New Economics Papers
on Law and Economics
Issue of 2009‒08‒08
five papers chosen by
Jeong-Joon Lee, Towson University

  1. Better that X guilty persons escape than that one innocent suffer By Matteo Rizzolli; Margherita Saraceno
  2. Soft Law and the Rule of Law in the European Union: Revision or Redundancy? By Mark Dawson
  3. Crime, Corruption and Institutions By Ishita Chatterjee; Ranjan Ray
  5. Organized crime and regional development. A review of the Italian case By Vittorio , Daniele

  1. By: Matteo Rizzolli; Margherita Saraceno
    Abstract: The principle that it is better to let some guilty individuals be set free than to mistakenly convict an innocent person is generally shared by legal scholars, judges and lawmakers of modern societies. The paper shows why this common trait of criminal procedure is also efficient. It extends the standard Polinsky and Shavell (2007) model of deterrence and shows that when the costs of convictions are positive, and guilty individuals are more likely to be convicted than innocent individuals it is always efficient to minimize the number of wrongful convictions, while a more than minimal amount of wrongful acquittals may be optimal.
    Keywords: Type I errors, Type II errors, evidence, optimal underdeterrence, Blackstone Pareto distribution, optimal screening
    JEL: K14 K41 K42
    Date: 2009–07
  2. By: Mark Dawson
    Abstract: The increasing use in the EU of soft law norms has created an extensive debate over the centrality of law as the principle instrument of European integration. Under a certain understanding of legality - one that sees the function of law as the provision of stable normative expectations - the development of methods like the OMC appears as an explicit threat. By another, the complex nature of the EU polity - and the functional tasks it must carry-out - places an impossibly high burden on any attempt by the EU to model its conception of legality this way. While this seemingly leaves the EU with a stark choice, the very features - the dispersion of normative authority between different national orders, and the need for rapid and iterative regulatory interventions - that have borne soft law also point towards the development of new conceptions of legality and its limits in a post-national setting. Soft law has both empirically challenged law's place in the integration project, and demanded a re-evaluation of its contemporary meaning.
    Keywords: European law; open coordination; social policy; soft law; rule of law
    Date: 2009–05–15
  3. By: Ishita Chatterjee; Ranjan Ray
    Abstract: This paper explores the link between crime and corruption, compares their magnitudes, determinants and their effects on growth rates. The study uses a large cross country data set containing individual responses to questions on crime and corruption along with information on the respondents’ characteristics. This data set is supplemented by country level indicators from a variety of sources on a range of macro variables and on institutions in the respondent’s country of residence. A methodological contribution of this study is the estimation of an ordered probit model based on outcomes defined as combinations of crime and bribe victimisation. The principal results include the evidence that while a male is more likely to be a corruption victim, a female is more exposed to crime, especially, serious crime. Older individuals and those living in the smaller towns and cities are less exposed to crime and corruption due presumably to their ability to form informal networks that act as protective mechanisms. With increasing levels of income and education, an individual is more likely to report both crime and bribe victimisation. A crime victim is more likely than a non victim to report receiving demands for a bribe. The results suggest that variables such as inequality, unemployment rate and population size have a strong effect on the country’s crime and corruption statistics though the sign and significance of the country effects are not always robust. However, the paper does provide robust evidence that a stronger legal system and a happier society result in a reduction in both crime and corruption. While the study finds that both crime and corruption rates decline as a country becomes more affluent, as measured by its per capita GNP at PPP, there is no evidence of a strong and uniformly negative impact of either crime or corruption on a country’s growth rate. There is limited OLS based evidence of a non linear relationship between growth and corruption rates, though the significance of the corruption effect on growth disappears on the use of IV estimation. The paper also provides evidence that there has been a decline in both crime and corruption during the latter half of the 1990s. This is true even after controlling for the individual and country characteristics.
    Keywords: Crime Victimisation, Institutions, Happiness, Ordered Probit, Rule of Law.
    JEL: C13 D63 H80 I31 K42
    Date: 2009–08
  4. By: Dyuti S. Banerjee; Teyu Chou
    Abstract: This paper uses a strategic entry-deterrence approach to address the effects of anti-commercial piracy policies on a firm’s incentive to innovate. Monitoring increases the firm’s incentive to innovate. However, inclusion of innovation does not necessarily result in monitoring as the socially optimal policy. If monitoring is the socially optimal policy then the commercial pirate’s entry may or may not be deterred. The entry-deterring limit price and quality is less than that in the monopoly case. Only in the extreme situation the monopoly results are restored.
    Keywords: Accommodating strategy, aggressive strategy, copyright protection, innovation.
    JEL: K42 L11
    Date: 2009–08
  5. By: Vittorio , Daniele
    Abstract: This paper offers a review of the effects of organized crime on regional economic development, with particular reference to the case of Italy. After reviewing the empirical studies that analyse the relationship between crime and economic development, the paper examines the regional distribution and the social costs of some crimes (in particular extortion) that can be linked to mafia type criminality.
    Keywords: Organized crime; Italy; economic development; costs of crime
    JEL: K49 K42 R59
    Date: 2009–04

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