New Economics Papers
on Law and Economics
Issue of 2007‒09‒30
nine papers chosen by
Jeong-Joon Lee, Towson University

  1. "Role of Courts in Economic Development: A Case of Prewar Japan" By Masaki Nakabayashi; Tetsuji Okazaki
  2. The “Reasonable Man” and other legal standards By Miller, Alan D.
  3. Product Market Competition in the OECD Countries: Taking Stock and Moving Forward By Jens Høj; Miguel Jimenez; Maria Maher; Giuseppe Nicoletti; Michael Wise
  4. Behaviour in Networks of Collaborators: Theory and Evidence from the English Judiciary By Jordi Blanes i Vidal; Clare Leaver
  5. The Effect of Bank Competition on the Bank’s Incentive to Collateralize By Christa Hainz
  6. The Unbundling Regime for Electricity Utilities in the EU: A Case of Legislative and Regulatory Capture? By Silvester van Koten; Andreas Ortmann
  7. Enforcement and Over-Compliance By Jay P. Shimshack; Michael B. Ward
  8. Cumulative Innovation, Sampling and the Hold-Up Problem By Pollock, Rufus
  9. Innovation and Imitation with and without Intellectual Property Rights By Pollock, Rufus

  1. By: Masaki Nakabayashi (Department of Economics, University of Tokyo); Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: In this paper, we explore the role of courts in the Japanese economic development, using prefecture-level litigation statistics. Since the late nineteenth century, the Japanese people brought many cases before the courts. The dominant part of the cases dealt with monetary issues, which implies that the court played a substantial role in arbitrating disputes related to economic transactions. Through regression analyses of prefecture-level panel data, it was found that frequency of law suits was positively correlated with the scale of economic activities, but that it was only in case economic development was accompanied by urbanization or decline of local communities. At the same time, it is found that increase of the capacity of the legal system enhanced financial development. In this case also, the importance of the capacity of legal system was conditional on the function of local communities.
    Date: 2007–09
  2. By: Miller, Alan D.
    Date: 2007–09
  3. By: Jens Høj; Miguel Jimenez; Maria Maher; Giuseppe Nicoletti; Michael Wise
    Abstract: Based on 18 country reviews performed over the 2003-2005 period, this paper examines, the cross-country differences in policy approaches to product market competition and their consequences for product market rents. Against this background, the paper summarises OECD recommendations to further strengthen competition in various sectors and areas. These include: removing remaining barriers to trade and inward foreign direct investments; better securing deterrence of cartels through effective sanctions; facilitate market access to inherently competitive industries by easing zoning laws (the retail sector), abolishing reserved monopolies (sales of tobacco and alcohol), limiting the scope of trade associations’ self-regulation and easing residency or nationality requirements (professional services); meet competition challenges in network industries by facilitating the effective separation of monopoly components from competitive activities, reducing public ownership, clearly separating the government’s ownership and regulatory functions and creating the right incentives for investing in infrastructures. <P>Concurrence dans les marchés des produits des pays de l’OCDE : bilan et perspectives <BR>Ce document est basé sur 18 études économiques de l’OCDE menées entre 2003 et 2005. Il examine les différences entre pays dans les politiques de la concurrence ainsi que leur conséquences sur les caractéristiques des marchés de produits. Sur cette base, le document propose une synthèse des recommandations de l’OCDE pour renforcer la concurrence dans différents domaines et secteurs économiques. Celles-ci comprennent: la suppression des barrières commerciales et aux investissements directs étrangers encore en place; une meilleure dissuasion des stratégies de cartel à l’aide de sanctions plus efficaces; un accès plus aisé aux activités concurrentielles en assouplissant les régulations concernant l’aménagement du territoire (commerce de détail), la suppression de certains monopoles (vente de tabac et d’alcool), la limitation des prérogatives des associations professionnelles dans le domaine règlementaire ainsi que l’assouplissement des obligations de résidence ou de nationalité (professions libérales) ; et un meilleur essor de la concurrence dans les industries de réseau par la séparation des activités en situation de monopole des activités concurrentielles, la réduction du degré de contrôle public, notamment en distinguant clairement les fonctions de tutelle des fonctions de régulation sectorielle et en mettant en place les bonnes incitations à l’investissement en infrastructures.
    Keywords: network industries, industrie de réseau, trade policy, politique commerciale, competition law, droit de la concurrence, OECD countries, market imperfections, antitrust issues and policies, inherently competitive sectors, pays membres de l'OCDE, défaillances de marché, régulations anti-trust, secteurs concurrentiels
    JEL: D43 F13 K21 L4 L8 L9
    Date: 2007–09–17
  4. By: Jordi Blanes i Vidal; Clare Leaver
    Abstract: This paper uses data on judicial citations to explore whether the diffusion and/or application of knowledge within an organisation is affected by worker connectivity. Developing a simple model of discretionary citations, we distinguish between two hypotheses: knowledge diffusion whereby connected judges are more likely to be aware of each others` cases than unconnected judges, and socialisation whereby judges are more likely to be positively disposed to judges to whom they are more connected. Our empirical strategy exploits three important institutional features: (a) the random allocation of judges to case committees in the English Court of Appeal, (b) the existence of both positive and neutral citations and (c) the fact that connections occur over time. We are able to reject the knowledge diffusion hypothesis in its simplest form. We are unable to reject the socialisation hypothesis, and find strong evidence to support it. The paper concludes with a discussion of implications for other knowledge-based organisations.
    Keywords: Networks, Public Sector Organizations, Judicial Citations
    JEL: H1 K4 Z13
    Date: 2007
  5. By: Christa Hainz (Department of Economics, University of Munich, Akademiestr. 1/III, 80799 Munich, Tel.:+49 89 2180 3232, Fax.: +49 89 2180 2767,
    Abstract: It has been argued that competing banks make inefficiently frequent use of collateralization in situations where they are better able to evaluate a project’s risk than entrepreneurs. We study the bank’s choice between screening and collateralization in a model where banks do not have this superior screening skill. In particular, we study the effect of bank competition on this choice. We find that competing banks use collateral less often than a monopolistic bank because competition will intensify if both banks collateralize. Moreover, bank competition is welfare improving if collateralization is rather costly.
    Keywords: collateralization, screening, incentives, bank competition
    JEL: D82 G21 K00
    Date: 2007–09
  6. By: Silvester van Koten; Andreas Ortmann
    Abstract: Theory and empirics suggest that by curbing competition, incumbent electricity companies which used to be and here are referred to as Vertically Integrated Utilities (VIUs), can increase their profitability through combined ownership of generation and transmission and/or distribution networks. Because curbing competition is generally believed to be welfare-reducing, EU law requires unbundling (separation) of the VIU networks. However, the EU allows its member states the choice between incomplete (legal) and complete (ownership) unbundling. There is tantalizing anecdotal evidence that VIUs have tried to influence this choice through questionable means of persuasion. Such means of persuasion should be more readily available in countries with a more corrupted political culture. This paper shows that among the old EU member states (EU-15), countries which are perceived as more corrupt are indeed more likely to apply weaker forms of unbundling. Somewhat surprisingly, we do not obtain a similar finding for the new EU member states that acceded in 2004 (NMS-10). We provide a conjecture for this observation.
    Keywords: Electricity markets; regulation; vertical integration; corruption.
    JEL: K49 L43 L51 L94 L98
    Date: 2007–05
  7. By: Jay P. Shimshack; Michael B. Ward
    Abstract: Economists generally view environmental enforcement as a tool to secure compliance with regulations. This paper demonstrates that credible enforcement significantly increases statutory overcompliance with regulations as well. We find that many plants with discharges typically below legally permitted levels reduce discharges further when regulators issue fines, even on other plants. Also, likely non-compliant plants often respond to sanctions by reducing discharges well beyond reductions required by law. Thus, increased enforcement generates substantial discharge reductions above and beyond those expected from simply deterring violations.
    Keywords: Over-compliance; Fines; Compliance; Enforcement; Regulation; Pollution Policy
    JEL: K42 Q58 Q53
    Date: 2007
  8. By: Pollock, Rufus
    Abstract: With cumulative innovation and imperfect information about the value of innovations, intellectual property rights can result in hold-up and therefore it may be better not to have them. Extending the basic cumulative innovation model to include `sampling' by second-stage firms, we find that the lower the cost of sampling, or the larger the differential between high and low value second-stage innovations, the more likely it is that a regime without intellectual property rights will be preferable. Thus, technological change which reduces the cost of encountering and trialling new `ideas' implies a reduction in the socially optimal level of rights such as patent and copyright.
    Keywords: Cumulative Innovation; Hold-Up; Sampling; Intellectual Property
    JEL: L5 O3 K3
    Date: 2006–01–24
  9. By: Pollock, Rufus
    Abstract: An extensive empirical literature indicates that returns from innovation are appropriated primarily via mechanisms other than formal intellectual property rights -- and that `imitation' is itself a costly activity. However most theory assumes the pure nonrivalry of `ideas' with its implication that, in the absence of intellectual property, innovation (and welfare) is zero. This paper introduces a formal model of innovation based on imperfect competition in which imitation is costly and an innovator has a first-mover advantage. Without intellectual property, a significant amount of innovation still occurs and welfare may actually be higher than with intellectual property.
    Keywords: Innovation; Imperfect Competition; Intellectual Property; Imitation
    JEL: L5 O3 K3
    Date: 2006–09

This issue is ©2007 by Jeong-Joon Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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