New Economics Papers
on Law and Economics
Issue of 2006‒06‒24
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Optimal Incentives under Moral Hazard and Heterogeneous Agents: Evidence from Production Contracts Data By DUBOIS, Pierre; VUKINA, Tomislav
  2. Cultures of Corruption: Evidence From Diplomatic Parking Tickets By Raymond Fisman; Edward Miguel
  3. Boosting Competition in Ireland By David Rae; Line Vogt; Michael Wise
  4. Effectiveness of Bailouts in the EU By Ela Glowicka

  1. By: DUBOIS, Pierre; VUKINA, Tomislav
    JEL: D82 L24 Q12 K32 L51
    Date: 2005–12
  2. By: Raymond Fisman; Edward Miguel
    Abstract: Corruption is believed to be a major factor impeding economic development, but the importance of legal enforcement versus cultural norms in controlling corruption is poorly understood. To disentangle these two factors, we exploit a natural experiment, the stationing of thousands of diplomats from around the world in New York City. Diplomatic immunity means there was essentially zero legal enforcement of diplomatic parking violations, allowing us to examine the role of cultural norms alone. This generates a revealed preference measure of government officials' corruption based on real-world behavior taking place in the same setting. We find strong persistence in corruption norms: diplomats from high corruption countries (based on existing survey-based indices) have significantly more parking violations, and these differences persist over time. In a second main result, officials from countries that survey evidence indicates have less favorable popular views of the United States commit significantly more parking violations, providing non-laboratory evidence on sentiment in economic decision-making. Taken together, factors other than legal enforcement appear to be important determinants of corruption.
    JEL: K42 Z13 D73 P48
    Date: 2006–06
  3. By: David Rae; Line Vogt; Michael Wise
    Abstract: While Ireland’s economic performance has been impressive, there are too many sectors where producers are shielded from competition, at the expense of consumers. The loss in efficiency from these policies will become more noticeable as Ireland’s growth rate settles down towards more normal levels. International evidence suggests that enhancing competition is an important means for lowering prices and boosting productivity and innovation. This paper reviews the main areas for reform, including retail trade, pharmacies, professional services such as legal and medical services, and various network industries including electricity, telecommunications and inter-city buses. It also appraises the structure and enforcement of competition law. <P>Dynamiser la concurrence en Irlande Bien que les performances économiques de l’Irlande soient impressionnantes, il subsiste encore trop de secteurs où les producteurs sont protégés de la concurrence, au dépend des consommateurs. Le manque d’efficience résultant de ces politiques devient plus manifeste à mesure que le taux de croissance s’établit à des niveaux plus normaux. D’un point de vue international, tout indique que renforcer la concurrence est un moyen efficace pour réduire les prix et stimuler la productivité et l’innovation. Ce document passe en revue les principaux secteurs à réformer, notamment le commerce de détail, les pharmacies, les services professionnels tels que les services de santé et juridiques, ainsi que divers secteurs de réseaux, en particulier celui de l’électricité, des télécommunications et des bus intercommunaux. Ce document examine aussi la structure et l’application de la loi sur la concurrence.
    Keywords: productivity, productivité, competition, regulatory reforms, réforme réglementaire, concurrence, residential construction, construction résidentielle, immobilier, taxe foncière
    JEL: K21 L11 L16 L22 L8 L9
    Date: 2006–06–15
  4. By: Ela Glowicka
    Abstract: Governments in the EU frequently bail out firms in distress by granting state aid. I use data from 86 cases during the years 1995-2003 to examine two issues: the impact of bailouts on bankruptcy probability and the determinants of bailout policy. I have three main results. First, the estimated discrete-time hazard rate increases during the first four years after the subsidy and drops after that, suggesting that some bailouts only delayed exit instead of preventing it. The number of failing bailouts could be reduced if European control was tougher. Second, governments’ bailout decisions favored public firms, even though public firms did not outperform private ones in the survival chances. Third, subsidy choice is an endogenous variable in the analysis of the hazard rate. Treating it as exogenous underestimates its impact on the bankruptcy probability. <br> <br> <i>ZUSAMMENFASSUNG - (Die Wirksamkeit von Beihilfe in der EU) <br> Europäische Unternehmen, die in Schwierigkeiten geraten sind, werden regelmäßig von den Regierungen in der EU durch Rettungs- und Restrukturierungsbeihilfen (R&R-Beihilfen) unterstützt. Im vorliegenden Paper werden 86 von der Europäischen Kommission überprüfte Fälle von R&RBeihilfen zwischen 1995 und 2003 herangezogen, um zwei Probleme zu untersuchen: die Auswirkung von R&R-Beihilfen auf die Bankrotthäufigkeit und die bestimmenden Faktoren für Subventionspolitik der Regierungen. <br><br> Dabei kommt die Studie zu drei Ergebnissen. Es zeigt sich, dass sich die geschätzte Bankrottwahrscheinlichkeit während der ersten vier Jahre nach der Beihilfe erhöht und danach sinkt. Dies deutet darauf hin, dass einige Beihilfen den Marktaustritt nur verzögern, anstatt ihn zu verhindern. Die Zahl der Firmen, die erfolglos Beihilfe bekommen, könnte durch eine strengere europäische Beihilfekontrolle verringert werden. Das zweite Ergebnis besagt, dass die Regierungen bei der Beihilfevergabe staatliche Unternehmen bevorzugt haben, obwohl staatliche Unternehmen gegenüber den privaten keine bessere Überlebenswahrscheinlichkeit haben. Drittens ist die Beihilfewahl eine endogene Variable in der Analyse der Bankrottwahrscheinlichkeit. Sie als exogen zu behandeln bedeutet, ihre Auswirkung auf die Bankrottwahrscheinlichkeit zu unterschätzen.</i>
    Keywords: AState aid, European Union, Discrete-time hazard, Bivariate probit
    JEL: K2 G3 L5
    Date: 2006–05

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