New Economics Papers
on Law and Economics
Issue of 2008‒02‒23
eight papers chosen by
Jeong-Joon Lee, Towson University

  1. Is justice blind? An examination of disparities in homicide sentencing in Colombia, 1980-2000 By Mariana Martínez; Fabio Sánchez T.; Holly Kosiewicz
  2. The Economic Costs of Court Decisions Concerning Dismissals in Japan: Identification by Judge Transfers By Hiroko Okudaira
  3. Do immigrants cause crime? By Milo Bianchi; Paolo Buonanno; Paolo Pinotti
  4. Monitoring the Realization of the Right to Food: Adaptation and Validation of the U.S. Department of Agriculture Food Insecurity Module to Rural Senegal By Susan Randolph; Ibrahima Gaye; Ibrahima Hathie; Rafael Perez-Escamilla
  5. Plaintiffs exploiting Plaintiffs By Alexander Stremitzer
  6. The Problem of Internalisation of Social Costs and the Ideas of Ronald Coase By Enrico, Baffi
  7. Organized Crime and Foreign Direct Investment: the Italian Case By Vittorio, Daniele; Ugo , Marani
  8. Are Judges Sensitive to Economic Conditions? Evidence from UK Employment Tribunals By Ioana Marinescu

  1. By: Mariana Martínez; Fabio Sánchez T.; Holly Kosiewicz
    Abstract: Evidence has repeatedly shown that disparities in crime sentences can be attributed to certain variables considered outside the legal dimensions of the case. The majority of research that investigates factors that contribute to such disparities has primarily focused on crimes of varying severities adjudicated in the U.S. court system. We expand research on this topic by focusing on disparities in homicide sentences using data from over 9000 homicide cases tried in Colombia from 1980 – 2000. We specifically explore whether judges use substantive rationality when deciding the length of the offender’s sentence and if the sentence should be above the legal minimum set for the severity of the crime according to the criminal code under which it is adjudicated. Results reveal that disparities in homicida sentences can be attributed to extra-legal variables such as: the city in which the homicide trial took place, where the body of the victim was retrieved, and whether the defendant was identified by an ID parade. However, we also find evidence that suggests that legal variables such as the defendant’s previous criminal record and the aggravating circumstances of the case engender greater differences in sentence outcomes than non-legal variables previously mentioned. Explanations and policy implications are discussed.
    Date: 2007–01–14
  2. By: Hiroko Okudaira (Graduate School of Economics, Osaka University)
    Abstract: The goal of this paper is to detect the degree to which court decisions control the stringency of employment protection and investigate how such judicial discretion affects labor market performance. However, Identification difficulty arises because court decisions are volatile against economic and social conditions. This paper overcomes the endogeneity problem by exploiting the triennial judge transfer system in Japan, or the exogenous allocation of judges to prefectures. Specifically, I estimated the judge-specific effects from litigation records and instrumented them to the judgment indicator in the original model. A key finding in this paper is that prefecture employment rate is reduced by approximately 1.5% if a prefecture receives more pro-worker judgments than pro-employer ones in a given year. Interestingly, the result is robust to the instrumental variable estimates only if the sample includes observations of the Tokyo and Osaka Prefectures. Thus, judges assigned to these prefectures have played leading roles in exogenously establishing the doctrine of abusive adjustment dismissals, whereas the rest of the variation in judgments4 is reversely explained by local labor market performance.
    Keywords: Employment Protection, Wrongful-Discharge Law, Weak Instrumental Variables
    JEL: J65 K31 K41
    Date: 2008–02
  3. By: Milo Bianchi; Paolo Buonanno; Paolo Pinotti
    Abstract: In this paper we examine the empirical relationship between immigration and crime across Italian provinces during the period 1990-2003. Drawing on police administrative data, we first document that the size of immigrant population is positively correlated with the incidence of most types of crime, as well as with the overall number of criminal offenses. However, using changes of immigrant population in other European countries to identify exogenous shifts of immigrant population in Italy, the causal effect seems limited to some categories of crime: murders, robberies and, to a lesser extent, thefts.
    Date: 2008
  4. By: Susan Randolph (University of Connecticut); Ibrahima Gaye (ENEA); Ibrahima Hathie (ENEA); Rafael Perez-Escamilla (University of Connecticut)
    Abstract: The Universal Declaration of Human Rights first formally recognized food security as a human right. This right was subsequently codified into international law in 1976 when the International Covenant of Economic, Social and Cultural Rights, ICESCR, entered into the force of law. The ICESCR obligates states to respect, protect, and fulfill the right to food, but in the absence of reliable measures of food security, simply monitoring progress towards the realization of the right to food is problematic. Moreover, if duty bearers are to design effective policies and programs to fulfill the right to food, it is essential to have reliable information on who is food insecure. This paper assesses the validity of an adaptation of the United States Department of Agriculture's (USDA) Food Insecurity Survey Instrument to the rural Senegalese context. The advantage of this instrument is that it is simple and inexpensive to administer, identifies the food security status of individual adults as well as children, and assesses the certainty, quality, and quantity aspects of food access. The USDA Food Insecurity Instrument has been successfully adapted to other developed countries and several developing countries as well. Adaptation to the Sub-Saharan context poses particular challenges given the complex household structure, the more limited reach of markets, the myriad of languages spoken within a limited geographic area, and the influence of seasonality on food access. Despite these challenges, this study demonstrates the validity of a reasonably straightforward adaptation of the USDA food insecurity instrument for rural Kaolack, Senegal, attesting to the promise of this approach for measuring food insecurity in developing countries in general and Sub-Saharan African countries in particular.
    JEL: D6 I1 I3 K33 O1 O55
    Date: 2007–10
  5. By: Alexander Stremitzer (University of Bonn, Wirtschaftspolitische Abteilung, Adenauerallee 24-42, 53113 Bonn, Germany;
    Abstract: We consider a model of a single defendant and N plaintiffs where the total cost of litigation is fixed on the part of the plaintiffs and shared among the members of a suing coalition. By settling and dropping out of the coalition, a plaintiff therefore creates a negative externality on the other plaintiffs. It was shown in Che and Spier (2007) that failure to internalize this externality can often be exploited by the defendant. However, if plaintiffs make sequential take-it-or-leave-it settlement offers, we can show that they will actually be exploited by one of their fellow plaintiffs rather than by the defendant. Moreover, if litigation is a public good as is the case in shareholder derivative suits, parties may fail to reach a settlement even having complete information. This may explain why we observe derivative suits in the US but not in Europe.
    Keywords: litigation, settlement, bargaining, contracting with externalities, derivative suits, public goods
    JEL: K41 C7 H4
    Date: 2008–01
  6. By: Enrico, Baffi
    Abstract: This work examines the influence of Coasian thought on the analysis of externalities as used by economists and legal economists. Ronald Coase, a Chicago scholar, advanced a series of critiques of the Pigovian tax system; the theorem that bears his name is merely the best known. In his 1960 work, he sought to demonstrate that the internationalisation of social costs was not always socially useful. In addition, he identified other institutional solutions to which systems can - and often do - resort. One of these solutions is to simply authorise the harmful activity without introducing mechanisms to internalise social costs. Beyond the abstraction of his ideas, Coase's method of analysis has not had a great influence on economists' thinking. His theorem, as it is commonly known, looks more like an elegant, abstract reflection then a tool for identifying institutional solutions to concrete societal problems. Among legal economists, however, Coase's teachings have had a greater influence. Unfortunately, even within this group of scholars, the conviction that external costs should, optimally, be internalised often emerges almost unconsciously in their literature. The risk inherent in this attitude lies in the possibility of finding systems for internalising social costs in legal institutions which do not appear to have such an underlying logic, as for example some kinds of tort liability.
    JEL: D62 H20 K10 H23 D60
    Date: 2007–02–20
  7. By: Vittorio, Daniele; Ugo , Marani
    Abstract: The paper estimates the effects of organized crime on FDI inflows in 103 Italian provinces in the period 2004-06. The presence of organized crime at a provincial level is quantified through several indicators, based on data for different kinds of crimes: extortion; association for criminal purposes, including mafia (Art. 416 and 416 bis of the Italian Penal Code); attacks; arson. Several control variables are used, included a proxy for (financial) investment incentives provided by public sectors. Estimation suggests that FDI inflows are influenced by different variables. Our results show that the extent of extortion and the number of persons denounced for "criminal association" are significantly and negatively correlated with FDI inflows. Finally, our analysis suggests the presence of organized crime is a strong disincentive for foreign investors, particularly in the less developed Italian provinces.
    Keywords: Foreign Direct Investments determinants; Italy: Mezzogiorno; crime; regional attractiveness.
    JEL: R30 F23
    Date: 2008–01–29
  8. By: Ioana Marinescu
    Abstract: In the UK, dismissed workers can sue their ex-employers for unfair dismissal. This paper investigates whether judges deciding on such cases are sensitive to economic conditions faced by firms and workers. In bad times, getting fired is more costly for workers, while at the same time firms find firing costs harder to bear. How do judges decide? I use British data on individual unfair dismissal and redundancy payment cases brought to Employment Tribunals in 1990-1992. Controlling for case selection, I find that, when the dismissed worker has found a new job, higher unemployement and bankruptcy rates both have a negative impact on the worker’s probability of pervailing at trial. However, when dismissed workers are still unemployed, a higher unemployment rate has a positive impact on their probability of winning. On the whole population of cases brought to trial, a one point increase in the unemployment rate leads to a 7 points decrease in the probability of judges deciding in favour of dismissed employees. An increase in the bankruptcy rate has a similar effect. These findings are consistent with the idea that judges maximize the joint welfare of the dismissed worker and the firm, tailoring firing costs to local and individual economic circumstances.
    Keywords: judges, economics, British, unemployment
    Date: 2008–01

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