New Economics Papers
on Law and Economics
Issue of 2007‒04‒14
four papers chosen by
Jeong-Joon Lee, Towson University

  1. The Origins of State Capacity: Property Rights, Taxation, and Politics By Timothy Besley; Torsten Persson
  2. Do we Know More Now? Trends in Public Knowledge, Support and Use of Fair Housing Law By Martin D. Abravanel
  3. Universal Service Obligations and Competition with Asymmetric Information By Poudou, J.C.; Roland, M.; Thomas, L.
  4. Social Norms By H. Peyton Young

  1. By: Timothy Besley; Torsten Persson
    Abstract: Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where "policy choices", regulation of markets and tax rates, are constrained by "economic institutions", which in turn reflect past investments in legal and fiscal state capacity. We study the economic and political determinants of these investments. The analysis shows that common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity. Preliminary empirical evidence based on cross-country data find a number of correlations consistent with the theory.
    JEL: D70 E60 H10 K40 O10
    Date: 2007–04
  2. By: Martin D. Abravanel
    Abstract: The federal Fair Housing Act defines basic obligations, protections, and enforcement provisions pertaining to housing discrimination in the United States. Although enacted in 1968, it was not until 2001 that we learned the extent of the general public’s awareness of and support for this law and the degree to which persons believing they were victims of housing discrimination sought to take advantage of its enforcement provisions. This report documents what we have learned since that time, based on new information.
    JEL: K30
    Date: 2006–02
  3. By: Poudou, J.C.; Roland, M.; Thomas, L.
    Abstract: This paper takes into account adverse selection in the implementation of universal service obligations (USOs) for a network industry with no bypass. USOs are characterized by a coverage constraint imposed on the network’s owner. We develop fully the model for a welfare maximizing coverage constraint and explain how to adapt it for a full coverage (ubiquity) constraint. We use a market without USO as a benchmark case. We show that, because of information rents, a sufficiently high shadow cost of public funds can lead to a lower coverage with the USO than without it when firms turn out to be relatively inefficient. If the regulator is able to determine the industry structure by issuing licences to operate, the optimal number of firms reflects a trade-off between allocative efficiency and the industry capacity to finance internally the USO. The shadow cost of public funds then plays a dual role as it determines the terms of this efficiency funding trade-off in addition to the terms of the traditionnal efficiency rent trade-off.
    Keywords: universal service obligations, coverage constraints, asymmetric information, regulation
    JEL: D82 K23 L43 L51
    Date: 2007
  4. By: H. Peyton Young
    Abstract: The function of a social norm is to coordinate people`s expectations in interactions that possess multiple equilibria. Norms govern a wide range of phenomena, including property rights, contracts, bargains, forms of communication, and concepts of justice. Norms impose uniformity of behavior within a given social group, but often vary substantially among groups. Over time norm shifts may occur, prompted either by changes in objective circumstances or by subjective changes in perceptions and expectations. The dynamics of this process can be modeled using evolutionary game theory, which predict that some norms are more stable than others in the long run.
    Keywords: Norms, Institutions, Equilibrium Selection
    JEL: C73 B52 K0
    Date: 2007

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