New Economics Papers
on Law and Economics
Issue of 2010‒11‒27
six papers chosen by
Jeong-Joon Lee, Towson University

  1. Too Low to be True: The Use of Minimum Thresholds To Fight Tax Evasion By Tonin, Mirco
  2. Cycles in Crime and Economy: Leading, Lagging and Coincident Behaviors By Claudio Detotto; Edoardo Otranto
  3. Re-election Concerns and the Failure of Plea Bargaining By Siddhartha Bandyopadhyay; Bryan C McCannon
  4. Collusion through Joint R&D: An Empirical Assessment By Tomaso Duso; Lars-Hendrik Röller; Jo Seldeslachts
  5. Collective Exit Strategies: New Ideas in Transnational Labour Law By Silvana Sciarra
  6. International Law, Domestic Political Orders, and the ‘Democratic Imperative’: Has Democracy Finally Emerged as a Global Legal Entitlement? By Christian Pippan

  1. By: Tonin, Mirco
    Abstract: The enforcement of compliance with tax regulation is a complex task. This is particularly the case when the administrative capacity of the tax authority is low, as is often the case in developing and transition countries. In this paper, I first formally model the impact of minimum thresholds by explicitly taking into account the low administrative capacity. The model shows that the introduction of a threshold creates a spike and a "missing middle" in the distribution of declared incomes and highlights under which conditions introducing a threshold is likely to increase net revenues for the tax authority. Then, I draw on some international experiences in fighting tax evasion to identify tools that can be used to reduce underreporting by employed labour, small and medium enterprises, self-employed, and professionals. In particular, I analyze the Italian "Business Sector Analysis" and the Bulgarian "Minimum Social Insurance Thresholds". <BR>Keywords; Tax evasion; miminum threshold; studi di settore <BR>JEL Classification: H26, K35, K42, P37
    Date: 2010–11–01
  2. By: Claudio Detotto; Edoardo Otranto
    Abstract: In the last decades, the interest in the relationship between crime and business cycle has widely increased. It is a diffused opinion that a causal relationship goes from economic variables to criminal activities. This work aims to verify this proposition by using the dynamic factor model to analyze the common cyclical components of Gross Domestic Product (GDP) and a large set of criminal types. Italy is the case study for the time span 1991 - 1 - 2004 - 12. The purpose is twofold - on the one hand we verify if such a relationship does exist; on the other hand we select what crime types are related to the business cycle and if they are leading, coincident or lagging. The study finds that most of the crime types show a counter-cyclical behavior with respect to the overall economic performance, but only a few of them have an evident relationship with the business cycle. Furthermore, some crime offenses, such as bankruptcy, embezzlement and fraudulent insolvency, seem to anticipate business cycle, in line with recent global events.
    Keywords: business cycle; crime; common factors; dynamic factor models
    JEL: E32 K0
    Date: 2010
  3. By: Siddhartha Bandyopadhyay; Bryan C McCannon
    Abstract: A new explanation for the failure of plea bargaining is provided. It is shown that a retention agent (i.e. median voter) can use convictions at trial as a signal of the quality of a prosecutor. This encourages a public prosecutor to take cases to trial even when both social welfare and her utility (absent the retention motivatiOn) from plea bargaining is higher.
    Keywords: plea bargaining, prosecutor evaluation, signaling
    JEL: K41 D82
    Date: 2010–10
  4. By: Tomaso Duso (Humboldt University and Wissenschaftszentrum Berlin (WZB)); Lars-Hendrik Röller (European School of Management and Technology (ESMT) and Humboldt University Berlin); Jo Seldeslachts (University of Amsterdam)
    Abstract: This paper tests whether upstream R&D cooperation leads to downstream collusion. We consider an oligopolistic setting where firms enter in research joint ventures (RJVs) to lower production costs or coordinate on collusion in the product market. We show that a sufficient condition for identifying collusive behavior is a decline in the market share of RJV-participating firms, which is also necessary and sufficient for a decrease in consumer welfare. Using information from the US National Cooperation Research Act, we estimate a market share equation correcting for the endogeneity of RJV participation and R&D expenditures. We find robust evidence that large networks between direct competitors – created through firms being members in several RJVs at the same time – are conducive to collusive outcomes in the product market which reduce consumer welfare. By contrast, RJVs among non-competitors are efficiency enhancing.
    Keywords: Research Joint Ventures, Innovation, Collusion, NCRA
    JEL: K21 L24 L44 O32
    Date: 2010–11
  5. By: Silvana Sciarra
    Abstract: Abstract: The metaphor ‘exit strategy’ is often used in current European discussions, in connection with the impact of the economic and financial crisis. This chapter adapts the same metaphor to the role of collective actors. An accentuated mobility of companies and labour generates new transnational collective interests and challenges traditional ideas in labour law. Hierarchies of sources are frequently dismantled and denationalization takes place in regimes of standard setting. Transnational juridification of new social spheres occurs in a very open and unstructured way. Solidarity addresses issues of differentiation, rather than integration, following the needs of the most vulnerable ones, badly hit by the crisis. In this scenario, labour law is searching new answers to questions of legitimacy and power. Thus, theories of democratic representation need to be reset, facing the spreading of new transnational collective actors.
    Keywords: legitimacy
    Date: 2010–11–18
  6. By: Christian Pippan
    Abstract: Abstract: After the end of the Cold War, democratic transitions in many parts of the world, a significant increase in the number of signatories to global and regional human rights instruments containing participatory rights, and a growing interest in ‘free and fair’ elections on the part of the UN and other international organizations have led some legal scholars to assert the emergence of an internationally constituted ‘right to democratic governance’. In a certain sense, this was in line with the predominantly liberal reading of the events of 1989 in social science, which interpreted the demise of European communism as a confirmation of the superiority of Western-style democracy over other political regimes. In the controversial debate that followed its initial articulation in the early 1990s, the ‘democratic entitlement thesis’ was hailed by some commentators as finally giving substance to widely accepted but highly ambiguous international concepts such as self-determination, popular sovereignty and political participation, whereas others criticized it as a form of ‘liberal messianism’, or even as a ‘democratic jihad’. The present essay aims to revisit the discussion in light of recent international developments, particularly within the United Nations. Following a general introduction (Section 1), it briefly recapitulates the major strands of the democratic norm thesis and the vivid critique it has received (Section 2). In order to better grasp the overall problématique raised by the thesis, the main section of the paper (Section 3) then addresses three interrelated, yet ultimately distinct, questions: Does the international legal system display any preference for democracy over other domestic political regimes and concurrent constitutional orders? If so, does the contemporary international order embrace any particular vision of democracy? Finally, provided the two prior questions can be answered in the affirmative, do any of the components of an emerging international vision of democracy have a universal legal character? The essay concludes (in Section 4) by arguing that, unless one (inappropriately) equates democracy with free and fair elections, no general rule of international law can be identified requiring states to design their domestic political and constitutional orders in accordance with a particular (e.g. liberal) model of democracy. Moreover, while the persistent refusal to allow for the holding of periodic and genuine elections may today be regarded as constituting a violation of a customary norm (an argument supported here), the responsible government usually does not forfeit its legal standing in the international arena. Notwithstanding these findings, it will be argued that an international regime on domestic democratic governance is progressively taking shape. This regime is comprised of principles, norms, rules, and standards with varying degrees of normativity, around which the expectations of international actors regarding efforts of states ‘to implement the principles and practices of democracy’ increasingly converge.
    Date: 2010–10–18

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