New Economics Papers
on Law and Economics
Issue of 2008‒06‒21
nine papers chosen by
Jeong-Joon Lee, Towson University

  1. Cumulative Innovation, Experimentation and the Hold-Up Problem By Pollock, R.
  2. No 'Third Way' for Economic Organizations? Networks and Quasi-Markets in Broadcasting By Simon Deakin; Ana Lourenço; Stephen Pratten
  3. Law, Finance, and Politics: The Case of India By John Armour; Priya Lele
  4. The Law and Economics Debate about Secured Lending: Lessons for European LawMaking? By John Armour
  5. The Impact of Social Capital on Crime: Evidence from the Netherlands By Akçomak, Semih; Weel, Bas ter
  6. Whatever happened to the domestic division of labour? A theoretical analysis of the effects of legislation on marriage, fertility and participation. By Alessandro Cigno
  7. Preventing Innovative Cooperations: The Legal Exemptions Unintended Side Effect By Christian Growitsch; Nicole Nulsch; Margarethe Rammerstorfer
  8. The perception of corruption By Natalia Melgar; Máximo Rossi; Tom W. Smith
  9. Naked Exclusion: An Experimental Study of Contracts with Externalities By Landeo, Claudia M.; Spier, Kathryn E.

  1. By: Pollock, R.
    Abstract: Extending the basic model of two-stage cumulative innovation with asymmetric information to include `experimentation' by second-stage rms, we nd that the costs of a strong (versus weak) intellectual property (IP) regime may be substantially increased. In addition, these costs increase as experimentation becomes cheaper and as the differential between high and low value second-stage innovations grows, with the result that a weak IP regime is more likely to be optimal. Thus, technological change which reduces the cost of encountering and trialling new `ideas' implies a reduction in the socially optimal level of IP rights such as patent and copyright.
    Keywords: Cumulative Innovation, Hold-Up, Experimentation, Intellectual Property.
    JEL: K3 L5 O3
    Date: 2008–04
  2. By: Simon Deakin; Ana Lourenço; Stephen Pratten
    Abstract: We present two linked, longitudinal case studies of the use of quasi markets in UK broadcasting over the past decade: one looks at the regulated outsourcing of programme making to independent producers, the other at the development of an internal market system within the BBC. New network forms are shown to have arisen from the interaction of legal regulation, contracts, and property rights. However, these organizational forms are also seen to be associated with increased transaction costs and with signs of deterioration in programme quality and innovation. We suggest that for such networks to be a viable 'third way' between markets and hierarchy, closer attention needs to be given to the issue of institutional design.
    Keywords: networks, quasi markets, television production
    JEL: K23 L14 L24 L82
    Date: 2008–03
  3. By: John Armour; Priya Lele
    Abstract: The process of liberalisation of India's economy since 1991 has brought with it considerable development both of its financial markets and the legal institutions which support these. An influential body of recent economic work asserts that a country's 'legal origin'-as a civilian or common law jurisdiction-plays an important part in determining the development of its investor protection regulations, and consequently its financial development. An alternative theory claims that the determinants of investor protection are political, rather than legal. We use the case of India to test these theories. We find little support for the idea that India's legal heritage as a common law country has been influential in speeding the path of regulatory reforms and financial development. There is a complementarity between (i) India's relative success in services and software, (ii) the relative strength of its financial markets for outside equity, as opposed to outside debt, and (iii) the relative success of stock market regulation, as opposed to reforms of creditor rights. We conclude that political explanations have more traction in explaining the case of India than do theories based on 'legal origins'.
    Keywords: India, Law and Finance, Investor Protection, Economic structure and financial structure
    JEL: G28 G38 K22 K40 O16 P37
    Date: 2008–03
  4. By: John Armour
    Abstract: This review paper is a contribution to a symposium on the 'Future of Secured Credit in Europe'. Its theme is the way in which empirical research has shed light on earlier theoretical literature. These findings tend to suggest that the legal institution of secured credit is, on the whole, socially beneficial, and that such benefits are likely to outweigh any associated social costs. Having made this general claim, the paper then turns to consider the effects of four particular dimensions across which systems of secured credit may differ, and which may therefore be of interest to European law-makers. These are: (i) the scope of permissible collateral; (ii) the efficacy of enforcement; (iii) the priority treatment of secured creditors; and (iv) the mechanisms employed to assist third parties in discovering that security has been granted. In each case, consideration is paid first to the theoretical position, and then empirical findings. It is argued that perhaps the most difficult of these issues for European law-makers concerns the appropriate design of publicity mechanisms for third parties.
    Keywords: secured credit, European corporate finance, notice filing, enforcement, insolvency priorities
    JEL: G33 K22
    Date: 2008–03
  5. By: Akçomak, Semih (UNU-MERIT); Weel, Bas ter (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This paper investigates the relation between social capital and crime. The analysis contributes to explaining why crime is so heterogeneous across space. By employing current and historical data for Dutch municipalities and by providing novel indicators to measure social capital, we find a link between social capital and crime. Our results suggest that higher levels of social capital are associated with lower crime rates and that municipalities’ historical states in terms of population heterogeneity, religiosity and education affect current levels of social capital. Social capital indicators explain about 10 percent of the observed variance in crime. It is also shown why some social capital indicators are more useful than others in a robustness analysis.
    Keywords: Social capital, Crime, the Netherlands
    JEL: A13 A14 K42 Z13
    Date: 2008
  6. By: Alessandro Cigno
    Abstract: We derive the behavioural implications of legislation on the subject of marriage, divorce, de-facto unions, domestic violence, and labour market discrimination, within a game-theoretical frame- work. The predictions are consistent with two empirical obser- vations. One is that, while the prevalent pattern in development countries is for the father to specialize completely in market work, the tendency in developed countries is towards mother and father sharing market work and care of the children more or less equally between them. The other is that the sign of the cross-country correlation between fertility and female labour market participa- tion, negative worldwide until the mid-1970s, remains negative across developing countries, but has turned positive where devel- oped countries are concerned. We show that domestic division of labour is e¢ cient, while equal sharing is not. But we also argue that e¢ ciency is bought, in developing countries, at the expense of women, and discuss ways in which e¢ ciency could be restored in developed countries without setting the clock back.
    Keywords: gender, fertility, domestic division of labour, civil partnership, marriage, divorce, alimony, community property, dowry, bride-price, domestic violence, labour market discrimination, skill premium.
    JEL: D13 J12 J13 J16 J24 K30
    Date: 2008–06
  7. By: Christian Growitsch; Nicole Nulsch; Margarethe Rammerstorfer
    Abstract: In 2004, European competition law had been faced with considerable changes due to the introduction of the new Council Regulation No. 1/2003. One of the major renewals was the replacement of the centralized notification system for inter-company cooperations in favor of a so-called legal exemption system. We analyze the implications of this reform on the agreements firms implement. In contrast to previous research we focus on the reform’s impact on especially welfare enhancing, namely innovative agreements. We show that the law’s intention to reduce the incentive to establish illegal cartels will be reached. However, by the same mechanism, also highly innovative cooperations might be prevented. To avoid this unintended effect, we conclude that only fines but not the monitoring activities should be increased in order to deter illegal but not innovative agreements.
    Keywords: Competition policy, competition law enforcement, legal exemption system
    JEL: K42 L40
    Date: 2008–06
  8. By: Natalia Melgar (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Máximo Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Tom W. Smith (NORC/University of Chicago)
    Abstract: In this paper we analyze the foundations of corruption perception. Even when we employ the concept of corruption in several areas and its connotations vary widely depending on societies and people, it is possibly to find some elements in common which are connected with the misuse of public office with the purpose of making private gains. This paper focuses on this wide concept of corruption. We use data from the module on Citizenship of the 2004 International Social Survey Program (ISSP). Ordered probit models were estimated in order to study the impact of independent variables on the perception of corruption. We conclude that there are significant socio-demographic variables: gender, marital status, religiosity, education and sector of employment, among others. Additionally, we find that country of residence matters and that there are similar results among countries with common characteristics.
    Keywords: corruption, microeconomic behavior, comparative research, public opinion, ISSP
    JEL: D73 K42 O57
    Date: 2008–03
  9. By: Landeo, Claudia M.; Spier, Kathryn E.
    Abstract: This paper reports the results of an experiment designed to assess the ability of an incumbent seller to profitably foreclose a market with exclusive contracts. We use the strategic environment described by Rasmusen, Ramseyer, and Wiley (1991) and Segal and Whinston (2000) where entry is unprofitable when sufficiently many downstream buyers sign exclusive contracts with the incumbent. When discrimination is impossible, the game resembles a stag-hunt (coordination) game in which the buyers' payoffs are endogenously chosen by the incumbent seller. Exclusion occurs when the buyers fail to coordinate on their preferred equilibrium. Two-way non-binding pre-play communication among the buyers lowers the power of exclusive contracts and induces more generous contract terms from the seller. When discrimination and communication are possible, the exclusion rate rises. Divide-and-conquer strategies are observed more frequently when buyers can communicate with each other. Exclusion rates are significantly higher when the buyers' payoffs are endogenously chosen rather than exogenously given. Finally, secret offers are shown to decrease the incumbent's power to profitably exclude.
    Keywords: Bargaining with Externalities; Contracting with Externalities; Experiments; Exclusive Dealing; Antitrust; Discrimination; Endogenous Payoffs; Communication; Coordination Games; Equilibrium Selection
    JEL: D86 C9 L0 K0 K21 D4 L1 L4 C72
    Date: 2007–12–11

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