New Economics Papers
on Law and Economics
Issue of 2005‒10‒08
five papers chosen by
Jeong-Joon Lee, Towson University

  1. How Unobservable Productivity Biases the Value of a Statistical Life By Thomas J. Kniesner; W. Kip Viscusi; Christopher Woock; James P. Ziliak
  2. Religious Extremism: The Good, The Bad, and The Deadly By Eli Berman; Laurence R. Iannaccone
  3. The Effect of Joint and Several Liability Under Superfund on Brownfields By Howard F. Chang; Hilary Sigman
  4. Minorities and Storable Votes By Alessandra Casella; Thomas Palfrey; Raymond Riezman
  5. Courts, firms and allocation of credit By Julia Shvets

  1. By: Thomas J. Kniesner; W. Kip Viscusi; Christopher Woock; James P. Ziliak
    Abstract: A prominent theoretical controversy in the compensating differentials literature concerns unobservable individual productivity. Competing models yield opposite predictions depending on whether the unobservable productivity is safety-related skill or productivity generally. Using five panel waves and several new measures of worker fatality risks, first-difference estimates imply that omitting individual heterogeneity leads to overestimates of the value of statistical life, consistent with the latent safety-related skill interpretation. Risk measures with less measurement error raise the value of statistical life, the net effect being that estimates from the static model range from $5.3 million to $6.7 million, with dynamic model estimates somewhat higher.
    JEL: I10 J17 J28 K00
    Date: 2005–10
  2. By: Eli Berman; Laurence R. Iannaccone
    Abstract: This paper challenges conventional views of violent religious extremism, particularly those that emphasize militant theology. We offer an alternative analysis that helps explain the persistent demand for religion, the different types of religious that naturally arise, and the special attributes of the “sectarian” type. Sects are adept at producing club goods both spiritual and material. Where governments and economies function poorly, sects often become major suppliers of social services, political action, and coercive force. Their success as providers is much more due to the advantages of their organizational structure than it is to their theology. Religious militancy is most effectively controlled through a combination of policies that raise the direct costs of violence, foster religious competition, improve social services, and encourage private enterprise.
    JEL: Z12 H56 H41 K4
    Date: 2005–10
  3. By: Howard F. Chang; Hilary Sigman
    Abstract: In response to claims that the threat of Superfund liability deters the acquisition of potentially contaminated sites or "brownfields" for redevelopment, the federal government and the states have enacted laws or adopted programs to protect purchasers from liability. This protection may be unwarranted, however, if sellers can simply adjust the price of contaminated property downward to compensate buyers for the liabilities associated with the property. We present a formal model of joint and several liability under Superfund that allows us to distinguish four different reasons that Superfund liability may discourage the purchase of contaminated property despite the tendency for land prices to reflect the expected transfer of liability to the buyer. The previous literature has overlooked the four effects that we identify, which all arise because a sale may increase the number of defendants in a suit to recover cleanup costs. First, a sale may increase the share of liability that a seller and a buyer may expect to pay as a group. Second, a sale may increase the amount of damages that the government can expect to recover from the defendants at trial. Third, a sale may increase the total litigation costs that a buyer and a seller may face as a group. Fourth, game theory suggests that a sale may increase the amount that the government can expect to extract from defendants in a settlement.
    JEL: Q5 K32 R3
    Date: 2005–10
  4. By: Alessandra Casella; Thomas Palfrey; Raymond Riezman
    Abstract: The paper studies a simple voting system that has the potential to increase the power of minorities without sacrificing aggregate efficiency. Storable votes grant each voter a stock of votes to spend as desidered over a series of binary decisions. By cumulating votes on issues that it deems most important, the minority can win occasionally. But because the majority typically can outvote it, the minority wins only of its strength of preferences is high and the majority's strength of preferences is low. The result is that aggregate efficiency either falls little or in fact rises. The theoretical predictions are confirmed by a series of experiments: the frequency of minority victories, the relative payoff of the minority versus the majority, and the aggregate payoffs all match the theory.
    JEL: C9 D7 H1 K19
    Date: 2005–10
  5. By: Julia Shvets (University of Cambridge, Corpus Christi College)
    Abstract: The paper investigates whether and how performance of regional commercial courts has affected external credit of Russian enterprises between 1995 and 2002. The results show that more reliable courts lead to higher bank lending to firms. This occurs predominantly through expansion of the number of businesses which have access to bank financing. There is limited evidence that trade credit also responds to changes in quality of courts. However, credit from suppliers is considerably less sensitive to court performance than bank credit. Court reliability is precisely defined and measured objectively using appeal rates of lower court decisions. The paper analytically derives the relationship between reliability of courts, appeal rates and lending to firms, identifying a specific channel through which law enforcement affects external financing. Empirical analysis is based on a new panel dataset which measures credit at the level of a firm and permits a number of robustness tests.
    Keywords: law enforcement, finance
    JEL: O12 G38 G32 K42 K41 H40
    Date: 2005–09–29

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