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on Law and Economics |
| By: | Roine, Jesper (Stockholm School of Economics); Waldenstrom, Daniel (Research Institute of Industrial Economics) |
| Abstract: | This study presents new homogenous series of top income shares in Sweden over the period 1903–2004. We find that, starting from levels of inequality approximately equal to those in other Western countries at the time, the income share of the Swedish top decile drops sharply over the first eighty years of the twentieth century. Most of the decrease takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries. The fall is almost entirely due to a dramatic drop in the top percentile explained mostly by decreases in capital income, while the lower half of the top decile – consisting mainly of wage earners – experiences virtually no change over this period. In the past decades top income shares evolve very differently depending on whether capital gains are included or not. When included, Sweden’s experience resembles that in the U.S. and the U.K. with sharp increases in top incomes. Excluding capital gains, Sweden looks more like the continental European countries where top income shares have remained relatively constant. A possible interpretation of our results is that Sweden over the past 20 years has been a country where it is more important to make the right financial investments than to earn a lot to become rich. |
| Keywords: | Income inequality; Income distribution; Wealth distribution; Top incomes; Welfare state; Sweden; Taxation; Capital gains |
| JEL: | D31 H20 J30 N30 |
| Date: | 2006–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0667&r=law |
| By: | Hvide, Hans K. (University of Aberdeen Business School); Kristiansen, Eirik G. (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | We study how complementarities and intellectual property rights affect the management of knowledge workers. The main results relay when a firm will wish to sue workers that leave with innovative ideas, and the effects of complementary assets on wages and on worker initiative. We argue that firms strongly protected by property rights may not sue leaving workers in order to motivate effort, while firms weakly protected by complementary assets must sue in order to obtain positive profits. Firms with more complementary assets pay higher wages (and have lower turnover), but such higher pay has a detrimental effect on worker initiative. Our analysis suggests that strengthened property rights protection reduces turnover costs but weakens worker initiative. |
| Keywords: | Entrepreneurship; Innovation; IPP; Litigation; Personnel economics; R&D; Start-ups |
| JEL: | K41 M13 M50 O32 |
| Date: | 2006–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2006_007&r=law |
| By: | James E. Anderson |
| Abstract: | Predation -- extortion or theft -- imposes significant, sometimes prohibitive, costs on trade. Mutual causation of predation and trade can explain trade volume responses to liberalization that are otherwise puzzlingly 'too big' or 'too small'. Efficient commercial policy in this setting should subsidize (tax) trade when enforcement is weak (strong). The Mercantilist predilection for trade monopoly and for subsidy has a rationale. Tolerance (intolerance) of smuggling is rational when enforcement is weak (strong). The switch from weak to strong enforcement explains the switch from tolerance to intolerance by British policy toward its North American colonies after 1763. |
| JEL: | F13 K42 O17 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12576&r=law |
| By: | Darius Lakdawalla; Eric Talley |
| Abstract: | This paper analyzes the normative role for civil liability in aligning terrorism precaution incentives, when the perpetrators of terrorism are unreachable by courts or regulators. We consider the strategic interaction among targets, subsidiary victims, and terrorists within a sequential, game-theoretic model. The model reveals that, while an "optimal" liability regime indeed exists, its features appear at odds with conventional legal templates. For example, it frequently prescribes damages payments from seemingly unlikely defendants, directing them to seemingly unlikely plaintiffs. The challenge of introducing such a regime using existing tort law doctrines, therefore, is likely to be prohibitive. Instead, we argue, efficient precaution incentives may be best provided by alternative policy mechanisms, such as a mutual public insurance pool for potential targets of terrorism, coupled with direct compensation to victims of terrorist attacks. |
| JEL: | K13 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12578&r=law |
| By: | Tomaso Duso; Klaus Gugler; Burcin Yurtoglu |
| Abstract: | We use a sample of 167 mergers during the period 1990-2002 involving 544 firms either as merging firms or competitors. We contrast a measure of the merger’s profitability based on event studies with one based on accounting data. We find positive and significant correlations between them when using a long window around the announcement date. <br> <br> <i>ZUSAMMENFASSUNG - (Ist die "event study" Methodologie nützlich für die Analyse von Fusionen? Ein Vergleich von Aktienmärkte und Bilanzdaten) <br> Wir analysieren eine Stichprobe von 167 Fusionen, die zwischen 1990 und 2002 stattgefunden haben und welche 544 Unternehmen -entweder als fusionierende Parteien oder als Wettbewerber- involviert haben. Wir vergleichen eine auf "event studies" basierende Rentabilitätsmaß der Fusion zu einer alternativen Maß, die durch Bilanzdaten konstruiert wurde. Wir finden, dass diese zwei maße positiv und signifikant korrelieren besonders wenn wir ein langes Fenster um die Fusionsankündigung in dem "event study" benutzen.</i> |
| Keywords: | Mergers, Merger Control, Event Studies, Ex-post Evaluation |
| JEL: | L4 K21 G34 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:wzb:wzebiv:spii2006-19&r=law |
| By: | Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Elke U. Weber (Columbia University, Professor of Psychology and Management) |
| Abstract: | The human mind is not a general problem solving machine. Instead of deliberately, consciously and serially processing the available information, men can rely on routines, rules, roles or affect for the purpose. They can bring in technology, experts or groups. For all of these reasons, men have a plurality of problem solving modes at their disposition. Often, the meta-choice of problem solving mode matters for behavioural output. Some performance standards are only to be met if a certain problem solving mode is used, like a well-established skill. Other requirements are easier to fulfil with some problem solving modes. This explains why institutions frequently impact on the choice of problem solving mode. To show how institutions are able to do that, a model of problem solving modes is developed. It allows to systematise the access points for institutional intervention. |
| Keywords: | Decision Making, Problem Solving, Institutions |
| JEL: | D10 D21 D83 K20 K40 L51 Z13 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2006_19&r=law |
| By: | Martin Hellwig (Max Planck Institute for Research on Collective Goods, Bonn) |
| Abstract: | The paper studies the assessment of private damages that the cartelization of a market imposes on buyers in that market and, possibly, on the buyers’ own customers in further market downstream. Abstracting from procedural problems and focussing on conceptual issues, the paper argues that damages comprise not just the overcharge on the actual quantity purchased, but also foregone profits on the units that are not purchased because the cartel price is higher than the competitive price. The paper also argues that the passing-on defense against claims by direct buyers is flawed because it neglects the business loss effect that is associated with a direct buyer’s raising his own price to pass the higher cartel price on to his own customers. If direct buyers are not in competition with each other, a revealed-preference argument shows that the business loss effect on the direct buyer’s profits is necessarily greater than the effect of the increase in revenues per unit that is sold. The overcharge on the actual quantity purchased again is a lower bound for actual damages. The assessment of damages suffered by indirect buyers is independent of this refutation of the passing-on defense. If direct buyers are in competition with each other, there is an additional business gain effect because the cartelization upstream raises rivals’ costs and thereby affects the competition between the direct buyers. In this case, the assessment of damages depends on the treatment of causation i.e., to what extent a direct buyer’s competitors’ price increases are ascribed to the cartelization upstream. Consistency requires that, for claims raised at the level of direct and indirect buyers alike, the same treatment of causation should be used. Either the cartel members should be held responsible for the entire shift in the equilibrium of the strategic game between direct buyers in suits involving indirect buyers, as well as direct buyers, or a ceteris paribus assumption should be applied to the actions of a direct buyer’s competitors, which eliminates the business gain effect resulting from their price increases. In the latter treatment, which seems conceptually and procedurally the simplest, the overcharge on the actual quantity purchased is again a lower bound for actual damages. |
| Keywords: | Horizontal Price Fixing, Passing-On Defense, Private Damage Claims |
| JEL: | K L |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2006_22&r=law |
| By: | Eyal Ert (Max Wertheimer Minerva Center for Cognitive Research, Faculty of Industrial Engineering and Management, Israeli Institute of Technology, Haifa, Israel); Andreas Nicklisch (Max Planck Institute for Research on Collective Goods, Bonn) |
| Abstract: | We report an experiment designed to test the influence of noisy commitments on efficiency in a simple bargaining game. We investigate two different levels of commitment reliability in a variant of the peasant-dictator game. Theoretical analysis suggests that the reliability of commitments in this game does not affect efficiency. We find that accurate commitments promote efficiency, as expected by game theory. However, noisy commitments are found to impair efficiency. We explain this effect by the differences between incentives off the equilibrium path under conditions of accurate commitments and noisy commitments. This difference changes the game structure and in the current game facilitates more random responses. |
| Keywords: | Commitments, efficiency, experimental economics, information, trust |
| JEL: | A12 D02 K00 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2006_4&r=law |
| By: | Harrington, Winston (Resources for the Future) |
| Abstract: | I review two recent estimates of the costs and, in one case, benefits of federal regulation. The first is found in the Office of Management and Budget’s 2005 report to Congress on the benefits and costs of federal regulations (OMB 2005b). OMB estimates annual benefits in 2004 to be $70 to $277 billion and costs to be $34 to $39 billion, but these estimates omit a great deal; the cost estimate, in particular, is generally acknowledged to be an underestimate. The other estimate, written by Mark Crain (Crain 2005) and sponsored by the Small Business Administration, uses a different approach and generates an estimate of $1 trillion. Crain also finds that the burden on small firms is much greater than the burden on large firms. In the final section of the paper, I also review a recent comparison, presented in the 2005 report to Congress, of ex ante and ex post estimates of the benefits and costs of individual regulations. I find the Crain report to be deeply problematic and the OMB’s ex ante/ex post comparison slightly less so. |
| Keywords: | regulation, benefits, costs, ex ante, ex post, OMB |
| JEL: | K29 Q58 I18 |
| Date: | 2006–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-06-39&r=law |