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COST OF LAW SUBMISSION: COMPONENTS AND THEIR DESCRIPTION

Автор Доклада: 
Blaga M.
Награда: 
COST OF LAW SUBMISSION: COMPONENTS AND THEIR DESCRIPTION

COST OF LAW SUBMISSION: COMPONENTS AND THEIR DESCRIPTION

Mariia Blaga, student
National University of “Kyiv-Mohyla Academy”

The efficiency of economic activity in the country considerably depends on the legal field in which it is carried out. In the article the consideration is given to the concept ‘costs of law submission’. Author considers and describes the basic components of costs of law submission. It is expediently to select three components in the structure of costs of law submission: cost of access to activity, continuation activity cost and completion activity cost within the framework of law.
Keywords: transactional costs, costs of law submission, costs of access to activity, continuation activity costs and completion activity costs within the framework of law, ‘good’ law.


The efficiency of economic activity in the country considerably depends on the legal field in which it is carried out. Not only economic but also legal factors influence on the decision-making about beginning, continuation or stopping of economic activity. A law is ‘good’, if it guarantees economic efficiency and assists in it, and – ‘bad’, if it hinders effective activity or worsens it. Due to bad laws citizens are obliged to pay too high price for law obedience; lack of good laws forces them to bear expenses because of activity out of law.
The concept ‘costs of law submission’ (a sum-total of transactional costs, related to the activity in a legal sector; in a counterbalance there is the cost of illegal activity) was first used by Peruvian scientist Hernando de Soto. Different aspects of analysis of essence of transactional costs and their influence on activity of enterprises and economy in general were also researched by Ronald Coase, Oliver E. Williamson, Michael C. Jensen, Douglass C. North, among Ukrainian scientists – S. Arkhiiereiev and T. Kuznetsova.
Author has for an object to consider and describe the basic components of law submission costs.
In accordance to classification of de Soto the cost of law submission is divided into the cost of access to activity and continuation activity cost in the proper institutional environment [1]. Also it should be noticed that the charges of law submission consist not only of charges in a money form but also costs in time on implementation of different procedures.
Costs of access to activity in case of law are created by the work of government control, including different by the value and by nature mechanisms.
The concept of continuation activity costs in case of law in wide sense engulfs many difficult situations. It characterizes both charges caused by law (taxes, submission bureaucratic procedures, observance of some obligatory norms at a management a personnel, top rates of payments for public utilities etc.) and charges which are mediately created by legal institutes  in general (instability of the legal system in general, absence of guarantees of ownership rights etc.). [1]
Obviously, that not only sizes of taxes but also other necessary charges, which are required by legislation, are important. It is possible to draw conclusion that costs on the observance of law strongly influence on business tactic and strategy and determine both the mechanisms of conducting business and results at any technologies of production.
For description of cost of law submission we will consider the indicators of business regulations which are estimated by World Bank (Doing Business ranking) [2]. They can be grouped in 3 categories:

  • 1 – Related to beginning of activity: starting a business, dealing with construction permits, registering property;
  • 2 – Related to the conduct of activity: getting credit, paying taxes, trading across borders, enforcing contracts;
  • 3 – Related to completion of activity: protecting investors, closing a business.

So, it is expediently to enter a concept ‘charges (costs) of completion of activity within the framework of law’, which will characterize transactional costs, related to stopping of activity and to liquidation of enterprises. It is necessary to notice that the conditions of stopping the activity, which are fastened in legislation, are often examined by businessmen and investors as one of key factors at a decision-making about beginning of activity.
As we see, it is expediently to select three components in the structure of costs of law submission: cost of access to activity, cost of continuation of activity and cost of completion of activity within the framework of law. That is why as an economic situation in a country considerably depends on regulator pressure and level of transactional costs as its effect, for providing of efficiency of economic activity in a country it is necessary to have not very high transactional costs on every stage of functioning of enterprise, which foresees the comprehensive functioning of ‘good’ law.

Bibliography:
1. Эрнандо де Сото «Иной путь: Невидимая революция  в  третьем  мире» – М.: Catallaxy, 1995 – 320 ст.
2. Ranking of economies / Measuring business regulation «Doing Business» –http://doingbusiness.org/

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