New Economics Papers
on Law and Economics
Issue of 2005‒12‒20
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Severance Pay and the Shadow of the Law: Evidence for West Germany By Laszlo Goerke; Markus Pannenberg
  2. Preferences, Gender Segregation and Affirmative Action By Peter J. Sloane; Suzanne Grazier; Richard J. Jones
  3. Search Profiling with Partial Knowledge of Deterrence By Charles F. Manski
  4. The Case for Managed Judges: Learning from Japan after the Political Upheaval of 1993 By J. Mark Ramseyer

  1. By: Laszlo Goerke; Markus Pannenberg
    Abstract: Due to the complexity of employment protection legislation (EPL) in Germany, there is notable uncertainty about the outcomes of dismissal conflicts. In this study we focus on severance pay and inquire whether its incidence and level varies in a systematic manner with the legal rules as defined by labour as well as tax law. We start with a theoretical model that generates the main observable outcomes of dismissal conflicts as potential equilibrium situations. Using German panel data (GSOEP), we put our theoretical model to an empirical test. Our main result is that the shadow of the law matters. Criteria regarding the validity of dismissals either found in respective legislation or defined by labour courts significantly affect the incidence and magnitude of severance pay. Moreover, restrictive changes in the taxation of severance pay have a negative causal impact on its incidence.
    Keywords: severance pay, labour law, taxation, sample selection, survey data
    JEL: C23 C24 H24 J65 K31
    Date: 2005
  2. By: Peter J. Sloane (University of Wales at Swansea and IZA Bonn); Suzanne Grazier (University of Wales at Swansea); Richard J. Jones (University of Wales at Swansea)
    Abstract: In the UK concern has been expressed over the degree of gender occupational segregation. Though there are no general provisions for affirmative action, it does apply in limited areas and pro-active measures have been suggested. In this paper we focus on gender differences in work preferences in relation to job satisfaction, risk aversion and self employment, and question the rationale for affirmative action.
    Keywords: occupational segregation, job satisfaction, risk aversion, gender, affirmative action
    JEL: J0 J2 K2
    Date: 2005–12
  3. By: Charles F. Manski
    Abstract: Economists studying public policy have generally assumed that the relevant social planner knows how policy affects population behavior. Planners typically do not possess all of this knowledge, so there is reason to consider policy formation with partial knowledge of policy impacts. Here I consider the choice of a profiling policy where decisions to search for evidence of crime may vary with observable covariates of the persons at risk of being searched. To begin I pose a planning problem whose objective is to minimize the utilitarian social cost of crime and search. The consequences of candidate search rules depends on the extent to which search deters crime. Deterrence is expressed through the offense function, which describes how the offense rate of persons with given covariates varies with the search rate applied to these persons. I study the planning problem when the planner has partial knowledge of the offense function. To demonstrate general ideas, I suppose that the planner observes the offense rates of a study population whose search rule has previously been chosen. He knows that the offense rate weakly decreases as the search rate increases, but he does not know the magnitude of the deterrent effect of search. In this setting, I first show how the planner can eliminate dominated search rules and then how he can use the minimax or minimax-regret criterion to choose an undominated search rule.
    JEL: H8 K4 D8
    Date: 2005–12
  4. By: J. Mark Ramseyer (Harvard Law School)
    Abstract: Although the executive branch appoints Japanese Supreme Court justices as it does in the United States, a personnel office under the control of the Supreme Court rotates lower court Japanese judges through a variety of posts. This creates the possibility that politicians might indirectly use the postings to reward or punish judges. For forty years, the Liberal Democratic Party (LDP) controlled the legislature and appointed the Supreme Court justices who in turn controlled the careers of these lower-court judges. In 1993, it temporarily lost control. We use regression analysis to examine whether the end of the LDP’s electoral lock changed the court’s promotion system, and find surprisingly little change. Whether before or after 1993, the Supreme Court used the personnel office to 'manage' the careers of lower court judges. The result: uniform and predictable judgments that economize on litigation costs by facilitating out-of-court settlements.
    Keywords: judges, Japan, supreme court, political economy
    JEL: K
    Date: 2005–12–12

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