The (Mixed) Effects of Minimum Asset Requirements When There is a Possibility of Technological Change

Jacob Julien ()
Additional contact information
Jacob Julien: BETA, CNRS – University of Strasbourg, Faculté des Sciences Economiques et de Gestion, 61 avenue de la Forêt Noire, 67000, Strasbourg, Cedex, France

Review of Law & Economics, 2021, vol. 17, issue 1, 167-191

Abstract: Civil liability and ex ante authorizations are usually combined to regulate risks from high-risk industries. Authorizations may require firms to be sufficiently endowed with assets. Such a requirement is made in order to force sufficient risk internalization by firms, thus ensuring optimal decisions on risk control. But most studies on the incentives provided by asset requirements for controlling risks have been conducted in a context of a unique technology of production. When the firm has the possibility of adopting new and more cost-efficient technology, we show that tightening the minimum asset requirement can have a non-monotonic effect on the firm’s technological choice: increasing the firm’s level of assets can lead to a divergence of private and social interests as regards the technological choice. This feature can be observed both when the level of harm is dependent on, or independent of, the level of activity.

Keywords: asset requirement; solvency; risk; technological change; civil liability (search for similar items in EconPapers)
JEL-codes: D81 K13 O33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/rle-2018-0071 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:rlecon:v:17:y:2021:i:1:p:167-191:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rle/html

DOI: 10.1515/rle-2018-0071

Access Statistics for this article

Review of Law & Economics is currently edited by Francesco Parisi

More articles in Review of Law & Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().