New Economics Papers
on Law and Economics
Issue of 2007‒12‒08
ten papers chosen by
Jeong-Joon Lee, Towson University

  1. Multiple Equilibria in a Firing Game With Impartial Justice By Besancenot, Damien; Vranceanu, Radu
  2. The European democratic challenge By Agustín José Menéndez
  3. How Global Rules are established and stabilized By Horst Siebert
  4. Bankruptcy law and practice in 19th century France By Pierre-Cyrille Hautcoeur; Nadine Levratto
  5. Optimal discretion in asylum lawmaking. By Jenny Monheim; Marie Obidzinski
  6. Lawyer Advising in Evidence Disclosure By Che, Yeon-Koo; Severinov, Sergei
  7. Exploiting Plaintiffs Through Settlement: Divide and Conquer By Che, Yeon-Koo; Spier, Kathryn
  8. The Rule Incentives that Rule Civil Justice By Daniela Marchesi
  9. Passing-On Defense and Indirect Purchaser Standing in Actions for Damages against the Violations of Competition Law: what can the EC learn from the US? By Firat Cengiz
  10. Costs and Benefits of Kosovo's Future Status By Vladimir Gligorov

  1. By: Besancenot, Damien (Université Paris 13 and CEPN); Vranceanu, Radu (ESSEC Business School)
    Abstract: In many European countries, a majority of employees are hired under very protective labor contracts that restrict the ability of the employer to dismiss them. In particular, employees can take to courts the firm's layoff motive. This paper analyses the interaction between firms, employees and the labor judicial system specific to South European countries. If judges' error margin increases when the judicial system is subject to congestion, the game presents multiple equilibria which differ in the frequency of workers abusively fired for personal motives. Policy implications can be inferred.
    Keywords: EPL; Labor judges; Firing costs; Layoff motive; Multiple equilibria
    JEL: J32 J53 K31
    Date: 2007–11
  2. By: Agustín José Menéndez
    Abstract: In this paper, I explore in a systematic manner the different components of the democratic legitimacy of the Union from the standpoint of deliberative democratic theory. Contrary to standard accounts, I claim that the question must be disaggregated, given that the Union has not only several democratic deficits, but also some democratic surpluses. On the one hand, the Union was created to tackle the democratic deficit of nation-states, and has been partially successful in mending the mismatch between the scope of application of their legal systems and the geographical reach of the consequences of legal decisions. Moreover, the European legal order is based on a synthetic constitutional law, which reflects the common constitutional traditions of the member states, which lend democratic legitimacy to the whole European legal order. On the other hand, the lack of a democratically written and ratified constitution is a central part of the democratic challenge of the Union. But equally important is the structural bias in favour of certain material legal results, which stems from the interplay of the division of competences between the Union and its member states and the plurality of law-making procedures, some of which multiply veto points at the cost of rendering decision-making rather improbable. Special attention is paid through the paper to the democratic implications of the structural features of European constitutional law for new member states.
    Keywords: constitutional change; deliberative democracy; European law; European public space; legal culture; legitimacy; national autonomy; normative political theory; participation
    Date: 2007–11–15
  3. By: Horst Siebert
    Abstract: This paper analyzes how international rules are established and stabilized, i.e. how an international institutional order develops. Rules emerge mainly through learning from negative experience and serve to reduce transaction costs. The paper looks at mechanisms that stabilize rule systems, at bargaining procedures for cooperation gains, dispute settlement, sanctions, side payments, self-enforcing contracts, waivers and regional integrations within a multilateral order. In addition it analyzes the prevention of negative spillovers, international courts and global public goods.
    Keywords: International rules, transaction costs, institutional competition, gains from cooperation, bargaining for cooperation gains, positive mechanisms, dispute settlement, sanctions, side payments, self-enforcing contracts, negative spillovers, international courts, global public goods
    JEL: A12 F02 F15 K00 N00 P00
    Date: 2007–12
  4. By: Pierre-Cyrille Hautcoeur; Nadine Levratto
    Abstract: In this paper, we try to measure the impact of the changes in French bankruptcy law in the 19th century focusing on the behaviour of economic agents as users of bankruptcy law for the sake of finding the best solution to their economic problems. Debtors used bankruptcy law in order to minimize their debt level when facing difficulties in servicing it, but they had to convince their creditors and/or the courts of their good faith, and faced the adverse effects of bankruptcy on their reputation and on the smooth functioning of their business. Creditors used bankruptcy law in order to force their debtors to pay, if they could. Judges - who in the French system of specialized commercial courts were elected entrepreneurs - applied the law within a specific economic context (both a specific local context and at a specific moment in the business cycle) which could affect them. The first part of the paper presents the evolution of French bankruptcy law during the 19th century in its historical context. The second part briefly describes the theoretical model we use in order to understand the choices facing debtors and creditors in the face of financial distress. The last part proposes some major stylized facts concerning bankruptcies during that period (based on contemporary official statistics) and tries to understand their relationship with the legal evolution described before.
    Date: 2007
  5. By: Jenny Monheim; Marie Obidzinski
    Abstract: This paper studies whether refugee law should be centralized, how it should be centralized, and what are the consequences for migrants seeking protection as well as for host countries. Jurisdictions face different refugee in ows. We show that the resulting varying levels of strictness of the eligibility criteria create a legal externality which leads to a "race to the bottom", or a toughening, of asylum standards. They are stricter than the Pareto efficient level. To solve this problem, we consider two forms of harmonization: fixed and minimum standards. We find no proof that either type would lead to a better result for the member countries than national asylum law making. However, the system of minimum standards is clearly best for refugees, and that it is and better than total harmonization for both host countries.
    Keywords: competition in law making, asylum law, European law, human rights.
    JEL: K33 H11 D61 D62
    Date: 2007
  6. By: Che, Yeon-Koo; Severinov, Sergei
    Abstract: This paper examines how the advice that lawyers provide to their clients affects the disclosure of evidence and the outcome of adjudication, and how the adjudicator should allocate the burden of proof in light of these effects. Despite lawyers' expertise in assessing the evidence, their advice is found to have no effect on adjudication, if the lawyers follow disclosure strategies that are undominated in a certain sense. A lawyer's advice can influence the outcome to his client's favor, if he can credibly advise his client to suppress some favorable evidence, but this effect is socially undesirable.
    JEL: K0 D8
    Date: 2007–05–06
  7. By: Che, Yeon-Koo; Spier, Kathryn
    Abstract: This paper considers settlement negotiations between a single defendant and $N$ plaintiffs when there are fixed costs of litigation. When making simultaneous take-it-or-leave-it offers to the plaintiffs, the defendant adopts a divide and conquer strategy. Plaintiffs settle their claims for less than they are jointly worth. The problem is worse when $N$ is larger, the offers are sequential, and the plaintiffs make offers instead. Although divide and conquer strategies dilute the defendant's incentives, they increase the settlement rate and reduce litigation spending. Plaintiffs can raise their joint payoff through transfer payments, voting rules, and covenants not to accept discriminatory offers.
    JEL: K0 D8
    Date: 2007
  8. By: Daniela Marchesi (ISAE - Institute for Studies and Economic Analyses)
    Abstract: The excessive length of civil judicial proceedings may be understood being the consequence of a disequilibrium between demand and supply of justice. A comparison between EU countries and a statistical and analytical investigation demonstrates that the problems do not rest in insufficient supply – which has been the general opinion – but in pathological demand for civil justice. Opportunistic behaviour incentivized by the procedural rules and by the excessive length of trials is at the root of such demand. Therefore changing the formula which determines lawyer’s fees should be the first reform introduced.
    Keywords: Efficiency of civil justice, Comparison among EU countries and the Italian case, Supply of justice, Pathological demand of civil justice, Effectiveness of reforms
    JEL: K4
    Date: 2007–11
  9. By: Firat Cengiz (School of Law and Centre for Competition Policy, University of East Anglia)
    Abstract: This paper analyses the raison d’être of the current initiative for the federal policy change in the US regarding the issues of passing-on defense and indirect purchaser standing in order to draw policy lessons for the EC in the light of the Commission’s Green Paper on private enforcement of Community competition law. The paper finds that transatlantic policy learning in the substantive sense does not seem plausible due to the dramatic difference between the American rationale regarding the goals of private enforcement and the European doctrine of direct effect. Nevertheless, the paper argues that the US experience contains important policy lessons regarding the risks brought forward by private enforcement under diverse standards in the lack of effective judicial cooperation mechanisms in a multi-level polity. After analysing the current positions of the Community and national laws from this perspective, the paper finds that there is substantial room for diversity amongst the national standards. In addition, although existing Community measures provide solid ground for judicial cooperation, those measures should be strengthened in order to avert the litigation chaos which forced a policy change in the US. Consequently, the paper suggests that the Commission gives substantial weight to the procedural aspects of private enforcement in its forthcoming White Paper which the Green Paper largely overlooked.
    Keywords: Private enforcement, indirect purchasers, Passing-on defense, Illinois Brick, Hanover Shoe, Antitrust Modernization Commission, European Commission Green Paper on actions for breach of the EC Antitrust Rules, Brussels I Regulation, Rome II Regulation
    JEL: K21 K41
    Date: 2007–11
  10. By: Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Stability and normalization should be the crucial ingredients of Kosovo's future status. If achieved, it would lead to strong economic recovery in Kosovo and to more sustainable economic growth in Serbia. Chances for positive economic development, strong recovery and sustained long-term growth are significant if normalization is achieved. Kosovo's potential growth rate could be close to 7% to 8% per year in the medium run while Serbia could sustain a convergence growth rate above 5% per year. Both would also benefit from a 'peace dividend', i.e., lower security costs. Of the scenarios considered: (i) full Serbian sovereignty, (ii) substantial autonomy for Kosovo, (iii) supervised independence in accordance with Ahtisaari's Plan, and (iv) Serbian and Kosovo partnership of some sort, only the last one would provide for a significant decline of risks, for increased investment and trade, for improved prospects of EU integration and for strong recovery in Kosovo and sustained growth in Serbia, whereas any solution that would be rejected by any of the parties would trigger increased fiscal and security costs and impair investment and GDP.
    Keywords: Serbia, Kosovo, post-conflict settlement, fiscal costs and benefits, Economic Integration, Regional Development
    JEL: O52 H73 K33
    Date: 2007–11

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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