New Economics Papers
on Law and Economics
Issue of 2010‒05‒15
two papers chosen by
Jeong-Joon Lee, Towson University

  1. Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results: Comment By Martijn I. Dröes; Ryan C.R. van Lamoen
  2. Building on the trust of management: overcoming the paradoxes of principles based regulation By Ojo, Marianne

  1. By: Martijn I. Dröes; Ryan C.R. van Lamoen
    Abstract: The seminal papers by Friedberg (1998) and Wolfers (2006) find a positive effect of the regulatory change in divorce laws on divorce rates. Their results are based on analytical weights to correct for heteroskedasticity (WLS). In contrast, the OLS regression results in this comment indicate that there is no evidence in favor of a positive significant relationship between the divorce law change and divorce rates if those weights are excluded. Estimates based on OLS and WLS always differ to some extent due to sampling error. However, the large discrepancies between our results and the results of Friedberg (1998) and Wolfers (2006) are an indication of functional form or model misspecification. The counterintuitive negative effect of the divorce law change on divorce rates in some of our and Wolfers. regression estimates are in line with this explanation. The results in this comment imply that economists and policy makers should be cautious when they interpret the results of Friedberg (1998) and Wolfers (2006) as evidence of an effect of the divorce law change on divorce rates. In particular, their results cannot be used to draw conclusions about the validation of the Coase theorem in a marital bargaining setting.
    Keywords: Divorce
    Date: 2010–04
  2. By: Ojo, Marianne
    Abstract: This paper illustrates how trust in management can be consolidated through the order and mode of application of enforcement measures (negotiating and punitive enforcement measures) which are employed in facilitating and maximising compliance with rules. “Whilst negotiating strategies are introduced initially to develop trust between the regulator and the regulated, resort is made to more punitive strategies where an absence of trust in the compliance activity has been confirmed.” In considering techniques which could be introduced to maximise compliance with rules, standards and principles, this paper not only highlights why responsive and negotiating strategies are more effective than deterrence based strategies in facilitating compliance with rules and principles, but also the importance of introducing some element of fairness and high degree of accountability into the decision making process. Whilst fairness is considered to be of greater significance to decisions founded on principles and discretion, accountability is a benefit and feature which is usually attributed to “bright lines rules”. Even though it is contended that issues related to legitimacy and accountability could still arise with group decisions, this paper seeks to demonstrate that some degree of accountability (along with the fairness attributed to group decisions) could be fostered through corporate and group decision making. Furthermore, the paper highlights how effective communication can be achieved, how such communication – as well as an effective system of communication, is vital to determining the point at which there should be a departure from the systematic application of rules.
    Keywords: communication; compliance; principles; enforcement; regulation; trust
    JEL: K2 D7 G3
    Date: 2010–05–05

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