New Economics Papers
on Law and Economics
Issue of 2008‒08‒06
eight papers chosen by
Jeong-Joon Lee, Towson University

  1. Expanding the Focus of Cost-Benefit Analysis for Food Safety: A Multi-Factorial Risk Prioritization Approach By Julie A. Caswell
  2. Satisfaction with Democracy and Collective Action Problems: The Case of the Environment By Halla, Martin; Schneider, Friedrich; Wagner, Alexander F.
  3. Valuing environmental patents legal protection when data is not available By Simona Tenaglia; Marco Ventura
  4. Geographical Distribution of Crime in Italian Provinces: A Spatial Econometric Analysis By Teodora Erika Uberti; Maria Francesca Cracolici
  5. Corruption and Political Interest: Empirical Evidence at the Micro Level By Benno Torgler; Bin Dong
  6. Past Performance Evaluation in Repeated Procurement: A Simple Model of Handicapping By Berardino Cesi; Gian Luigi Albano
  7. Accountability in Government and Regulatory Policies: Theory and Evidence By Carmine Guerriero
  8. The Political Economy of Incentive Regulation: Theory and Evidence from US States By Carmine Guerriero

  1. By: Julie A. Caswell (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: A pressing need in the area of food safety is a tool for making overall, macro judgments about which risks should be given priority for management. Governments often seek to base this prioritization on public health impacts only to find that other considerations also influence the prioritization process. A multi-factorial approach formally recognizes that public health, market-level impacts, consumer risk preferences and acceptance, and the social sensitivity of particular risks all play a role in prioritization. It also provides decision makers with a variety of information outputs that allow risk prioritization to be considered along different dimensions. Macro-level prioritization of risks based on multiple factors is an important expanded use of cost-benefit analysis to manage risk.
    Keywords: cost-benefit analysis, food safety, risk prioritization
    JEL: I18 L51 Q18 K32 H11
    Date: 2008–07
  2. By: Halla, Martin (University of Linz); Schneider, Friedrich (University of Linz); Wagner, Alexander F. (University of Zurich)
    Abstract: Using modern methods for analyzing multi-level data, we find that, by and large, citizens of OECD countries are more satisfied with the way democracy works in their country if more environmental policies are in place and if environmental quality is higher. We also document that parents care about carbon dioxide emissions more than non-parents and that those with a high willingness to pay for environmental quality deplore intervention through government policies.
    Keywords: satisfaction with democracy, environmental economics and policy, collective action problems
    JEL: K32 P16 Q21 Q28
    Date: 2008–07
  3. By: Simona Tenaglia (ISFOL - Institute for the Development of Training for Workers); Marco Ventura (ISAE - Institute for Studies and Economic Analyses)
    Abstract: This paper aims at estimating the value of legal patent protection of environment-related technologies, using the real options approach. In particular, we manage to overcome the problem of the lack of data for those countries that do not collect patent renewal data. Following this estimation strategy, we rank the value of legal patent protection for seventeen countries, closely reproducing other rankings based on surveys, for instance the PatVal survey by the EU Commission (2006), but relying on macro data publicly available and easy to access. The unit value of damage is found to be the most important determinant of the value of patents granted by legal protection.
    Keywords: value of patents, legal protection, real options, abatement technology, environmental technologies.
    JEL: K40 O38 Q55
    Date: 2008–07
  4. By: Teodora Erika Uberti (Università Cattolica del Sacro Cuore); Maria Francesca Cracolici (Catholic University of Milano)
    Abstract: For a long time social sciences scholars from different fields have devoted their attention to identifying the causes leading to commit criminal offences and recently lots of studies have included the analysis of spatial effects. Respect to the Italian crime phenomenon some stylized facts exist: high spatial and time variability and presence of “organised crime” (e.g. Mafia and Camorra) deep-seated in some local territorial areas. Using explanatory spatial data analysis, the paper firstly explores the spatial structure and distribution of four different typologies of crimes (murders, thefts, frauds, and squeezes) in Italian provinces in two years, 1999 and 2003. ESDA allows us to detect some important geographical dimensions and to distinguish crucial macro- and micro- territorial aspects of offences. Further, on the basis of Becker-Ehrlich model, a spatial cross-sectional model including deterrence, economic and socio-demographic variables has been performed to investigate the determinants of Italian crime for 1999 and 2003 and its “neighbouring” effects, measured in terms of geographical and relational proximity. The empirical results obtained by using different spatial weights matrices highlighted that socioeconomic variables have a relevant impact on crime activities, but their role changes enormously respect to crimes against person (murders) or against property (thefts, frauds and squeezes). It is worthy to notice that severity does not show the expected sign: its significant and positive sign should suggest that inflicting more severe punishments does not always constitute a deterrence to commit crime, but it works on the opposite direction.
    Keywords: Crime, Spatial Econometrics
    JEL: C21 K42
    Date: 2008–02
  5. By: Benno Torgler (Queensland University of Technology); Bin Dong (Queensland University of Technology)
    Abstract: The topic of corruption has recently attracted a great deal of attention, yet there is still a lack of micro level empirical evidence regarding the determinants of corruption. Furthermore, the present literature has not investigated the effects of political interest on corruption despite the interesting potential of this link. We address these deficiencies by analyzing a cross-section of individuals, using the World Values Survey. We explore the determinants of corruption through two dependent variables (perceived corruption and the justifiability of corruption). The impact of political interest on corruption is explored through three different proxies, presenting empirical evidence at both the cross-country level and the within-country level. The results of the multivariate analysis suggest that political interest has an impact on corruption controlling for a large number of factors.
    Keywords: Corruption, Political Interest, Social Norms
    JEL: K42 D72 O17 J24
    Date: 2008–04
  6. By: Berardino Cesi (University "G. D.Annunzio"); Gian Luigi Albano (Italian Public Procurement Agency (Consip S.p.A.))
    Abstract: When procurement contracts are awarded through competitive tendering participating firms commit ex ante to fulfil a set of contractual duties. However, selected contractors may find profitable to renege ex post on their promises by opportunistically delivering lower quality standards. In order to deter ex post moral hazard, buyers may use different strategies depending on the extent to which quality dimensions are contractible, that is, verifiable by contracting parties and by courts. We consider a stylized repeated procurement framework in which a buyer awards a contract over time to two firms with different efficiency levels. If the contractor does not deliver the agreed level of performance the buyer may handicap the same firm in future competitive tendering. We prove that under complete information extremely severe handicapping is never a credible strategy for the buyer, rather the latter finds it optimal to punish the opportunistic firm so as to make the pool of competitors more alike. In other words, when opportunistic behaviour arises, the buyer should use handicapping to “level the playing field”.
    Keywords: Repeated Procurement, Handicapping, Relational Contracts, Stick and Carrot Strategy
    JEL: C73 D82 D44 H57 K12 L14
    Date: 2008–03
  7. By: Carmine Guerriero (University of Cambridge)
    Abstract: This paper analyzes the political economy of regulatory and judicial appointment rules. I study a model of price-setting by a political principal faced with a firm with unknown costs, and endowed with an information-gathering technology whose efficiency rises with the effort exerted by two accountable supervisors (a regulator and a judge). This set-up captures the institutions of several international markets. The model predicts that reforms toward election rather than appointment of regulators are more likely the less efficient is the information-gathering technology, the less stringent are the investment concerns of society, the stronger are regulators’ revolving-door motivations, and the closer is political competition. These predictions are consistent with US electric power market data. Moreover, in accordance with the model, electricity rates are lower and respond less to shock in input costs in states that elect their regulators or their High Court judges.
    Keywords: Election, Agency, Judges, Regulation, Electricity
    JEL: K23 L51 Q43
    Date: 2008–06
  8. By: Carmine Guerriero (University of Cambridge)
    Abstract: The determinants of incentive regulation are a key issue in industrial policy. I study an asymmetric information model of incentive rules selection by a political principal endowed with an information-gathering technology whose efficiency increases with the effort exerted by two accountable supervisors (a regulator and a judge). This set up captures the institutions of several international markets. The model predicts that reforms toward higher powered rules are more likely the more inefficient (efficient) is the production (information-gathering) technology, the less tight is political competition and the greater are pro-consumer supervisors’ incentives. This prediction is consistent with evidence based on US electric power market data.
    Keywords: Incentive Schemes, Accountability Rules, Regulatory Capture
    JEL: D73 H11 L51 K2
    Date: 2008–04

This issue is ©2008 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.