Economics, Management, and Financial Markets

Volume 7(4), 2012, pp. 209214, ISSN 1842-3191

CONTEMPORARY READINGS IN
THE ECONOMIC ANALYSIS OF LAW

BOGDAN DAVID
bogdan.david@dccu.ro
Dimitrie Cantemir Christian University

ABSTRACT. I will consider some of the previous writings on the materialization of

the subprime crisis in 2007, the economic justification for securitization, and the
behavioral aspects of the governance process. This study is grounded in the con-
siderable body of scholarship examining urban poverty in China, determinants of tax
morale, and the significance of insurance against natural hazards.
JEL Classification: K33, K11, K20

Keywords: governance process, insurance protection, securitization, subprime crisis

1. Introduction

The objective of this paper is to emphasize Chinas economic growth rate,

interventions designed to prevent crises, and the formulation and implemen-
tation of strategies in the organization. There has been a flurry of pronoun-
cements over recent years about problems experienced in the structured
credit markets, the growth of the market for mortgage-backed securities, and
accessibility of insurance protection for all.

2. The Chinese Growth Pattern

The US benefits from running persistent trade deficits as a result of its special
position in the international system, and from being the most dominant
power today, continuing to be the greatest power for the foreseeable future,
and using the threat of exclusion to advantage under various configurations of
power. The US alternates between an optimal tariff strategy and a strategy
of limit pricing, attracts a lot of investment by offering equity in return, is

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able to benefit from policies that would be disastrous for other countries, and
has attracted an enormous share of world capital (the US position in the
monetary domain has produced commercial advantages). There are risks
involved with continuous deficits, which the US faces. The current world
system has built-in stabilizers that strengthen American power following
bouts of decline.1 There is no other great power to replace the United States
as a hegemon. The United States represents a hybrid between the notion of
hegemony and empire. Hegemonic global capitalism and American hegemony
are the mirrored reflection of one other. The promise of a more integrated
world is coming into being to replace Americas global hegemony. 2 The
United States prefers the resulting asymmetric distribution of market power
over self-sufficiency, avoiding gains in technology and reductions in price
while extending the global production of weapons.3
Chinas economic growth rate will decrease in the coming decades. Life
expectancy has been rising rapidly. Most Chinese cease working before or
in the years soon after they reach age 60. Population aging is not likely to
cause significant problems for Chinas economic growth. Much of the urban
Chinese population does not have pension coverage. The culture of mutual
support among family members remains central in China. Men are more fully
involved in the employed workforce than women.4 Increasing urban land use
efficiency is a policy priority of the Chinese government. Logistics costs
could be lowered through more efficient urban form.5 China has become the
workshop or factory of the world through the expansion of manufacturing
production. The sustainability of the current pattern of economic expansion
in China is based on a high export-high accumulation model. The Chinese
growth pattern generates more productive and remunerative employment
outside agriculture.6 Urban poverty in China emerged during the transition
from central planning to market economy. Labor migrants in China are not
landless people.7
China is facing a new urban poverty, experiencing peak labor supply. The
withdrawal of social welfare provision and exclusion from regular employ-
ment is an important factor in Chinese cities. Poverty concentration is closely
associated with state-led urban development policies.8 The EU and its member-
states have helped China make its economy greener and more energy efficient.
Chinas rulers could try to force local authorities to enforce environmental
laws and energy efficiency targets. There is no more important single issue
in EU-China relations than climate change. The Europeans should show their
willingness to support serious reforms of international financial institutions,
using their dialogue with the Chinese on global governance to bring China
closer to existing economic institutions (multilateralism can serve Chinas
interests at the global level). The EU and China should convince the worlds
other powers to maintain an open global system.9 The 21st century is touted

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to be the Asian age, belonging to China and India. Indias economic modern-
ization and liberalization program is proceeding slowly. India seeks to
articulate its national interest but to speak for development issues, targeting
states that will bring it specific and tangible security, political and economic
benefits. Indias foreign policy demonstrates an increasing tempering of ideal-
ism with pragmatism, showing a mix of balancing and hedging of interests.10

3. The Insurance Industry

The quality of political institutions has a strong observable effect on tax

morale. The institutional crisis in Eastern Europe affect negatively the tax
morale of citizens.11 Tax morale causally affects compliance behavior, and
can help to explain why people pay taxes.12 Tax morale plays a significant
role in explaining observed tax evasion behavior. Progressive taxes contribute
to less tax evasion and higher perceived fairness and equality. People are
more willing to pay taxes in systems that provide them with more utility.
Understanding determinants of tax morale can help to fight tax evasion.13
Insurance instruments are one of many activities in managing risks of
natural hazards. Recent insurance systems and initiatives offering cover for
natural perils in developing countries are in pilot stages. 14 Insurance com-
panies providing insurance against natural hazards have been assuming that
a climate change was in progress. The significance of insurance against natural
hazards is going to increase globally due to climate change. Accessibility
of insurance protection for all requires that premiums remain affordable
throughout.15 Those with a higher perceived vulnerability to future catastrophic
losses may acquire first-party insurance. High reinsurance prices induce
investment in the reinsurance business. Reasons for purchasing insurance
take into account an individuals need to feel justified and avoid anxiety.16
Economic efficiency will be improved when private insurance coverage
against flood damage is extended. Differentiated flood insurance premiums
provide incentives for individuals to limit their risk exposure. Incentives to
limit losses may be better with insurance arrangements. The ability of in-
surance companies to provide incentives to mitigate damages is outstanding
in the context of adaptation to climate change. 17 The insurance industry
should retain the capacity to buffer businesses exposure to weather-related
losses. Climate change poses a risk to the long-term stability of the insurance
industry itself, and may affect most major types of insurance products. Some
insurance products have the potential to reduce greenhouse gas emission
reductions directly. The insurance industry has identified climate change as
a significant issue affecting its future health. Bearing risk is the core business
of insurance. Reinsurance plays a crucial role in allowing insurers to take on
risks of large losses. Risks covered by liability insurance are ambiguous.18
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 Capital inflows can have a positive effect in the short run during periods
of booming capital inflows. There is an empirical relationship between
capital account openness and income inequality. Governments need to take
into account how their actions affect the attractiveness of investment. Capital
market interventions can be used to stabilize short-term volatile capital flows.
Financial and capital markets are highly segmented under the current glob-
alization process. Interventions designed to prevent crises can be effective
even if controls are partially circumvented. Developing countries continue to
be subject to strong pro-cyclical swings in external financing.19 More than
planning, management stresses dynamic and critical processes. Understand-
ing the interaction between actors and strategies is at the core of any man-
agerial process. The formulation and implementation of strategies in the
organization are the test of the validity of institutional policies. Shock can
be opposed to incremental change management.20

4. The Evaluation of Training

Individuals have been able to help identify their own particular training needs
through the completion of individual training and development plans. Im-
proving quality and consistency, and complying with occupational health and
safety and environment standards, are part of sound business practice. The
evaluation of training is often based on feedback from trainees, employees,
line managers and customers.21 Our knowledge on the interactions between
formal education and employer-provided training is still weak. The supply
of training (by employers) shows no variation with the educational level of
employees. Employees who are perceived to have a high probability of
leaving the company are less likely to receive employer-provided training.
The reported wage returns on training highlight only average effects.22 Train-
ing programs cannot be expected to provide a bridge over all performance
gaps. Trainers and HRD practitioners play an important role in national
workforce development. The time frame for interventions is a longer term
than a one-shot training event.23 Funding for training mostly resides locally
with individual businesses. Training must be purposeful to help corporations
achieving their business goals. E-learning training is judged on the basis of
relevance, rather than class hours. E-learning is an essential component of a
corporate training program to help corporations achieve their strategic goals
and competitive advantage. Classroom training offers a familiar and com-
fortable method that learners are used to. Standardization is the ability to
train people in different countries with different languages in a quick, cost
effective, and consistent manner.24

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5. Conclusions

The key contribution of this paper is to articulate and give expression to

state-led urban development policies, the ability of insurance companies to
provide incentives to mitigate damages, and the procyclical nature of the
banking industry. This paper seeks to fill a gap in the current literature by
examining Chinas interests at the global level, the quality of political insti-
tutions, and insurance systems and initiatives offering cover for natural
perils in developing countries. The current study has extended past research
by elucidating the tax morale of citizens, the sustainability of the current
pattern of economic expansion in China, and insurance companies providing
insurance against natural hazards.

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Bogdan David

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permission.