New Economics Papers
on Law and Economics
Issue of 2010‒01‒10
three papers chosen by
Jeong-Joon Lee, Towson University

  1. Empirical Evidence on Prisoners’ Discount Rates By Andrew Torre
  2. The Quality of the Legal System and Labor Market Performance around the World By Feldmann, Horst
  3. On and Off Contract Remedies By Richard Brooks; Alexander Stremitzer

  1. By: Andrew Torre
    Abstract: Listokin has recently drawn our attention to the fact that virtually nothing is known about the magnitude of prisoners’ discount rates in relation to their foregone income (legal or illegal), which incarceration implies. He argues that since prisoners are likely to exhibit high discount rates, pre sentence delays will impose higher costs on offenders not on bail compared with those who are granted bail by the court. Utilising actual plea choices made by a sample of not on bail prisoners for three different offences in NSW, this study derives convincing estimates of prisoners’ rates of time preference. Prisoners do discount future returns and at high rates, as predicted by criminologists and other scholars, who have addressed this issue theoretically. The modelling technique utilised in this paper (dynamic present value) captures the stochastic movement of the prisoner’s probability of conviction during the delay period. This is a considerable methodological improvement over the standard static present value technique, which is not appropriate to capture the dynamics of the final plea choice.
    Date: 2009–12–08
  2. By: Feldmann, Horst
    Abstract: Using data on 75 countries for six years in the period 1995 to 2003, this paper analyzes empirically whether and to what extent the quality of the legal system affects the performance of the labor market. According to the regression results, a legal system characterized by a dependent judiciary, biased courts, a lack of intellectual property protection and a lack of integrity increases unemployment and lowers the employment level. The magnitude of the effect seems to be substantial, particularly among young people.
    Keywords: employment; legal system; rule of law; unemployment
    Date: 2009
  3. By: Richard Brooks (Yale Law School); Alexander Stremitzer (Yale University and University of Bonn)
    Abstract: A party dissatisfied with the contractual performance of a counterparty is typically able to pursue a variety of legal recourses. Within this apparent variety lurk two fundamental alternatives. The aggrieved party may (i) “affirm” the contract and seek money damages or specific performance; or (ii) “disaffirm” the contract with the remedy of rescission and restitution. This simple dichotomy of contract remedies applies broadly in both common law and civil law practice. We show here that this remedial regime allows parties to write simple contracts that induce first-best cooperative investments.
    Keywords: breach remedies, incomplete contracts, cooperative investments
    JEL: K12 L22 J41 C70
    Date: 2009–12

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