New Economics Papers
on Law and Economics
Issue of 2009‒02‒22
seven papers chosen by
Jeong-Joon Lee, Towson University

  1. The short arm of the law: judicial institutions and local governance in Brazil By Stephan Litschig; Yves Zamboni
  2. How compliant are developing countries with their TRIPS obligations? By Intan Hamdan-Livramento
  3. Reforms to Open Sheltered Sectors to Competition in Switzerland By Andrés Fuentes
  4. The effect of childhood conduct disorder on human capital By Suncica Vujic; Pierre Koning; Dinand Webbink; Nick Martin
  5. Tort Reform, Disputes and Belief Formation By Landeo, Claudia M.
  6. Compulsory or Voluntary Pre-merger Notification? Theory and Some Evidence By Chongwoo, Choe; Shekhar, Chander
  7. Why We Need to Measure the Effect of Merger Policy and How to Do It By Dennis W. Carlton

  1. By: Stephan Litschig; Yves Zamboni
    Abstract: This paper estimates the effect of judicial institutions on governance at the local level in Brazil. Our estimation strategy exploits a unique institutional feature of state judiciary branches which assigns prosecutors and judges to the most populous among contiguous counties forming a judiciary district. As a result of this assignment mechanism there are counties with nearly identical populations, some with and some without local judicial presence, which we exploit to impute counterfactual outcomes. Conditional on observable county characteristics, offenses per civil servant are about 35% lower in counties that have a local seat of the state judiciary. The lower incidence of infractions stems mostly from fewer violations of financial management regulations by local administrators, fewer instances of problems in project execution and project managment, fewer cases of non-existent or ineffective civil society oversight and fewer cases of improper handling of remittances to local residents.
    Keywords: Law enforcement, corruption, local governance, institutions
    JEL: H75 K42 M42
    Date: 2008–05
  2. By: Intan Hamdan-Livramento (Chaire en Economie et Management de l'Innovation, Collège du Management de la Technologie, Ecole Polytechnique Fédérale de Lausanne)
    Abstract: This paper constructs an intellectual property rights (IPR) index based on the World Trade Organization's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement for 53 developing countries. TRIPS agreement attempts to standardize the minimum level of IPR protection for all 153 WTO member countries regardless of their income levels, and allows recourse to an effective dispute settlement mechanism, unlike previous international IPR agreements. The Agreement is thus applicable to a large number of countries and enforceable both at the national and international levels, making it an important legal agreement to study. This TRIPS-specific index takes into consideration the seven IPR categories defined by TRIPS agreement and the transition period for their implementation. In addition, it assumes the governments of the developing countries investigated would not necessarily implement the legislations for the seven IPR categories simultaneously. National IPR legislations, various IPR-specific reports and legal experts and practitioners, whenever possible, are consulted to build the index. Analysis of the data collected show three implementation trends. Firstly, almost all developing country members availed themselves to the transition period afforded by the Agreement, and in some cases have exceeded the time limit imposed by the transition period. Secondly, implementation efforts of developing countries vary, and not necessarily because of their income levels. And lastly, countries in regional trade agreements (RTAs) that specify IPR obligations tend to comply with the TRIPS agreement earlier than the rest. The results collected in this study show that TRIPS does imply a convergence of global IPR protection across countries, and that the implementation of this Agreement is an external factor, not influenced by the countries' level of economic development.
    Keywords: intellectual property rights, developing countries
    JEL: O34 K33 C43
    Date: 2009–01
  3. By: Andrés Fuentes
    Abstract: Measures to make the regulation of product markets more conducive to competition play a prominent role in the governments “growth package” of measures to stimulate economic growth which are in the process of being implemented. This paper discusses these measures and suggests further improvements. Notwithstanding significant reforms in recent years, competition law and its enforcement are still weaker than in other OECD countries. Scope for making regulation of product markets more competition-friendly is large in the network industries. While sector-specific regulators have been introduced, their independence needs to be strengthened. The reform of the electricity supply law provides the main building block opening the industry to competition, but vertical separation requirements of the electricity grid from electricity generation and trading activities need to be strengthened. In telecommunications, restrictions in access of competitors to the local loop limit the scope for lowering prices and improving quality of service in broadband connections. Measures still need to be taken to prevent discrimination against market entrants in the railway passenger services market and much scope exists to widen competition in postal services. Progress in lowering the degree of protection in the proposed legislation on agricultural policy 2007-11 is modest. Trade barriers can also be lowered for manufactured goods through the adoption of the Cassis de Dijon principle.<P>Réformes pour ouvrir à la concurrence les secteurs abrités en Suisse<BR>Les mesures visant à rendre la réglementation des marchés de produits plus propice à la concurrence occupent une place de premier plan dans le « programme de croissance » destiné à stimuler l'expansion économique, dont la mise en oeuvre a commencé. Le présent chapitre examine les mesures figurant dans ce programme et propose de nouvelles améliorations. Malgré les importantes réformes opérées ces dernières années, la Suisse est encore à la traîne des autres pays de l'OCDE du point de vue du droit de la concurrence et de son application. Beaucoup reste à faire dans les industries de réseau pour rendre la réglementation des marchés de produits plus favorable à la concurrence. Des autorités de régulation sectorielles ont été mises en place mais elles ont besoin d'une plus grande indépendance. La réforme de la législation relative à la fourniture d'électricité jette les bases de l'ouverture de ce secteur à la concurrence, mais séparation verticale plus stricte est nécessaire entre le réseau de transport et les activités de production et de commercialisation. Dans le secteur des télécommunications, les restrictions d'accès des concurrents à la boucle locale limitent les possibilités de baisse des prix et d'amélioration de la qualité du service dans le haut débit. Il y a encore des mesures à prendre afin d'éviter la discrimination à l'encontre des entrants sur le marché des services de transport ferroviaire de passagers et beaucoup reste à faire pour élargir la concurrence dans les services postaux. La législation sur la politique agricole proposée pour la période 2007-11 ne marque qu'un léger progrès en matière de réduction de la protection. L'adoption du principe « Cassis de Dijon » pourrait aussi contribuer à abaisser les obstacles au commerce des produits manufacturés.
    Keywords: Suisse, network industries, industrie de réseau, competition, privatisation, concurrence, privatisation, competition law, productivity and growth, droit de la concurrence, productivité globale et croissance, agriculture, agriculture, regulatory policies, politique de régulation
    JEL: K21 K23 L16 L40 L43 L51 L53 O52 Q3
    Date: 2009–02–17
  4. By: Suncica Vujic; Pierre Koning; Dinand Webbink; Nick Martin
    Abstract: This paper estimates the longer-term effects of childhood conduct disorder on human capital accumulation and violent and criminal behaviour later in life using data of Australian twins. We measure conduct disorder with a rich set of indicators based on diagnostic criteria from psychiatry (e.g., aggression to people and animals, destruction of property, deceitfulness or theft, and/or serious violations of rules). Using ordinary least squares (OLS) and twin fixed effects (FE) estimation approaches, we find that early (pre-18) conduct disorder problems significantly affect both human capital accumulation and violent and criminal behaviour over the life course. For instance, within pairs of identical twins we find that conduct disorder reduces the probability of high school graduation with 4 to 13 percent points and increases the probability of being arrested with 7 to 16 percent points. Robustness checks suggest that these estimates may be lower bounds of the true effects of conduct disorder. In addition, we find that conduct disorder is more deleterious if these behaviours occur earlier in life. We conclude that childhood mental health problems have high human and financial costs for families and society at large. Effective treatments early in life might yield high returns.
    Keywords: conduct disorder; human capital; twins
    JEL: I2 K42
    Date: 2008–11
  5. By: Landeo, Claudia M.
    Abstract: We experimentally study the effects of the split-award tort reform, where the state takes a share of the plaintiff's punitive damage award, on litigants' beliefs and bargaining outcomes. In addition, we study the formation of litigants' beliefs in a strategic environment. Our results provide support for coherence-based reasoning theories: coherence shifts in litigants' background beliefs (elicited before a role is assigned and after commitment to a choice at the pretrial bargaining stage) suggest bi-directionality between choices and beliefs. Our findings also suggest role-specific bias in the updating of plaintiffs' beliefs about firm's negligence. Finally, our findings indicate that split-awards affect plaintiffs' beliefs about fairness and lower out-of-court settlement amounts.
    Keywords: Tort Reform; Belief Formation; Split-Award Statute; Coherence-Based-Reasoning; Role-Specific Bias; Self-Serving Bias; Motivated Reasoning; Settlement; Litigation; Experiments; Debiasing through Law
    JEL: C9 K0 K13 A12 D83 K41
    Date: 2009–02
  6. By: Chongwoo, Choe; Shekhar, Chander
    Abstract: We compare the prevailing system of compulsory pre-merger notification with the Australian system of voluntary pre-merger notification. It is shown that, for a non-trivial set of parameter values, a perfect Bayesian equilibrium exists in mixed strategies in which the regulator investigates un-notified mergers with probability less than one and the parties choose notification with probability less than one. Thanks to the signaling opportunity that arises when notification is voluntary, voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties. Some of the theoretical predictions are supported by exploratory empirical tests using merger data from Australia. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the merging parties as well as to the regulator.
    Keywords: Merger regulation; pre-merger notification; abnormal returns
    JEL: D21 G34 K21 L40
    Date: 2009–02
  7. By: Dennis W. Carlton
    Abstract: In this article, I explain the inadequacy of our current state of knowledge regarding the effectiveness of antitrust policy towards mergers. I then discuss the types of data that one must collect in order to be able to perform an analysis of the effectiveness of antitrust policy. There are two types of data one requires in order to perform such an analysis. One is data on the relevant market pre and post merger. The second is data on the specific predictions of the government agencies about the market post-merger. A key point of this article is to stress how weak an analysis of only the first type of data is. The frequent call for retrospective studies typically envisions relying on just this type of data, but the limitations on the analysis are not well understood. As I explain below, retrospective studies that ask whether prices went up post merger are surprisingly poor guides for analyzing merger policy. It is only when the second type of data is combined with the first type that a reliable analysis of antitrust policy can be carried out. There is a need both to collect the necessary data and to analyze it correctly.
    JEL: C01 K21 L10 L4 L41
    Date: 2009–02

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