New Economics Papers
on Law and Economics
Issue of 2007‒01‒23
six papers chosen by
Jeong-Joon Lee, Towson University

  1. Employment Protection Legislation By Anja Deelen; Egbert Jongen; Sabine Visser
  2. Exclusive Quality - Why Exclusive Distribution may Benefit the TV-viewers By Stennek, Johan
  3. Do U.S. Firms Have the Best Corporate Governance? A Cross-Country Examination of the Relation between Corporate Governance and Shareholder Wealth By Reena Aggarwal; Isil Erel; Rene M. Stulz; Rohan Williamson
  4. Climate Change, Insurability of Large-scale Disasters and the Emerging Liability Challenge By Howard C. Kunreuther; Erwann O. Michel-Kerjan
  5. Striking at the Roots of Crime: The Impact of Social Welfare Spending on Crime During the Great Depression By Ryan S. Johnson; Shawn Kantor; Price V. Fishback
  6. The Industrial Organization of the Japanese Bar: Levels and Determinants of Attorney Income By Nakazato, Minoru; Ramseyer, J. Mark; Rasmusen, Eric

  1. By: Anja Deelen; Egbert Jongen; Sabine Visser
    Abstract: Employment protection is a hotly debated topic. In this document we review the theoretical and empirical studies on the impact of employment protection. Subsequently, we confront the findings of these studies with the Dutch setup, and consider a number of reform options.
    Keywords: Employment protection; literature review; economic policy
    JEL: E60 J32 J65 K31
    Date: 2006–12
  2. By: Stennek, Johan (Research Institute of Industrial Economics)
    Abstract: Sports organizations, Hollywood studios and TV channels grant satellite and cable networks exclusive rights to televise their matches, movies and media contents. Exclusive distribution prevents viewers from watching attractive programs, and reduces the TV-distributors incentives to compete in prices. This paper demonstrates that exclusive distribution may also give providers of contents incentives to invest in higher quality and, as a result, force competitors to reduce their prices. Exclusive distribution may benefit all viewers, including those who are excluded
    Keywords: Exclusive Contracts; Quality; Bargaining; Avertising; Investment
    JEL: C78 D43 K21 L42
    Date: 2007–01–09
  3. By: Reena Aggarwal; Isil Erel; Rene M. Stulz; Rohan Williamson
    Abstract: We compare the governance of foreign firms to the governance of similar U.S. firms. Using an index of firm governance attributes, we find that, on average, foreign firms have worse governance than matching U.S. firms. Roughly 8% of foreign firms have better governance than comparable U.S. firms. The majority of these firms are either in the U.K. or in Canada. When we define a firm's governance gap as the difference between the quality of its governance and the governance of a comparable U.S. firm, we find that the value of foreign firms increases with the governance gap. This result suggests that firms are rewarded by the markets for having better governance than their U.S. peers. It is therefore not the case that foreign firms are better off simply mimicking the governance of comparable U.S. firms. Among the individual governance attributes considered, we find that firms with board and audit committee independence are valued more. In contrast, other attributes, such as the separation of the chairman of the board and of the CEO functions, do not appear to be associated with higher shareholder wealth.
    JEL: G30 G32 G34 G38 K22
    Date: 2007–01
  4. By: Howard C. Kunreuther; Erwann O. Michel-Kerjan
    Abstract: This paper focuses on the interaction between uncertainty and insurability in the context of some of the risks associated with climate change. It discusses the evolution of insured losses due to weather-related disasters over the past decade, and the key drivers of the sharp increases in both economic and insured catastrophe losses over the past 20 years. In particular we examine the impact of development in hazard-prone areas and of global warming on the potential for catastrophic losses in the future. In this context we discuss the implications for insurance risk capital and the capacity of the insurance industry to handle large-scale events. A key question that needs to be addressed is the factors that determine the insurability of a risk and the extent of coverage offered by the private sector to provide protection against extreme events where there is significant uncertainty surrounding the probability and consequences of a catastrophic loss. We discuss the concepts of insurability by focusing on coverage for natural hazards, such as earthquakes, hurricanes and floods. The paper also focuses on the liability issues associated with global climate change, and possible implications for insurers (including D&O), given the difficulty in identifying potential defendants, tracing harm to their actions and apportioning damages among them. The paper concludes by suggesting ways that insurers can help mitigate future damages from global climate change by providing premium reductions and rate credits to companies investing in risk-reducing measures.
    JEL: H23 H75 K32
    Date: 2007–01
  5. By: Ryan S. Johnson; Shawn Kantor; Price V. Fishback
    Abstract: The Great Depression of the 1930s led to dire circumstances for a large share of American households. Contemporaries worried that a number of these households would commit property crimes in their efforts to survive the hard times. The Roosevelt administration suggested that their unprecedented and massive relief efforts struck at the roots of crime by providing subsistence income to needy families. After constructing a panel data set for 83 large American cities for the years 1930 through 1940, we estimated the impact of relief spending by all levels of government on crime rates. The analysis suggests that relief spending during the 1930s lowered property crime in a statistically and economically significant way. A lower bound ordinary least squares estimate suggests that a 10 percent increase in per capita relief spending during the Great Depression lowered property crime rates by close to 1 percent. After controlling for potential endogeneity using an instrumental variables approach, the estimates suggest that a 10 percent increase in per capita relief spending lowered crime rates by roughly 5.6 to 10 percent at the margin. More generally, our results indicate that social insurance, which tends to be understudied in economic analyses of crime, should be more explicitly and more carefully incorporated into the analysis of temporal and spatial variations in criminal activity.
    JEL: H53 I38 K4 N31 N41
    Date: 2007–01
  6. By: Nakazato, Minoru; Ramseyer, J. Mark; Rasmusen, Eric
    Abstract: Using micro-level data on attorney incomes in 2004, we reconstruct the industrial organization of the Japanese legal services industry. These data suggest a somewhat bifurcated bar, with two sources of unusually high income: talent in Tokyo, and scarcity elsewhere. The most talented would-be lawyers (those with the highest opportunity costs) pass the bar-exam equivalent on one of their first tries or abandon the effort. If they pass, they tend to opt for careers in Tokyo that involve complex litigation and business transactions. This work places a premium on their talent, and from it they earn appropriately high incomes. The less talented face lower opportunity costs, and willingly spend many years studying for the exam. If they eventually pass, they disproportionately forego the many amenities available to professional families in Tokyo and opt instead for careers in the under-lawyered provinces. There, they earn scarcity and monopoly rents not available in the far more competitive Tokyo market.
    Keywords: lawyers; Japan
    JEL: K40
    Date: 2006–09–17

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