New Economics Papers
on Law and Economics
Issue of 2010‒06‒11
three papers chosen by
Jeong-Joon Lee, Towson University

  1. Tax Evasion and Community Effects in Italy By Francesco Flaviano Russo
  2. The Impact of Law Enforcement Design on Legal Compliance By Lisa Bruttel; Tim Friehe
  3. Informational Externalities and Settlements in Mass Tort Litigations By Deffains, Bruno; Langlais, Eric

  1. By: Francesco Flaviano Russo (University of Napoli Federico II and CSEF)
    Abstract: I propose an analysis of tax evasion in Italy using the data collected by the website This site collects reports by random internet users of the transactions in which they were involved that, lacking any legal receipt, were hidden from the tax authority. I interpret this experiment as a test of the attitude towards tax evasion by the community in which the tax offender operates: less reported episodes are an indication of a more lenient attitude. Since a more lenient attitude of the community is a lower cost of evading taxes, a smaller number of reports must be associated to less tax evasion. I show that the data confirm this claim. I also show that the presence of younger, less educated individuals and the size of the irregular labor force are associated to a more lenient attitude towards tax evasion.
    Keywords: Tax Morale, Tax Evasion Reports
    JEL: K34
    Date: 2010–06–03
  2. By: Lisa Bruttel; Tim Friehe
    Abstract: This paper presents experimental evidence on the way in which the design of law enforcement impacts legal compliance. The experiment includes two law enforcement designs: one in which sanctioning results in victim-compensation and one in which sanctions are rent-seeking devices for the enforcer. We show that in the rent-seeking design (i) potential violators choose non-compliance more often and (ii) the average violator tries to avoid detection less aggressively.
    Keywords: norm compliance, law enforcement, avoidance, experiment
    Date: 2010
  3. By: Deffains, Bruno; Langlais, Eric
    Abstract: This paper elaborates on a basic model of mass tort litigation, highlighting the existence of positive informational externalities afforded by the discovery process (as a general technology of production of evidences) in order to study when a class action is formed, or when a sequence of individual trials is more likely. We illustrate the argument that when several plaintiffs file individually a lawsuit against the same tortfeasor, the resolution of the various cases through repeated trials produces positive informational externalities. When class actions are forbidden, these externalities only benefit to the later plaintiffs (through precedents, jurisprudence...). When they are allowed, the first filers may have an incentive to initiate a class action as far as it enables him to benefit from these externalities, through the sharing of information with later filers. We provide sufficient conditions under which a class action is formed, assuming a perfect discovery process. We also show that when contingent fees are used to reward attorneys' services, plaintiffs become neutral to the arrival of new information on their case.
    Keywords: Mass Tort Class Action; information sharing; repeated litigation; contingent fees.
    JEL: K32 K20 K13 K22 K23 K21 K41
    Date: 2010–05–30

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