New Economics Papers
on Law and Economics
Issue of 2007‒03‒10
fourteen papers chosen by
Jeong-Joon Lee, Towson University

  1. The Argentine Competition Law and its Enforcement By Germán coloma
  2. Sharing Liability Between Banks and Firms: The Case of Industrial Safety Risk By Marcel Boyer; Donatella Porrini
  3. Multi-Level Judicial Trade Governance without Justice? On the Role of Domestic Courts in the WTO Legal and Dispute Settlement System By Ernst-Ulrich Petersmann
  4. State Sovereignty, Popular Sovereignty and Individual Sovereignty: from Constitutional Nationalism to Multilevel Constitutionalism in International Economic Law? By Ernst-Ulrich Petersmann
  5. Justice in International Economic Law? From the ‘International Law among States’ to ‘International Integration law’ and ‘Constitutional Law’ By Ernst-Ulrich Petersmann
  6. Consumer Citizenship in Postnational Constellations? By Michelle Everson; Christian Joerges
  7. The Extra-Territorialisation of EU Migration Policies and the Rule of Law By Jorrit Rijpma; Marise Cremona
  8. Marriage and Divorce: Changes and their Driving Forces By Betsey Stevenson; Justin Wolfers
  9. A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002 By Yael V. Hochberg; Paola Sapienza; Annette Vissing-Jorgensen
  10. Comment: Legal Liability as Climate Change Policy By Hilary Sigman
  11. The Effect of Divorce Laws on Divorce Rates in Europe By Libertad González Luna; Tarja K. Viitanen
  12. Intellectual Property as a Carrot for Innovators Using Game Theory to Show the Limits of the Argument By Christoph Engel
  14. The introduction of an appeals court in Dutch tax litigation By Kamphorst, Jurjen J.A.; Van Velthoven, Ben C.J.

  1. By: Germán coloma
    Abstract: This article analyzes the basic characteristics of the Argentine competition law and the way in which it has been enforced in several important antitrust cases. We begin with a section that introduces the evolution of the law, followed by another section about the basic economic and legal principles underlying that law. The rest of the article describes the enforcement of the law, in a number of cases that involve collusive practices, exclusionary practices, vertical restraints, abuses of dominant position, and mergers.
    Keywords: Competition law, antitrust, Argentina
    JEL: K21 L40
    Date: 2007–02
  2. By: Marcel Boyer; Donatella Porrini
    Abstract: We characterize the distortions in environmental liability sharing between firms and banks that the imperfect implementation of government policies implies. These distortions stem from three factors: the presence of moral hazard, the use of objective functions by firms and banks that differs from the social welfare function, and the difficulty for the court to assess the safety care level exerted by the firms. We characterize cases where the liability sharing factor is above or below its full information perfect implementation level. We derive comparative statics results indicating the sensitivity of the liability sharing factor to changes in some parameters relevant for characterizing the optimal policy toward environmental protection or the prevention of industrial accidents. <P>Nous caractérisons les distortions dans le partage de responsabilités entre banques et firmes qu'implique l'implémentation imparfaite des politiques gouvernementales. Ces distortions découlent de la présence de risque moral et de sélection adverse, de l'utilisation de fonctions-objectifs par les firmes et les banques diffèrentes de la fonction de bien-être social, et de la difficulté des cours de justice d'évaluer le niveau de précaution exercé par les firmes. Nous montrons l'existence de divers cas où le partage de responsabilités est supérieur ou inférieur au partage optimal en information et implémentation parfaites. Nous obtenons des résultats de statique comparée illustrant la sensibilité du partage des responsabilités aux paramètres pertinents à la détermination d'une politique optimale de protection environnementale ou de prévention d'accidents industriels.
    Keywords: liability sharing, industrial/environmental liability, safety care, moral hazard, principal-agent, partage de responsabilités, environnement, prévention, risque moral, sélection adverse, principal-agent
    JEL: D82 G32 K13 K32 Q28
    Date: 2007–03–01
  3. By: Ernst-Ulrich Petersmann
    Abstract: The fragmented nature of national and international legal and dispute settlement regimes, and the formalistic nature of the customary international law rules on treaty interpretation and conflicts of laws, offer little guidance on how national and international judges should respond to the proliferation of competing jurisdictions and the resultant incentives for forum shopping and rule shopping by governments and non-governmental actors in international economic law. Due to their different jurisdictions, procedures and different rules of applicable laws, national and international judges often interpret international trade law from different (inter)national, (inter)governmental, constitutional and judicial perspectives. This paper explores the judicial functions of national and international judges to reach justified decisions based on positive law, on the basis of transparent, predictable and fair procedures, and to interpret international treaties in conformity with principles of justice. Chapters I to III explain some of the principles of justice underlying international trade law and argue that international rules for a mutually beneficial division of labour among private citizens should be construed with due regard to the human rights obligations of governments. Chapters III and IV propose to strengthen international cooperation among national and international courts, for instance by negotiating additional WTO commitments to interpret domestic trade laws in conformity with the WTO obligations of the countries concerned and to settle WTO disputes over private rights primarily in domestic courts, without transforming essentially private disputes into disputes among governments.
    Keywords: WTO; governance; international trade; dispute resolution; European Court of Justice
    Date: 2006–12–01
  4. By: Ernst-Ulrich Petersmann
    Abstract: This paper discusses the basic constitutional problem of modern international law since the UN Charter: How can the power-oriented international legal system based on sovereign equality of states be reconciled with the universal recognition of inalienable human rights deriving from respect for human dignity and popular sovereignty? State representatives, intergovernmental organizations, international judges and non-governmental organizations often express different views on how far the universal recognition of human rights has changed the subjects, structures, general principles, interpretative methods and object and purpose of international law (e.g. by the emergence of erga omnes obligations and jus cogens limiting state sovereignty to renounce human rights treaties, to refuse diplomatic protection of individuals abroad, or domestic implementation of international obligations for the benefit of domestic citizens). The paper explains why effective protection of human rights at home and abroad requires multilevel constitutional protection of individual rights as well as multilevel constitutional restraints of national, regional and worldwide governance powers and procedures. While all European states have accepted that the European Convention on Human Rights and EC law have evolved into international constitutional law, the prevailing paradigm for most states outside Europe remains constitutional nationalism rather than multilevel constitutional pluralism. Consequently, European proposals for reforms of international economic law often aim at constitutional reforms (e.g. of worldwide governance institutions) rather than only administrative reforms, as they are frequently favoured by non-European governments defending state sovereignty and popular sovereignty within a more power-oriented international law among states.
    Keywords: multilevel governance; international trade; fundamental/human rights
    Date: 2006–12–01
  5. By: Ernst-Ulrich Petersmann
    Abstract: The UN Charter and the Vienna Convention on the Law of Treaties require interpreting treaties and settling international disputes in conformity with the principles of justice and international law. This contribution discusses procedural and substantive principles of justice which the international judge may take into account in interpreting international economic agreements. The sovereign equality of states underlying the international law of coexistence as well as the international law of intergovernmental cooperation must be interpreted in conformity with the universal recognition of human dignity as a source of inalienable human rights. The universal recognition of economic and social human rights further requires taking into account solidarity principles, as proposed also by the sociological approach to international law. The constitutional structures and citizen-oriented functions of the law of international economic organizations liberalizing and regulating mutually beneficial market transactions among citizens require judges to engage in a careful balancing of state-centered and citizen-oriented principles of international law, including respect for the emerging human right to democratic decision-making. This modern international integration law and the increasing number of international constitutional rules promote the reconciliation of the various state-centered approaches, human rights approaches, sociological approaches and policy-approaches to international law as a system not only of international rules and legal pluralism but also of constitutionally limited decision-making processes and struggles for human rights.
    Keywords: governance; international trade; intergovernmentalism
    Date: 2006–12–01
  6. By: Michelle Everson; Christian Joerges
    Abstract: It is perhaps a truism to note that ‘the consumer’ is but a role that is played by human subjects. This insight leaves us, as lawyers, with one vital question: how can or does the legal system meaningfully rationalise its encounters with the consumer? Can it, and if so to what way, shape the act of consumption? Can it even ensure that the ‘fact’ of consumption translates into ‘good’ normative institutions. In a summarizing account of legal encounters with the consumer since the era of laissez-faire liberalism we seek to show that this potential does exist within the constitutional state. However, as markets, political systems and consumers have broken free from national communities we need to ask: will the achievements of constitutional democracies survive Europeanisation and Gliobalisation? In our assessment of current trends in the EU we diagnose a seemingly paradoxical alliance between a new orthodoxy of neo-liberalism within market relations and a de-legalisation of regulatory policies. At international level, our analysis is restricted to a single case (namely, the recent report of a WTO Panel on the controversy over Genetically Modified Organisms (GMOs). It has become increasingly clear that the notion of a international consumer interest has been reduced to one of health and safety that is identified and secured with simple recourse to ‘scientific expertise’. ‘Sound science’ has become transnationally binding yardstick that both orients and limits consumer policy. The vision of a ‘consumer citizen’, who would actively participate in the transformation of consumption into a normative ‘good’, has become a matter of utopian history.
    Keywords: governance; WTO; risk regulation; international trade
    Date: 2006–12–01
  7. By: Jorrit Rijpma; Marise Cremona
    Abstract: This paper takes a closer look at one of the EU’s foundational values, the rule of law, and relates it to the external dimension of the EU’s migration policy. It examines how the EU’s powers in migration management have been put to use in order to project EU migration policies beyond the EU legal order, or more precisely to locate the physical control of migration outside EU territory. It categorises different types of extra-territorialisation, ranging from autonomous action by the Community, including Community action which requires third country cooperation, to action by way of international agreements and cases where third countries undertake to align their domestic law with the Community acquis. Starting from the prominence accorded to the rule of law in the EU’s external policy, this paper examines an external dimension of the rule of law which goes beyond the desire to promote this value outside EU territory, and its application to the external dimension of the EU’s migration policy. It highlights challenges for the rule of law posed by the increasing phenomenon of extraterritorialisation in EU migration policy. Practical examples taken from the EU’s visa policy and operational cooperation in the field of external border control serve to support the argument that if the EU is to continue the use of extra-territorialisation as an instrument of its migration policy it must address seriously the issue of ensuring a concomitant extra-territorialisation of the rule of law, in particular the effective judicial review of administrative action.
    Keywords: European law; fundamental/human rights; rule of law; judicial review; immigration policy; security/internal; Schengen
    Date: 2007–02–01
  8. By: Betsey Stevenson; Justin Wolfers
    Abstract: We document key facts about marriage and divorce, comparing trends through the past 150 years and outcomes across demographic groups and countries. While divorce rates have risen over the past 150 years, they have been falling for the past quarter century. Marriage rates have also been falling, but more strikingly, the importance of marriage at different points in the life cycle has changed, reflecting rising age at first marriage, rising divorce followed by high remarriage rates, and a combination of increased longevity with a declining age gap between husbands and wives. Cohabitation has also become increasingly important, emerging as a widely used step on the path to marriage. Out-of-wedlock fertility has also risen, consistent with declining "shotgun marriages". Compared with other countries, marriage maintains a central role in American life. We present evidence on some of the driving forces causing these changes in the marriage market: the rise of the birth control pill and women's control over their own fertility; sharp changes in wage structure, including a rise in inequality and partial closing of the gender wage gap; dramatic changes in home production technologies; and the emergence of the internet as a new matching technology. We note that recent changes in family forms demand a reassessment of theories of the family and argue that consumption complementarities may be an increasingly important component of marriage. Finally, we discuss the welfare implications of these changes.
    JEL: D1 H31 I3 J1 K36 N3
    Date: 2007–03
  9. By: Yael V. Hochberg; Paola Sapienza; Annette Vissing-Jorgensen
    Abstract: We evaluate the net benefits of the Sarbanes-Oxley Act (SOX) for shareholders by studying the lobbying behavior of investors and corporate insiders to affect the final implemented rules under the Act. Investors lobbied overwhelmingly in favor of strict implementation of SOX, while corporate insiders and business groups lobbied against strict implementation. We identify the firms most affected by the law as those whose insiders lobbied against strict implementation, and compare their returns to the returns of less affected firms. Cumulative returns during the four and a half months leading up to passage of SOX were approximately 10 percent higher for corporations whose insiders lobbied against one or more of the SOX disclosure-related provisions than for similar non-lobbying firms. Analysis of returns in the post-passage implementation period indicates that investors' positive expectations with regards to the effects of the law were warranted for the enhanced disclosure provisions of SOX.
    JEL: G3 G34 K22
    Date: 2007–03
  10. By: Hilary Sigman (Rutgers University)
    Abstract: Several U.S. states have attempted to use of legal liability imposed on greenhouse gas emitters as a public policy instrument for climate change. This brief comment considers the desirability of this approach, focusing on three possible roles for climate change liability: as a source of compensation, as a direct influence on greenhouse gas concentrations, and as a means to facilitate the adoption of ex ante public policies to control greenhouse gases. The strongest argument for liability may be that the threat of liability improves the chances that climate change policies will use more efficient, revenue-raising instruments.
    Keywords: Environmental policy, Law and economics, Revenue recycling
    JEL: K32 Q54
    Date: 2007–02–21
  11. By: Libertad González Luna; Tarja K. Viitanen
    Abstract: This paper analyzes a panel of 18 European countries spanning from 1950 to 2003 to examine the extent to which the legal reforms leading to “easier divorce” that took place during the second half of the 20th century have contributed to the increase in divorce rates across Europe. We use a quasi-experimental set-up and exploit the different timing of the reforms in divorce laws across countries. We account for unobserved country-specific factors by introducing country fixed effects, and we include country-specific trends to control for time-varying factors at the country level that may be correlated with divorce rates and divorce laws, such as changing social norms or slow moving demographic trends. We find that the reforms were followed by significant increases in divorce rates. Overall, we estimate that the introduction of no-fault, unilateral divorce increased the divorce rate by about 1, a sizeable effect given the average rate of 4.2 divorces per 1,000 married people in 2002.
    Keywords: Divorce rates, legislation
    JEL: J12 J18 K3
    Date: 2006–10
  12. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Policymakers all over the world claim: no innovation without protection. For more than a century, critics have objected that the case for intellectual property is far from clear. This paper uses a game theoretic model to organise the debate. It is possible to model innovation as a prisoner's dilemma between potential innovators, and to interpret intellectual property as a tool for making cooperation the equilibrium. However, this model rests on assumptions about cost and benefit that are unlikely to hold, or have even been shown to be wrong, in many empirically relevant situations. Moreover, even if the problem is indeed a prisoner's dilemma, in many situations intellectual property is an inappropriate cure. It sets incentives to race to be the first, or the last, to innovate, as the case may be. In equilibrium, the firms would have to randomise between investment and non-investment, which is unlikely to work out in practice. Frequently, firms would have to invent cooperatively, which proves difficult in larger industries.
    Keywords: intellectual property, game theory
    JEL: C72 O31 K11
    Date: 2007–02
  13. By: Francisco Martínez-Sánchez (Universidad de Alicante)
    Abstract: We analyze the roles of the government and the incumbent in preventing piracy, and the reasons and incentives why a pirate would want to be a leader in prices. The framework of analysis used is a duopoly model of vertical product differentiation with price competition, where both incumbent and pirate are committed to keep their prices. We find that both government and incumbent have a key role in avoiding the entry of the pirate. We show that the government will not help the incumbent to become a monopolist, even if he installs an antipiracy system, because a monopoly provides the lowest social welfare. However, he will let the pirate enters as a follower or as a leader, or encourage the incumbent to deter the entry of the pirate, which depends on the technology of the government for monitoring piracy. The pirate decides to become a leader to avoid being brought down by the incumbent and the government, although the leader's profit is lower than the follower's profit. Finally, we find that high-income countries with cheaper monitoring technology have lower piracy rates.
    Keywords: Pirate, Incumbent, Government, Price Leadership, Copy, Monitoring Piracy, Income
    JEL: K42 L13 L86
    Date: 2007–03
  14. By: Kamphorst, Jurjen J.A.; Van Velthoven, Ben C.J.
    Abstract: Since January 1, 2005, the Dutch tax litigation comprises an appeals court. Before 2005, it had but one court of instance. That means that now, after a court of first instance has given its verdict in a tax dispute, an unsatisfied party may appeal to a higher instance, where this was impossible before. In this paper we investigate which consequences introducing an appeals court has for the way tax payers and the tax administration solve their disputes. We focus on the following questions. Are more or less tax payers willing to go to court to solve the dispute? Is it more or less difficult for parties to agree upon a settlement? Which appeal rate can we expect? What is the role of trust in the courts in the answers to the questions above?
    Keywords: Economic analysis of law; Litigation; Appeal
    JEL: K41
    Date: 2006–04–25

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