Citation

Discussion Paper Details

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Title: Law Enforcement under Incomplete Law: Theory and Evidence from Financial Market Regulation

Author(s): Katharina Pistor and Chenggang Xu

Publication Date: February 2003

Keyword(s): financial market, incomplete law, law enforcement and regulation

Programme Area(s): Transition Economics

Abstract: This Paper studies the design of lawmaking and law enforcement institutions based on the premise that law is inherently incomplete. Under incomplete law, law enforcement by courts may suffer from deterrence failure. As a potential remedy, a regulatory regime is introduced. The major functional difference between courts and regulators is that courts enforce law reactively, that is only once others have initiated law enforcement procedures, while regulators enforce law proactively, i.e. on their own initiative. We study optimal regime selection between a court and a regulatory regime and present evidence from the history of financial market regulation.

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Bibliographic Reference

Pistor, K and Xu, C. 2003. 'Law Enforcement under Incomplete Law: Theory and Evidence from Financial Market Regulation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3788