New Economics Papers
on Law and Economics
Issue of 2008‒05‒05
three papers chosen by
Jeong-Joon Lee, Towson University

  1. Judicial Errors and Innovative Activity By Giovanni Immordino; Michele Polo
  2. Pandering Judges By Jordi Blanes i Vidal; Clare Leaver
  3. Forest-Mill Integration: A Transaction Costs Perspective By Kurt Niquidet; Glen O'Kelly

  1. By: Giovanni Immordino (Università di Salerno and CSEF); Michele Polo (Università Bocconi, IGIER and CSEF)
    Abstract: We analyze the effect of errors in law enforcement on the innovative activity of firms. If successful, the innovative effort allows to take new actions that may be ex-post welfare enhancing (legal) or decreasing (illegal). Deterrence in this setting works by affecting the incentives to invest in innovation, what we call average deterrence. Type-I errors, through over-enforcement, discourage innovative effort while type-II errors (under-enforcement) spur it. The ex-ante expected welfare effect of innovations shapes the optimal policy design. Accuracy, in this setting may be undesirable, when it would influence the innovative effort in the wrong way. This result is in contrast with the traditional model, where accuracy is always welcome since it enhances marginal deterrence. When innovations are ex-ante welfare enhancing, they can be sustained by laissez-faire or, if the enforcement effort is exogenous, through better (type-I) accuracy. When instead the innovative effort is ex-ante welfare decreasing, it is discouraged through positive enforcement and (type-II) accuracy. Finally, when the enforcer can selectively reduce type-I and type-II errors, he will always concentrate accuracy on one of them only, depending on the expected impact of innovations on welfare, adopting asymmetric protocols of investigation.
    Keywords: norm design, innovative activity, enforcement, Type I and Type II error
    JEL: D73 K21 K42 L51
    Date: 2008–02–20
  2. By: Jordi Blanes i Vidal; Clare Leaver
    Abstract: Tenured public officials such as judges are often thought to be indifferent to the concerns of the elctorate and, as a result, potentially lacking in discipline but unlikely to pander to public opinion. We investigate this proposition empirically using data on promotion decisions taken by senior English judges between 1985 and 2005. Throughout this period the popular view was one of ill-disciplined elitism: senior judges were alleged to be favouring candidates from elite backgrounds over their equally capable non-elite counterparts. We find no evidence of such ill-discipline; most of the unconditional difference in promotion prospects between the two groups can simply be explained by differences in promotion-relevant characteristics. However, exploiting an unexpected proposal to remove control over promotions from the judiciary, we do find evidence of pandering. When faced by the prospect of losing autonomy, senior judges began to favour non-elite candidates, as well as candidates who were unconnected to members of the promotion committee. Our finding that tenured public officials can display both the upsides and downsides of electoral accountability has implications for the literature on political agency, as well as recent constitutional reforms.
    Keywords: Electoral Accountability, Judges, Promotion Decisions
    JEL: H11 J44 J45 J70
    Date: 2008
  3. By: Kurt Niquidet; Glen O'Kelly
    Abstract: In Canada, where public ownership of forestland is prevalent, a central decision facing policy makers is how to allocate timber resources to private forest companies. Debates tend to focus around what proportion of the annual harvest should be devoted to markets opposed to long-term contracts. To give a guide to policy makers, we surveyed forest firms from New Zealand and Sweden where this decision is based purely on a commercial basis. On average, mills source fifty percent of their fibre from the market. However, using a fractional logit model, we test whether theories from transaction cost economics influence this decision. Results are consistent with transaction cost economics; firms decrease the proportion of fibre sourced from a market with increasing fibre specificity, capital intensity, and uncertainty.
    Keywords: transaction costs, forest tenure, vertical integration
    JEL: D23 K23 L22 L73
    Date: 2008–04

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