DP3231 The Political Economy of Finance

Author(s): Marco Pagano, Paolo Volpin
Publication Date: February 2002
Keyword(s): bankruptcy law, corporate governance, credit market regulation, financial development, political economy, privatization, shareholder protection
JEL(s): G28, G38, K22, K42
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3231

The regulations that shape the design and the operations of corporations, credit and securities markets differ vastly from country to country. In addition, similar regulations are often unequally enforced in different countries. Economists still have an imperfect understanding of why these international differences exist and of whether they tend to persist over time. A recent strand of research has shown that some progress on these issues can be made using the approach of the new political economy, which models regulation and its enforcement as the result of the balance of power between social and economic constituencies. In this Paper we offer a first assessment of the results and potential of this approach in three fields: corporate finance, banking and securities markets.