New Economics Papers
on Law and Economics
Issue of 2006‒04‒08
five papers chosen by
Jeong-Joon Lee, Towson University

  1. Satisfaction with Democracy and the Environment in Western Europe – a Panel Analysis By Alexander F. Wagner; Friedrich Schneider
  2. Youth Unemployment and Crime in France By Fougère, Denis; Kramarz, Francis; Pouget, Julien
  3. Ugly Criminals By Naci Mocan; Erdal Tekin
  4. Should You Allow Your Agent to Become Your Competitor? On Non-Compete Agreements in Employment Contracts By Matthias Kräkel; Dirk Sliwka
  5. What's in a sign? Trademark law and enconomic theory. By Ramello, Giovanni

  1. By: Alexander F. Wagner; Friedrich Schneider
    Abstract: We construct a panel of satisfaction with democracy (SWD) and economic, institutional, and environmental variables for 1990-2001 for fifteen European countries. In this sample, controlling for a number of factors, we find that average SWD is higher where (1) there exists an energy / CO2 tax, where (2) government expenditures on the environment are higher, where (3) certain environmental regulations like packaging rules are in place, and (4) where the government puts in place environmental offices or other official bodies charged with addressing environmental concerns. We also find that, on the environmental quality side, (5) more cars on the roads, (6) less unleaded fuel, and (7) higher pesticide use intensity all decrease SWD.
    Keywords: satisfaction with democracy, environment
    JEL: K32 P16 Q21 Q28
    Date: 2006
  2. By: Fougère, Denis; Kramarz, Francis; Pouget, Julien
    Abstract: In this paper we examine the influence of unemployment on property crimes and on violent crimes in France for the period 1990 to 2000. This analysis is the first extensive study for this country. We construct a regional-level data set (for the 95 départements of metropolitan France) with measures of crimes as reported to the Ministry of Interior. To assess social conditions prevailing in the département in that year, we construct measures of the unemployment rate as well as other social, economic and demographic variables using multiple waves of the French Labor Survey. We estimate a classic Becker type model in which unemployment is a measure of how potential criminals fare in the legitimate job market. First, our estimates show that in the cross-section dimension, crime and unemployment are positively associated. Second, we find that increases in youth unemployment induce increases in crime. Using the predicted industrial structure to instrument unemployment, we show that this effect is causal for burglaries, thefts, and drug offences. To combat crime, it appears thus that all strategies designed to combat youth unemployment should be examined.
    Keywords: crime; youth unemployment
    JEL: J19 J64 J65 K42
    Date: 2006–04
  3. By: Naci Mocan (University of Colorado at Denver and NBER); Erdal Tekin (Georgia State University, NBER and IZA Bonn)
    Abstract: Using data from three waves of Add Health we find that being very attractive reduces a young adult's (ages 18-26) propensity for criminal activity and being unattractive increases it for a number of crimes, ranging from burglary to selling drugs. A variety of tests demonstrate that this result is not because beauty is acting as a proxy for socio-economic status. Being very attractive is also positively associated adult vocabulary test scores, which suggests the possibility that beauty may have an impact on human capital formation. We demonstrate that, especially for females, holding constant current beauty, high school beauty (pre-labor market beauty) has a separate impact on crime, and that high school beauty is correlated with variables that gauge various aspects of high school experience, such as GPA, suspension or having being expelled from school, and problems with teachers. These results suggest two handicaps faced by unattractive individuals. First, a labor market penalty provides a direct incentive for unattractive individuals toward criminal activity. Second, the level of beauty in high school has an effect on criminal propensity 7-8 years later, which seems to be due to the impact of the level of beauty in high school on human capital formation, although this second avenue seems to be effective for females only.
    Keywords: beauty, crime, criminal, ugly, physical attractiveness
    JEL: I1 I2 K4 J2 J3
    Date: 2006–03
  4. By: Matthias Kräkel (University of Bonn and IZA Bonn); Dirk Sliwka (University of Cologne and IZA Bonn)
    Abstract: We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that not imposing such an agreement can be beneficial for the principal as the possibility to leave the firm generates implicit incentives for the agent. The principal prefers to impose such a clause if and only if the value created is sufficiently small relative to the agent’s outside option. If the principal can use an option contract for retaining the agent, she will never prefer a strict non-compete agreement.
    Keywords: fine, incentives, incomplete contracts, non-compete agreements, option contract
    JEL: D21 J3 K1 M5
    Date: 2006–03
  5. By: Ramello, Giovanni
    Abstract: The aim of this paper is to summarise the extant theory as it relates to the economics of trademark, and to give some suggestions for further research with reference to distinct streams ofliterature. The proposed line of study inevitably looks at the complex relationship between signs and economics. Trademark is a sign introduced to remedy a market failure. It facilitates purchase decisions by indicating the provenance of the goods, so that consumers can identify specific quality attributes deriving from their own, or others', past experience. Trademark holders, on their part, have an incentive to invest in quality because they will be able to reap the benefits in terms of reputation. In other words, trademark law becomes an economic device which, opportunely designed, can produce incentives for maximising market efficiency. This role must, of course, be recognised, as a vast body of literature has done, with its many positive economic consequences. Nevertheless, trademark appears to have additional economic effects that should be properly recognized: it can determine the promotion of market power and the emergence of rent-seeking behaviours. It gives birth to an idiosyncratic economics of signs where very strong protection tends to be assured, even though the welfare effects are as yet poorly understood. In this domain much remains to be done and the challenge to researchers is open.
    Keywords: trademark, brand, economics and signs, asymmetric information, intellectual property rights, law and economics

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