Licensing regimes East and West

International Review of Law and Economics

Volumn 25, Issue 1, 2005, Pages 124-142

  Ogus, Anthony ^a,b   Zhang, Qing ^a  

^a UNIVERSITY OF MANCHESTER   (United Kingdom)

^b MAASTRICHT UNIVERSITY   (Netherlands)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 20444447555     PISSN: 01448188     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.irle.2004.06.003     Document Type: Article

References (110)

1. Regulatory Reform, Privatisation and Competition Policy (1992).
2. For example: L. Guasch and R.W. Hahn, "The Costs and Benefits of Regulation: Implications for Developing Countries", Working Paper 1773 (1999)
3. E. Estache and D. Martimort, "Politics, Transaction Costs, and the Design of Regulatory Institutions", Working Paper 2073 (1999), both available on the World Bank website: http://worldbank.org/
4. For example: K. Pistor, "The Evolution of Legal Institutions and Economic Regime Change", in: J. Stiglitz and P.A. Muet (Eds.), Governance, Equity, and Global Markets (Oxford University Press, 1999), Chapter 6.
5. The economic literature has tended to focus on occupational licensing which has special features. See S. Svorny, "Licensing, Market Entry Regulation", in: B. Bouckaert and G. De Geest (Eds.), Encyclopedia of Law and Economics, Vol. III (Edward Elgar, 2000), 5120.
6. K. Schwab, et al., The Global Competitiveness Report 2001 (Oxford University Press, 2001).
7. S. Djankov, R. La Porta, F. Lopez de Silanes and A. Shleifer, "The Regulation of Entry", (2002) 117 Quarterly Journal of Economics 1 and see the database to be found at http://worldbank.org/DoingBusiness/TopicReports/EntryRegulation
8. European Commission, Benchmarking: The Administration of Business Start-Ups (Final Report) (2002).
9. For this distinction between economic and social regulation, see A. Ogus, Regulation: Legal Form and Economic Theory (Clarendon Press, 1994), 4-5.
10. Svorny, above, no. 4, 309-314.
11. Bureau of Industrial Economics (Australia), Business Licences: International Benchmarking (Report 96/9, 1996), 10-14
12. N. Devas and R. Kelly, "Regulation or Revenue? Implementing Local Government Business Licence Reform in Kenya", (2001) 21 Public Administration and Development 381, 383.
13. C. Scott and J. Black, Cranston's Consumers and the Law (3rd edn., Butterworths, 2000), 460. The World Bank study (above, no. 6) conflates the two types, but the EU study (above, no. 7) focuses mainly on registration.
14. The distinction is made in J. Morisset and O.L. Neso, "Administrative Barriers to Foreign Investment in Developing Countries", World Bank Policy Research Working Paper No. 2848 (2002), available at: http://econ.worldbank.org/files/
15. Scott and Black, above, no. 11, 448.
16. Ogus, above, no. 8, 215.
17. Ibid., 221.
18. See the reference in no. 6, above.
19. Bureau of Industrial Economics, above, no. 10, 20-24; European Commission, Benchmarking, above, no. 7. Details on systems in inter alia Austria, Belgium, Finland, Greece, Luxembourg, Quebec, and Sweden collated for the Benchmarking report by WIFO can be found at: http://bm-licensing.wsr.ac.at/reports/reports.html
20. Djankov et al., above, no. 6. See also the World Bank database, above, no. 6.
21. Detailed information on entry procedures in Colombia is available on the World Bank database, ibid.
22. Bureau of Industry Economics, above, no. 10, 21-24.
23. For example: Austria, Luxembourg, Portugal and Sweden: See the WIFO reports, above, no. 17.
24. World Bank Database, above, no. 6
25. Morisset and Neso, above, no. 12, 5-6. For Russia, see FIAS, "Administrative Barriers to Investment within Subjects of the Russian Federation", (2001), available at http://www.fias.net/documents/.
26. There is a well-recognised difference between "automatic" and "non-automatic" licensing in this area. We are concerned only with the latter; the former can be categorised as registration and is used mainly for compiling trade statistics: See OECD, "Analysis of Non-tariff Measures: The Case of Non-automatic Import Licensing", (2002), available at http://www.olis.oecd.org/
27. See OECD, "Analysis of Non-tariff Measures: The Case of Export Restrictions", (2003), available at http://www.olis.oecd.org/.
28. See also C. Michalopoulos, "Trade Policy and Market Access Issues for Developing Countries: Implications for the Millennium Round", World Bank Working Paper (1999) no. 2214, available at http://econ.worldbank.org/docs
29. Scott and Black, above, no. 11, 462-464.
30. D. Swann, "The Regulatory Scene: An Overview", in: K. Button and D. Swann (Eds.), The Age of Regulatory Reform (Clarendon Press, 1980), 5.
31. C. Graham, Regulating Public Utilities: A Constitutional Approach (Hart, 2000).
32. R.D. Blair and S. Rubin (Eds.), Regulating the Professions: A Public Policy Symposium (Lexington Books)1980
33. S. Rottenberg (Ed.), Occupational Licensure and Regulation (American Enterprise Institute, 1980)
34. M. Faure, J. Finsinger, J. Siegers and R. Van den Bergh (Eds.), Regulation of the Professions: A Law and Economics Approach to the Regulation of Attorneys and Physicians in the US, Belgium, the Netherlands, Germany and the UK (Maklu, 1993).
35. Bureau of Industrial Economics, above, no. 10, 12.
36. Illinois Code; Chapter 110.
37. Ogus, above, no. 8, 226.
38. For the reforms and their background, see W. Cui, "Shenpi (Licensing) Reform from the Perspective of One Municipal Jurisdiction: Ideologies, Institutions, and Law", 2003 33 Hong Kong Law Journal 417.
39. The Enterprise Registration Bureau of National Industry and Commerce Administration of P.R.C. (hereafter ERB), Collection of Laws and Regulations Concerning Prior Approvals for Enterprises' Registry (2000), 712. The list is incomplete. For example, it does not cover the education industry.
40. ERB, above, no. 34, 37-75; the licensing regimes of felling trees and transporting trees out of the forest regions are respectively stated in Article 32 and Article 37 of the Forestry Law of the People's Republic of China (1998).
41. ERB, above, no. 34, 76-124.
42. ERB, above, no. 34, 15-19.
43. ERB, above, no. 34, 11-15.
44. Bureau of Industrial Economics, Business Licences and Regulation Reform (Report 96/10, 1996), 18-19.
45. Morisset and Neso, above, no. 12.
46. In, e.g., Malaysia, Kenya and the Philippines. For general discussion, see F. Sader, "Do "One-stop Shops" work?", FIAS (Foreign Investment Advisory Services) working paper, available at http://www.fias.net/documents/.
47. Ogus, above, no. 14
48. Svorny, above, no. 4.
49. C.D. Foster, Privatization, Public Ownership and the Regulation of Natural Monopoly (Blackwell, 1992), 197-205.
50. D. Ray, Development Economics (Princeton University Press, 1998), 650-655.
51. The justification has vintage support. See, e.g., C.F. Bastable, The Commerce of Nations (10th edn., Methuen, 1927), 140-143.
52. For recent literature, see A.O. Krueger, "Trade policies in developing countries", in: G.M. Grossman and K. Rogoff (Eds.), Handbook of International Economics (Elsevier, 1997), Vol. 1, Chapter 11.
53. R.Z. Lawrence and R.E. Litan, Saving Free Trade: A Pragmatic Approach (Brookings Institution, 1986), 19.
54. Krueger, above, no. 44.
55. See also M. Bell, B. Ross-Larson and L. Westphal (1984). "Assessing the Performance of Infant Industries", (1984) 16 Journal of Development Economics 101-128.
56. A.W. Goudie and D. Stasavage, "A Framework for the Analysis of Corruption", (1998) 29 Crime, Law and Social Change 113, 128-129.
57. Ray, above, no. 44, 674.
58. M.J. Trebilcock and R. Howse, The Regulation of International Trade (2nd edn., Routledge, 1999), 382-383.
59. Krueger, above, no. 44
60. Bell et al., above, no. 46.
61. Although, given the existence of customs clearance procedures, the marginal additional administrative cost of a licensing system at this point may not be large.
62. See, e.g., H.J. Bruton, "A Reconsideration of Import Substitution", (1998) 36 Journal of Economic Literature 903.
63. P. Nelson, "Information and Consumer Behavior", (1970) 78 Journal of Political Economy 311.
64. G. Akerlof, "The Market for "Lemons": Qualitative Uncertainty and the Market Mechanism", (1970) 89 Quarterly Journal of Economics 48.
65. For a survey of paternalist arguments, and of the difficulties to which they may give rise, see P. Burrows, "Analyzing Legal Paternalism", (1995) 15 International Review of Law and Economics 489.
66. S. Shavell, "The Optimal Structure of Law Enforcement", (1993) 36 Journal of Law and Economics 255.
67. Ogus, above, no. 14, 215.
68. Bureau of Industrial Economics, above, no. 39, 19-20.
69. Economists have devised sophisticated methods of dealing with this problem. For life and human health, see M. Jones-Lee, The Economics of Safety and Physical Risk (Blackwell, 1989); and for the environment
70. see T.C. Haab, Valuing Environmental and Natural Resources (Edward Elgar, 2002).
71. R.G. Noll and J.E. Krier, "Some Implications of Cognitive Psychology for Risk Regulation", in: C. Sunstein (Ed.), Behavioral Law and Economics (Cambridge University Press, 2000), Chapter 13.
72. W.K. Viscusi, Rational Risk Policy (New York University Press, 1998), 17.
73. C. Sunstein, Risk and Reason: Safety, Law, and the Environment (Cambridge University Press, 2002), 112-113.
74. Including invocation of the influential, but highly ambiguous, "precautionary principle", on which see A. Ogus, "Risk Management from an Economic Perspective", in: E. Vos (Ed.), Recht en Risico (Maklu, forthcoming).
75. Majone G. "What Price Safety? The Precautionary Principle and its Policy Implications", (2002) 40 Journal of Common Market Studies 89.
76. H.G. Grabowski and J.M. Vernon, The Regulation of Pharmaceuticals: Balancing the Benefits and Risks (American Enterprise Institute, 1983), 9-12.
77. A. Ogus and C. Abbot, "Pollution and Penalties", (2002) 20 Research in Law and Economics 493.
78. There is no such licensing regime for sales of complete developments, perhaps because Chinese legislators think that here purchasers bear less risk of opportunistic behaviour by developers-at least they can recover the losses by seizing the fully-developed property.
79. The Urban Real Estate Administration Act of the People's Republic of China (1994), art. 44.
80. S. Johnson, D. Kaufmann and P. Zoido-Lobaton, "Regulatory Discretion and the Unofficial Economy", (1998) 88 American Economic Review (Papers & Procs) 387.
81. See e.g., E. Suhir and Z. Kovach, Administrative Barriers to Entrepreneurship in Central Asia (Center for International Private Enterprise, 2003), available at http://www.cipe.org/pdf/publications/. For evidence on the problem in the Philippines, see: http://www.sunstar.com.ph/static/zam/2002/12/06/news/ fake.business.permits.in.use.html.
82. In the Philippines, all businesses must obtain a "master" licence from the local mayor's office. This is designed, inter alia, to ensure that firms have obtained all the necessary activity licences and paid all licensing fees before commencing trading. See: http://rru.worldbank.org/DoingBusiness/TopicReports/ EntryRegulations-Summary.aspx?regionid=153.
83. The system might generate scale economicsin policing the existence of multiple licenses. See C. Abuodha and R. Bowles, "Business licence reform in Kenya and its impact on small enterprises", (2000) 11 Small Enterprise Development 16. But it adds a further barrier to entry which itself, to be effective, must be policed.
84. See, e.g., R. Kelly et al., Improving Revenue Mobilization in Malawi: Study on Business Licensing and Property Rates, Report prepared for the Government of Malawi and UNCDF (2001), available at: http://www.uncdf.org/english/countries/malawi/local_governance.
85. Devas and Kelly, above, no. 10.
86. J.L. Mikesell, Fiscal Administration Analysis and Applications for the Public Sector (Dorsey Press, 1986), 373, cited in Devas and Kelly, above, no. 10, 383.
87. The theories and literature are surveyed in Ogus, above, no. 14, Chapter 4.
88. Surveyed in Svorny, above, no. 4, 309-314.
89. Existing suppliers are often exempt from new, more stringent, conditions of entry by so-called "grandfather" clauses: W.D. White, "Dynamic Elements of Regulation: The Case of Occupational Licensure", (1979) 1 Research in Law and Economics 15.
90. Svorny, above, no. 4, 301.
91. M. Olson, The Logic of Collective Action (Harvard University Press, 1965).
92. Faure et al., above, no. 29.
93. Ogus, above, no. 14, 229-230.
94. A. Ogus, "Property Rights and Freedom of Economic Activity", in: L. Henkin and A.J. Rosenthal (Eds.), Constitutionalism and Rights: The Influence of the United States Constitution Abroad (Columbia University Press, 1990), Chapter 5.
95. A. Ogus, "Regulatory Law: Some Lessons from the Past", (1992) 12 Legal Studies 1.
96. A.R. Bridbury, "Markets and Freedoms in the Middle Ages", in: B.L. Anderson and A.J.H. Latham (Eds.), The Market in History (Croom Helm, 1986), Chapter 4.
97. Ogus, above, no. 83, 8.
98. R. Kenser, Economic Control and Colonial Development (Clio Press, 1981), 179-185.
99. Y. Ghai, "The Rule of Law, Legitimacy and Governance", in: Y. Ghai, R. Luckham and F. Snyder (Eds.), The Political Economy of Law: A Third World Reader (Oxford University Press, 1987), 256.
100. For general accounts of these issues, see W. Niskanen, Bureaucracy and Representative Government (Aldine, Atherton, 1971) and A. Breton and R. Wintrope, The Logic of Bureaucratic Conduct (Cambridge University Press, 1982).
101. A Breton and R. Wintrope, The Logic of Bureaucratic Conduct (Cambridge University Press, 1982).
102. See the references cited in no. 88.
103. On which, see P. Bardhan, "Corruption and Development: A Review of Issues", (1997) 35 Journal of Economic Literature 1320,
104. S. Rose-Ackerman, Corruption and Government: Causes, Consequences and Reform (Cambridge University Press, 1999).
105. See the corruption rankings recorded in Transparency International, 2002 (available at http://www.transparency.org/cpi/2002/cpi2002.en.html) based on perceptions of the degree of corruption as seen by business people, academics and risk analysts. Although, in general, industrialised countries rank above developing countries, Singapore (5th), Hong Kong (14th), Chile (17th) and Botswana (24th) come ahead of France (25th), Italy (31st) and Greece (44th) in terms of freedom from corruption.
106. Djankov et al., above, no. 6, 26-27.
107. M. Manion, "Corruption by Design: Bribery in Chinese Enterprise Licensing", (1996) 12 Journal of Law, Economics and Organization 167, 169 and the references there cited.
108. M. Weber, Economy and Society (tr. G. Roth and C. Wittich, Bedminister Press, 1968), 957-959.
109. R. Rose, The Problem of Party Government (Macmillan, 1974).
110. A. Seidman and R. Seidman, State and Law in the Development Process: Problem-Solving and Institutional Change in the Third World (Macmillan, 1994), 152.