economic Approach." American Economic Review, 87:2,

Ellickson, Robert. 1998. "Law and Economics Discovers Social Norms." Journal of Legal Studies, 27:2, 537-552.

Rasmusen, Eric B. and Richard H. McAdams. 2005. "Norms in Law and Economics." In Shavell, S.and M. Polinsky
(eds.), Handbook of Law and Economics, forthcoming.

Shavell, Steven. 2002. "Law versus Morality as Regulators of Conduct." American Law and Economics Review, 4:2,

Knight, Jack. 1998. "The Bases of Cooperation: Social Norms and the Rule of Law." Journal of Institutional and
Theoretical Economics, 154:4, 754-763.