New Economics Papers
on Law and Economics
Issue of 2010‒05‒22
seven papers chosen by
Jeong-Joon Lee, Towson University

  1. From Detroit to Singur: On the Question of Land Acquisition for Private Development By Subhash C. Ray
  2. Competition Among Spatially Differentiated Firms: An Empirical Model with an Application to Cement By Russell Pittman
  3. Private Antitrust Enforcement in the Presence of Pre-Trial Bargaining By Bourjade, Sylvain; Rey, Patrick; Seabright, Paul
  4. A History of Violence: Testing the ‘Culture of Honor’ in the US South By Pauline Grosjean
  5. ”Thou shalt not covet ...”: Prohibitions, Temptation and Moral Values By Matteo Cervellati; Paolo Vanin
  6. European Takeover Law: The Case for a Neutral Approach By Luca Enriques
  7. Conscription and Crime: Evidence from the Argentine Draft Lottery By Sebastian Galiani; Martín A. Rossi; Ernesto Schargrodsky

  1. By: Subhash C. Ray (University of Connecticut)
    Abstract: Private land is often taken by the government on behalf of another private investor in the interest of employment creation or general economic development of a region. This paper draws upon the parallel between the experiences of General Motors in Poletown, MI in the 1980s and the recent events relating to Tata Motors and the agricultural land in Singur, West Bengal to raise a number of questions about government taking of land for private development .A brief review of the history of land acquisition through Eminent Domain in the US serves as the background for a discussion of the different important questions like the problem of strategic holdouts and fair compensation. The essay ends with an emphasis on the moral obligation of the government, especially in India, for proper rehabilitation of the displaced when exercise of Eminent Domain powers becomes unavoidable.
    Keywords: Eminent Domain; Strategic Holdout; Fair compensation
    JEL: K11 R11
    Date: 2010–05
  2. By: Russell Pittman (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)
    Abstract: Recent rate increases by U.S. freight railroads have refocused attention on regulation, deregulation, and regulatory reforms in the railroad industry. Legislation introduced into Congress would render a variety of railroad behavior newly subject to the jurisdiction of the antitrust statutes, with potential enforcement by the Antitrust Division and the FTC and through lawsuits brought by state attorneys general or private parties. This paper considers the economic issues raised by legislation and the likely impacts on competition and welfare.
    Keywords: freight railroads, captive shippers, antitrust, regulation
    JEL: K21 K23 L41 L42 L43 L51 L92
    Date: 2010–01
  3. By: Bourjade, Sylvain; Rey, Patrick; Seabright, Paul
    Abstract: We study the effect of encouraging private actions for breaches of competition law. We develop a model in which a plaintiff, who may have private information about whether a breach of law has been committed, decides whether to open a case against a defendant. If opened, the case may be settled out of court or may proceed to full trial. The authorities can facilitate private actions by lowering the costs of opening a case or of proceeding to a full trial, or by raising the damages to be expected in the event of success. We show that facilitating private action increases the number of cases opened and sometimes but not always makes plaintiffs more aggressive in pre-trial bargaining. The latter, if it occurs, tends to make defendants who have committed anti-trust violations more likely to settle than innocent defendants. We also show that for screening to work requires the Court to be committed to rely only on submitted evidence in the case, and not on other possibly relevant background material. We finally study how to design the rules so as to enhance the role of private litigation on antitrust enforcement and prove that it is better to increase damages that to reduce costs of initiating a suit. In particular we find large benefits from introducing a system of compensation for Defendants found non-liable, paid by unsuccessful plaintiffs.
    JEL: K41 K42 L40
    Date: 2009–05
  4. By: Pauline Grosjean (University of San Francisco)
    Abstract: Using historical data on early settlers to the United States, this paper tests and confirms the “Culture of Honor” hypothesis by socio-psychologists Dov Cohen and Richard Nisbett (1994, 1996). This hypothesis argues that the high prevalence of homicides in the US South stems from the fact that it was a frontier region settled by people whose economy was based on herding: the Scotch-Irish. Herding societies develop cultures of honors for reasons having to do with their precariousness: violence is a necessary condition to preserve a reputation for toughness and deter animal theft. Using historical census data on waves of settlers from Europe and relating contemporaneous violence to early Scotch-Irish settlers, this paper provides a test of the link between Scotch-Irish settlers and the culture of honor. The results confirm that high numbers of Scotch-Irish immigrants to the US South by 1790 are associated with higher homicide rates today, including homicides by white offenders. Similar results do not hold for different origins of migrants or other violent crime or offenses. The effect is stronger in counties with high headcounts of pigs and sheep in the 19th century, confirming the herding origin of the culture of honor. An important contribution of this paper is to suggests an instrument for violence, based on past economic occupations and ecological suitability for herding vs. farming.
    Keywords: Cuture of honor, US South
    JEL: K4 Z Z13
    Date: 2010–05
  5. By: Matteo Cervellati (University of Bologna and IZA Bonn); Paolo Vanin (University of Bologna)
    Abstract: We propose a theory studying temptation in presence of both externally and internally sanctioned prohibitions. Moral values that (internally) sanction prohibited actions and their desire may increase utility by reducing self-control costs, thereby serving as partial commitment devices. We apply the model to crime and study the conditions under which agents would optimally adhere to moral values of honesty. Incentives to be moral are non- monotonic in the crime premium. Larger external punishments increase temptation and demand for morality, so that external and internal sanctions are complements. The model helps rationalizing stylized facts that proved difficult to explain with available theories.
    Keywords: Prohibitions, Temptation, Self-Control, Moral Values, Crime
    JEL: K42 Z13
    Date: 2010–05
  6. By: Luca Enriques (Consob, University of Bologna, Faculty of Law, and European Corporate Governance Institute (ECGI))
    Abstract: This paper argues that in revising the Takeover Bid Directive, EU policymakers should adopt a neutral approach toward takeovers, i.e. enact rules that neither hamper nor promote them. The rationale behind this approach is that takeovers can be both value-creating and value-decreasing and there is no way to tell ex ante whether they are of the former or the latter kind. Unfortunately, takeover rules cannot be crafted so as to hinder all the bad takeovers while at the same time promoting the good ones. Further, contestability of control is not cost-free, because it has a negative impact on managers’ and block-holders’ incentives to make firm-specific investments of human capital, which in turn affects firm value. It is thus argued that individual companies should be able to decide how contestable their control should be. After showing that the current EC legal framework for takeovers overall hinders takeover activity in the EU, the paper identifies three rationales for a takeover-neutral intervention of the EC in the area of takeover regulation (pre-emption of “takeover-hostile,” protectionist national regulations, opt-out rules protecting shareholders vis-à-vis managers’ and dominant shareholders’ opportunism in takeover contexts, and menu rules helping individual companies define their degree of control contestability) and provides examples of rules that may respond to such rationales.
    Keywords: Takeover Bid Directive, Board Neutrality, Mandatory Bid Rule, Market for Corporate Control
    JEL: K22 G34 G38
    Date: 2010–04
  7. By: Sebastian Galiani (Washington University in St. Louis); Martín A. Rossi (Universidad de San Andrés); Ernesto Schargrodsky (Universidad Torcuato Di Tella)
    Abstract: We estimate the causal effect of mandatory participation in the military service on the involvement in criminal activities. We exploit the random assignment of young men to military service in Argentina through a draft lottery to identify this causal effect. Using a unique set of administrative data that includes draft eligibility, participation in the military service, and criminal records, we find that participation in the military service increases the likelihood of developing a criminal record in adulthood. The effects are not only significant for the cohorts that performed military service during war times, but also for those that provided service at peace times. We also find that military service has detrimental effects on future performance in the labor market.
    Keywords: Military Service, Violent behavior, Crime
    JEL: K42
    Date: 2010–05

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