New Economics Papers
on Law and Economics
Issue of 2006‒07‒09
six papers chosen by
Jeong-Joon Lee, Towson University

  1. Entry regulations and labor market outcomes: evidence from the Italian retail trade sector By Eliana Viviano
  2. Contracting on Time By Sergei Guriev; Dmitriy Kvasov
  3. Regulatory Competition and Federalism in Switzerland: Diffusion by Horizontal and Vertical Interaction By Lars P. Feld
  4. Optimal Control of Externalities in the Presence of Income Taxation By Louis Kaplow
  5. The Catastrophic Effects of Natural Disasters on Insurance Markets By W. Kip Viscusi; Patricia Born
  6. A Big Push to Deter Corruption: Evidence from Italy By Antonio Acconcia; Claudia Cantabene

  1. By: Eliana Viviano (Banca d'Italia)
    Abstract: The paper analyzes the relationship between barriers to entry and employment in the Italian retail trade sector. In Italy the opening of large outlets is regulated at the regional level. By using differences-in-differences estimators I study the effects of the rules implemented in Abruzzo and Marche, two otherwise close and similar Italian regions, that adopted very different policies: the first set tight restrictions on the opening of large stores; the second did not impose substantial entry barriers. The results show that entry barriers have a negative and sizeable impact on employment growth. Some evidence is also found that fiercer competition encourages the development of more efficient small retail trade shops. These findings are robust to a number of checks.
    Keywords: entry barriers, employment growth, differences-in-differences estimator
    JEL: J21 J23 K23
    Date: 2006–05
  2. By: Sergei Guriev (New Economic School/CEFIR and CEPR); Dmitriy Kvasov (The University of Auckland)
    Abstract: The paper shows how the time considerations, especially those concerning contract duration, affect incomplete contract theory. Time is not only a dimension along which the relationship unfolds but also a continuous verifiable variable that can be included in contracts. We consider a bilateral trade setting where contracting, investment, trade, and renegotiation take place in continuous time. We show that efficient investment can be induced either through a sequence of constantly renegotiated fixed-term contracts; or through a renegotiation-proof ‘evergreen’ contract–a perpetual contract that allows unilateral termination with advance notice. We provide a detailed analysis of properties of optimal contracts.
    JEL: D23 K12 L14
    Date: 2005–02
  3. By: Lars P. Feld
    Abstract: The impact of regulatory competition on policy outcomes and particularly on policy innova-tion is widely debated among scientists from different fields as well as among policymakers. In this paper, Swiss cantonal regulation is studied in order to gain further insights into the policy impact of regulatory competition and harmonization. Starting from a theoretical per-spective that particularly emphasizes the beneficial impact of inter-jurisdictional competition on policy innovations, and a discussion of the existing empirical evidence on regulatory com-petition, the development of the common market, regulatory competition and harmonization in Switzerland across time is analyzed. In an econometric analysis of the extent of regulation at the Swiss cantonal level, some indicative empirical evidence on the main determinants of Swiss cantonal regulation is derived.
    Keywords: Regulatory Competition; Political Innovation; Corporatist Protectionism
    JEL: H11 H71 D72 J23 K31
    Date: 2006–06
  4. By: Louis Kaplow
    Abstract: A substantial literature examines second-best environmental policy, focusing particularly on how the Pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation. Additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription. It is demonstrated, however, that simple first-best rules – unmodified for labor supply distortion or distribution – are correct in a natural, basic formulation of the problem. Specifically, setting all commodity taxes equal to marginal harms (and subsidies equal to marginal benefits) can generate a Pareto improvement. Likewise, a marginal reform in the direction of the first-best can yield a Pareto improvement. For other reforms, a simple efficiency test characterizing when a Pareto improvement is possible is offered. Qualifications and explanations for the substantial departure from results in previous work are also elaborated.
    JEL: D61 D62 D63 H21 H23 K32
    Date: 2006–06
  5. By: W. Kip Viscusi; Patricia Born
    Abstract: Natural catastrophes often have catastrophic risks on insurance companies as well as on the insured. Using a very large dataset on homeowners’ insurance coverage by state, by firm, and by year for the 1984 to 2004 period, this paper documents the positive effect on losses and loss ratios of both unexpected catastrophes as well as large events that the authors term “blockbuster catastrophes.” Insurers adapt to these catastrophic risks by raising insurance rates, leading to lower loss ratios after the catastrophic event. There is a widespread event of unexpected catastrophes and blockbuster catastrophes that reduces total premiums earned in the state, reduces the total number writing insurance coverage in the state, and leads to the exit of firms from the state. Firms with low levels of homeowners’ premiums are most adversely affected by the catastrophes.
    JEL: D8 G22 K13
    Date: 2006–07
  6. By: Antonio Acconcia (Università di Napoli Federico II and CSEF); Claudia Cantabene (Università di Napoli Federico II)
    Abstract: During the first half of the 1990s a pool of Italian judges carried out an investigation, named Mani Pulite (literally clean hands), that led many people to be prosecuted and convicted because of corruption. The impact of Mani Pulite was so much influential that since then many indicators suggest a steadily decreasing path for bureaucratic corruption in Italy. This paper shows that Mani Pulite was mainly effective in deterring corruption as it broke up the feed due to infrastructure investments, mainly those related to public buildings, sanitation, and land reclamation.
    Keywords: Corruption, Public Investment, Deterrence
    JEL: D73 H54 K42
    Date: 2006–06–01

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