New Economics Papers
on Law and Economics
Issue of 2007‒10‒06
twelve papers chosen by
Jeong-Joon Lee, Towson University

  1. Measuring the Compactness of Political Districting Plans By Roland G. Fryer, Jr; Richard T. Holden
  2. The Smuggling of Art, and the Art of Smuggling: Uncovering the Illicit Trade in Cultural Property and Antiques By Raymond Fisman; Shang-Jin Wei
  3. Institutional Aspects of Police and Judicial Cooperation in Criminal Matters within the Area of Freedom, Justice and Security of the European Union By Jovanoski, Aleksandar
  4. Optimal income taxation in the presence of tax evasion: Expected utility versus prospect theory By Sanjit Dhami; Ali al-Nowaihi
  5. To Comply or Not To Comply? Pollution Standard Setting Under Costly Monitoring and Sanctioning By Arguedas, Carmen
  6. From the “Econometrics of Capital Punishment” to the “Capital Punishment” of Econometrics: On the Use and Abuse of Sensitivity Analysis By Hashem Dezhbakhsh; Paul Rubin
  7. The Impact of the Judiciary on Economic Activity By Matthieu Chemin
  8. Does Judicial Quality Shape Economic Activity? Evidence from a Judicial Reform in India By Matthieu Chemin
  9. Decoding the Code of Civil Procedure: Do Judiciaries Matter for Growth? By Matthieu Chemin
  10. The Impact of the Judiciary on Entrepreneurship: Evaluation of Pakistan's Access to Justice Programme By Matthieu Chemin
  11. Flexibility in the implementation of intellectual property rights in agricultural biotechnology By Trommetter, M.
  12. Cycles of violence, and terrorist attacks index for the State of Oklahoma By Gómez-Sorzano, Gustavo

  1. By: Roland G. Fryer, Jr; Richard T. Holden
    Abstract: The United States Supreme Court has long recognized compactness as an important principle in assessing the constitutionality of political districting plans. We propose a measure of compactness based on the distance between voters within the same district relative to the minimum distance achievable -- which we coin the relative proximity index. We prove that any compactness measure which satisfies three desirable properties (anonymity of voters, efficient clustering, and invariance to scale, population density, and number of districts) ranks districting plans identically to our index. We then calculate the relative proximity index for the 106th Congress, requiring us to solve for each state's maximal compactness; an NP-hard problem. Using two properties of maximally compact districts, we prove they are power diagrams and develop an algorithm based on these insights. The correlation between our index and the commonly-used measures of dispersion and perimeter is -.22 and -.06, respectively. We conclude by estimating seat-vote curves under maximally compact districts for several large states. The fraction of additional seats a party obtains when their average vote increases is significantly greater under maximally compact districting plans, relative to the existing plans.
    JEL: H70 K19
    Date: 2007–10
  2. By: Raymond Fisman; Shang-Jin Wei
    Abstract: We empirically analyze the illicit trade in cultural property and antiques, taking advantage of different reporting incentives between source and destination countries. We thus generate a measure of illicit trafficking in these goods based on the difference between imports recorded in United States' customs data and the (purportedly identical) trade as recorded by customs authorities in exporting countries. We find that this reporting gap is highly correlated with the corruption level of the exporting country as measured by commonly used survey-based indicies, and that this correlation is stronger for artifact-rich countries. As a placebo test, we do not observe any such pattern for U.S. imports of toys from these same exporters. We report similar results for four other Western country markets. Our analysis provides a useful framework for studying trade in illicit goods. Further, our results provide empirical confirmation that survey-based corruption indicies are informative, as they are correlated with an objective measure of illicit activity.
    JEL: F1 K42 O1 Z11
    Date: 2007–09
  3. By: Jovanoski, Aleksandar
    Abstract: With the Treaty on the European Union, the previously the Member States of the European Community had agreed to start intergovernmental cooperation in the sphere of Justice and Home Affairs. After Tampere European Summit in 1999, the Member States of the European Union agreed on the creation of a common area of freedom, security and justice in order to ensure security for its citizens and flourishing of the rule of Law. Presently, the judicial and police cooperation in criminal matters is at the very core on the European agenda, still it is highly dependent on the interest aggregation of the Member States and unanimity vote in the JHA Council of Ministers, with limited inclusion of the European Commission and European Parliament, and not under jurisprudence of the European Court of Justice. Therefore, this paper will assess the current institutional aspects of judicial and police cooperation under the JHA Pillar by considering the current method of decision-making in those matters.
    Keywords: European Union; Police and Judicial Cooperation; Area; Freedom; Security; Justice; Institutional; Aspects
    JEL: H41 H40 Y4 Y80 K30 K39 Z00
    Date: 2007–07–01
  4. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: The predictions of expected utility theory (EUT) applied to tax evasion are flawed on two counts: (i) They are quantitatively in error by huge orders of magnitude. (ii) Higher taxation is predicted to lower evasion, which is at variance with the evidence. An emerging literature in behavioral economics, most notably based on prospect theory (PT), has shown that behavioral economics is much better at explaining tax evasion. We extend this literature to incorporate issues of optimal taxation. As a benchmark for a successful theory, we require that it should explain, jointly, the facts on the tax rate, tax gap and the level of government expenditure. We find that when taxpayers use EUT (respectively, PT) and the optimal tax is derived from a social welfare function that also uses EUT (respectively, PT), then, the calibration results are completely at odds with the facts. However, when taxpayers use PT but the social welfare function uses standard EUT, there is a very close match between the predictions and the facts. This has important implications for context dependent preferences but also for the newly emerging literature on liberalism versus paternalism in behavioral economics.
    Keywords: Prospect theory; Expected utility theory; Tax evasion; Optimal taxation; Normative versus positive economics; Context dependent preferences; Liberalism; Paternalism
    JEL: D81 H26 K42
    Date: 2007–09
  5. By: Arguedas, Carmen (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: In this paper, we characterize optimal regulatory policies composed of pollution standards, probabilities of inspection and fines for non-compliance, in a context where both monitoring and sanctioning are socially costly, and penalties may include gravity and non-gravity components at the regulator's discretion. The optimal policy entails compliance with the standards as long as a quite intuitive condition is met. Non-compliant policies may include standards even below the pollution levels that minimize the sum of abatement costs and external damages. Interestingly, the appropriate structure of penalties under non-compliance is highly progressive, while the best possible shape of the fines under compliance is linear only if non-gravity sanctions are not allowed.
    Keywords: standards; monitoring; convex fines; non-compliance; non-gravity sanctions
    JEL: K32 K42 L51 Q28
    Date: 2007–09
  6. By: Hashem Dezhbakhsh; Paul Rubin
    Abstract: The academic debate over the deterrent effect of capital punishment has intensified again with a major policy outcome at stake. About two dozen empirical studies have recently emerged that explore the issue. Donohue and Wolfers (2005) claim to have examined the recent studies and shown the evidence is not robust to specification changes. We argue that the narrow scope of their study does not warrant this claim. Moreover, focusing on our two studies that they have examined, we show the deterrence findings to be robust, while their work has serious flaw in analysis and selectivity in reporting the results. The selectivity is biased toward showing “no deterrence.” This highlights the importance of a proper framework for guiding the sensitivity analysis of published work to guard against data-mining and agenda-driven empiricism. We hope that our study generates interests in appropriate ways to do sensitivity analysis of published work as much as it contributes to the debate about capital punishment.
    Date: 2007–09
  7. By: Matthieu Chemin
    Abstract: This paper examines the consequences of slow judiciaries on firms' contracting behaviour in India. After deriving testable implications from a game theoretical model, I examine how case pendency rates in India's state courts affect the contracting behaviour of 170,000 small non-agricultural informal firms from the 2000 National Sample Survey's 55th round. I find that a slow judiciary implies more breaches of contract, discourages firms from undertaking relationship-specific investments, impedes firms' access to formal financial institutions, and favours inefficient dynasties. Moving a firm from the highest to the lowest pendency state would result in a 10% improvement in firm performance.
    Keywords: Law and economics, Institutions, Courts, Contracts, Industrial Organisation, Economic Growth, Industrial Performance
    JEL: K10 K12 K40 K42 O12 O17 L14 D23 C72
    Date: 2007
  8. By: Matthieu Chemin
    Abstract: This paper investigates the impact of judiciaries on firms' contracting behaviour and economic performance. In 2002, the Code of Civil Procedure Amendment Act was enacted in India to facilitate speedy disposal of civil suits. Some State High Courts hal already enacted some of the amendments contained in this reform a long time ago. This spatial variation in the reform's implementation is used to identify the effect of judicial quality on firm's behavior. Using small informal firm data, I find that the reform led to fewer breaches of contract, encouraged investment, facilitated access to finance, and expanded rental markets.
    Keywords: Law and economics, Institutions, Courts, Contracts, Industrial Organisation, Economic Growth, Industrial Performance
    JEL: K10 K12 K40 K42 O12 O17 L14 D23 C72
    Date: 2007
  9. By: Matthieu Chemin
    Abstract: This paper attempts to measure the causal impact of the speed of judiciaries on economic activity by using two novel instrumental variables measuring judicial procedural ambiguity and complexity. First, I find that temporally exogenous conflicting judicial decisions taken in India due to the Code of Civil Procedure's ambiguity lead to higher expected trial duration as judges are required to spend considerable time in choosing between several conflicting views. Second, I find that Inidan High Court amendments complicating procedures to treat a case are related to higher trial duration. By using spatial and temporal variations in the occurrence of conflicting decisions and enactment of amendments as instrumental variables, I am able to measure the impact of judicial speed on credit markets, agricultural development and manufacturing performance.
    Keywords: Law and economics, Institutions, Courts, Economic Growth, Industrial Performance
    JEL: K10 K12 K40 K42 O12 O17
    Date: 2007
  10. By: Matthieu Chemin
    Abstract: A key element of government is to uphold law and order. This paper will evaluate the impact of slow judiciaries on entrepreneurship. In 2002 a judicial reform was implemented in 6 of Pakistan's 117 districts to facilitate rapid case disposal. Drawing on a panel dataset of 875 district judges' performance between 2001 and 2003, a difference-in-differences analysis shows that judges disposed of 25 percent more cases thanks to the reform. Three rounds of the Labour Force Surveys will be then used to show that the reform improved security of property rights, encouraged people to seek loans, fostered entrepreneurship and was associated with increased transition from unemployment and paid employment to entrepreneurship.
    Keywords: Legal System, Entrepreneurship
    JEL: H11 H41 K42 O12 L26
    Date: 2007
  11. By: Trommetter, M.
    Abstract: In this paper I discuss the fact that economists define optimal IP rights as a continuum of options in three dimensions: height, breadth and length. At the operational level we see the impossibility of multiplying rights indefinitely (due to prohibitive transaction costs), as well as the use of a limited number of IP tools which have led to the implementation of flexibilities. These flexibilities are designed to limit certain perverse effects of rights ill-adjusted to the characteristics of some economic sectors (agricultural biotechnologies, pharmacy, etc.). In this context, I analyse how these flexibilities are implemented in TRIPS and TRIPS+ agreements and I study the consequences for Developing Countries.
    JEL: K11 O31 L65
    Date: 2007
  12. By: Gómez-Sorzano, Gustavo
    Abstract: I apply the Beveridge-Nelson business cycle decomposition method to the time series of per capita murder of Florida State (1933-2005). Separating out “permanent” from “cyclical” murder, I hypothesize that the cyclical part coincide with documented waves of organized crime, internal tensions, crime legislation, social, and political unrest, and with the periodic terrorist attacks to the U.S. The estimated cyclical component of murder shows that terrorist attacks against the U.S. have affected Oklahoma, creating estimated turning point dates marked by the most tragic terrorist attacks to the nation, and the State: the World Trade Center bombing in 1993, 9/11 2001, and the Alfred P. Murrah Federal Building bombing This paper belongs to the series of papers helping the U.S, and Homeland Security identify the closeness of terrorist attacks, and constructs the attacks index for Oklahoma. Other indices constructed include the Index for the U.S., New York State, New York City, Arizona, Massachusetts, California, Washington, Ohio, Philadelphia City, Arkansas, Missouri, Florida, and Michigan. These indices must be used as dependent variables in structural models for terrorist attacks and in models assessing the effects of terrorism over the U.S. economy.
    Keywords: : A model of cyclical terrorist murder in Colombia; 1950-2004. Forecasts 2005-2019; the econometrics of violence; terrorism; and scenarios for peace in Colombia from 1950 to 2019; scenarios for sustainable peace in Colombia by year 2019; decomposing violence: terrorist murder in the twentieth in the United States; using the Beveridge and Nelson decomposition of economic time series for pointing out the occurrence of terrorist attacks; terrorist murder; cycles of violence; and terrorist attacks in New York City during the last two centuries; and terrorist murder; cycles of violence; and attacks index for the City of Philadelphia during the last two centuries.
    JEL: D74 C88 N42 H56 C65 O51 C22 C39 K42
    Date: 2007–02–04

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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