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on Law and Economics |
| By: | Carmen Arguedas; Sandra Rousseau |
| Abstract: | Over time, inspection agencies gather information about firms that cause harmful externalities. This information may allow agencies to differentiate their monitoring strategies in the future, since inspections can be influenced by firms' past performance relative to other competitors in the market. If a firm is less successful than it peers in reducing the externality, if faces the risk of being targeted for increased inspections in the next period This risk of stricter monitoring might induce high cost firms to mimic low cost firms, while the latter might try to avoid being mimicked We show that under certain circumstances, mimicking, or even the threat of mimicking, might reduce socially harmful activities and thus be welfare improving. |
| Keywords: | monitoring and enforcement, externalities, learning, mimicking |
| JEL: | D82 H83 K42 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0808&r=law |
| By: | Grimm, Michael (Institute of Social Studies); Klasen, Stephan (University of Göttingen) |
| Abstract: | There is a well-known debate about the roles of geography versus institutions in explaining the long-term development of countries. These debates have usually been based on cross-country regressions where questions about parameter heterogeneity, unobserved heterogeneity, and endogeneity cannot easily be controlled for. The innovation of Acemoglu, Johnson and Robinson (2001) was to address this last point by using settler mortality as an instrument for geography-induced endogenous institutions and found that this supported their line of reasoning. We believe there is value-added to consider this debate at the micro level within a country as particularly questions of parameter heterogeneity and unobserved heterogeneity are likely to be smaller than between countries. Moreover, at the micro level it is possible to identify more precise transmission mechanisms from geography via institutions to economic development outcomes. In particular, we examine the determinants of economic development across villages on the Indonesian Island of Sulawesi and find that geography-induced endogenous emergence of land rights is the critical institutional link between geographic conditions and technological change. We therefore highlight and empirically validate a new transmission channel from endogenously generated institutions on economic development. |
| Keywords: | geography, migration, land rights, institutions, technology adoption, agricultural development, Indonesia |
| JEL: | K11 O12 Q12 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3391&r=law |
| By: | Ahsan, Ahmad (World Bank); Pagés, Carmen (Inter-American Development Bank) |
| Abstract: | Using manufacturing data for India, this paper studies the economic effects of legal amendments on two types of labor laws: employment protection and labor dispute resolution legislation. We find that laws that increase employment protection or the cost of labor disputes substantially reduce registered sector employment and output. These laws do no seem to benefit workers either, as they do not increase the share of value added that goes to labor. Labor-intensive industries, such as textiles, are the hardest hit by amendments that increase employment protection while capital-intensive industries are the most affected by laws that increase the cost of labor dispute resolution. These adverse effects are not alleviated by the widespread and increasing use of contract labor, particularly in regards to employment. Results are robust to an alternative codification of legal amendments suggested by Bhattacharjea (2006). |
| Keywords: | employment protection, labor dispute resolution, contract labor, employment, India |
| JEL: | J23 J52 K31 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3394&r=law |
| By: | Drago, Francesco (University of Naples, Parthenope); Galbiati, Roberto (Bocconi University, Milan); Vertova, Pietro (University of Bergamo) |
| Abstract: | We use a unique data set on post-release behavior of former Italian inmates to estimate the effect of prison conditions on recidivism. By combining different sources of data we exploit variation in prison conditions measured by: 1) the extent of overcrowding at the prison level, 2) the number of deaths in the facility of detention during an inmate’s stay and 3) the distance of the prison from the chief town of the province where the prison is located. By considering inmates who served their sentence in a jurisdiction different from the hometown in which they live after release, we can include province of residence fixed effects and account for the main source of unobserved heterogeneity correlated to prison conditions. We find that a harsher prison treatment does not reduce former inmates’ criminal activity. The extent of overcrowding and the number of deaths do not decrease the probability to be re-arrested. Instead, we find evidence that the degree of isolation measured by distance from the prison of detention to the chief town of the province where the prison is located increases recidivism. |
| Keywords: | crime, prison, deterrence |
| JEL: | K42 J18 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3395&r=law |
| By: | Anthony Niblett; Richard Posner; Andrei Shleifer |
| Abstract: | The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained empirically untested. We create a dataset of 465 state-court appellate decisions involving the application of the Economic Loss Rule in construction disputes and track the evolution of law in this area from 1970 to 2005. We find that over this period the law did not converge to any stable resting point and evolved differently in different states. We find that legal evolution is influenced by plaintiffs' claims, the relative economic power of the parties, and nonbinding federal precedent. |
| JEL: | K13 K41 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13856&r=law |
| By: | Amin, Mohammad |
| Abstract: | This paper provides an alternative way of testing the theory of legal origins, one based on a firm ' s perception of how helpful the government is for doing business. The author argues that an approach based on firm perceptions offers a number of advantages over existing studies. Specifically, the analysis demonstrates that heavier regulation in civil law compared with common law countries is not viewed by businesses as an efficient and socially desirable response to disorder. Further, the findings show a strong effect of legal tradition on government helpfulness even after controlling for various institutional measures known to be correlated with the legal tradition of countries. This suggests that there is more to legal tradition than what existing studies have unearthed. |
| Keywords: | National Governance,Legal Products,Public Sector Corruption & Anticorruption Measures,Governance Indicators,Debt Markets |
| Date: | 2008–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4557&r=law |
| By: | Mikhail Drugov |
| Abstract: | This paper studies the consequences of introducing competition between bureaucrats. Bureaucrats are supposed to grant licences to firms that satisfy certain requirements. Firms have to invest into satisfying these requirements. Some bureaucrats are corrupt, that is, they give the licence to any firm in exchange for a bribe. Some firms prefer to buy the licence rather than to invest and satisfy the requirements imposing negative externalities on the society. The competition regime is found to create more ex ante incentives for firms to invest while the monopoly regime is better at implementing ex post allocation, that is, distributing the licences given the firms` investment decisions. Additional results on the effects of intermediaries, staff rotation, punishments and endogenous entry to the bureaucracy are provided. |
| Keywords: | Corruption, Competition, Bureaucracy |
| JEL: | D73 K42 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:369&r=law |
| By: | Arguedas, Carmen (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Rousseau, Sandra (Center of Economic Studies, K.U.Leuven, Naamsestraat 69, B-3000 Leuven, Belgium,) |
| Abstract: | Over time, inspection agencies gather information about firms that cause harmful externalities. This information may allow agencies to differentiate their monitoring strategies in the future, since inspections can be influenced by firms’ past performance relative to other competitors in the market. If a firm is less successful than its peers in reducing the externality, it faces the risk of being targeted for increased inspections in the next period. This risk of stricter monitoring might induce high cost firms to mimic low cost firms, while the latter might try to avoid being mimicked. We show that under certain circumstances, mimicking, or even the threat of mimicking, might reduce socially harmful activities and thus be welfare improving. |
| Keywords: | Monitoring and enforcement; externalities; learning; mimicking |
| JEL: | D82 H83 K42 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:uam:wpaper:200802&r=law |