New Economics Papers
on Law and Economics
Issue of 2010‒12‒11
five papers chosen by
Jeong-Joon Lee, Towson University

  1. Combating "Maritime Terrorism" off the Coast of Somalia By Anja Shortland; Marc Vothknecht
  2. Efficiency Rents: A New Theory of the Natural Vacancy Rate for Rental Housing By Thomas J. Miceli; C. F. Sirmans
  3. Outcome Performance Measures of Environmental Compliance Assurance: Current Practices, Constraints and Ways Forward By Eugene Mazur
  4. Crime and Conspicuous Consumption By Daniel Mejía; Pascual Restrepo
  5. Supply and demand for telecommunication infrastructure By Veith, Tobias

  1. By: Anja Shortland; Marc Vothknecht
    Abstract: This paper evaluates the effectiveness of the international naval mission in the Gulf of Aden from 2008-2010, both in terms of its counter-piracy and its counter-terrorism objectives. We draw on arguments developed in the literature of law and economics, detailed statistical analyses and a large number of in depth interviews. Counter-piracy operations are a qualified success: their main effects are the stabilisation of attacks at a high level and the substitution between the relatively well protected transit corridor in the Gulf of Aden and the open sea. However, the counter-piracy measures appear to deter pirates from forming alliances with Islamist movements and may therefore make a major contribution to international security.
    Keywords: Piracy, Somalia, counter-terrorism, law and economics, deterrence, naval intervention.
    JEL: K42 O17 F19
    Date: 2010
  2. By: Thomas J. Miceli (University of Connecticut); C. F. Sirmans (Florida State University)
    Abstract: This paper adapts the theory of efficiency wages to explain the natural vacancy rate in rental housing markets. An equilibrium vacancy rate penalizes landlords who fail to maintain their units because if a tenant vacates a unit, the landlord will not be able to fill it immediately, thus costing him the rental income for a finite period of time. We provide evidence for the theory by showing that vacancy rates across metropolitan areas vary inversely with the stringency of state habitability laws. We also find some evidence for the search-cost theory of the natural vacancy rate.
    Keywords: Efficiency rents, natural vacancy rate, rental housing
    JEL: K11 R31
    Date: 2010–11
  3. By: Eugene Mazur
    Abstract: This report analyses the experience of ten OECD countries in the design and implementation of quantitative indicators used to assess the outcomes of environmental enforcement authorities’ efforts to ensure compliance with pollution prevention and control regulations. To respond to the growing demand for results-oriented work methods and the need for performance management and accountability at the time of severe budget constraints, more and more environmental enforcement authorities are working to develop indicators to characterise improvements in behaviour of the regulated community (intermediate outcomes) or environmental conditions (final outcomes) stemming from their activities. The report considers six types of intermediate and final outcome performance measures, including compliance rates and indicators of improved environmental management practices and reduced risk. Based on the OECD criteria for the evaluation of environmental indicators – measurability, analytical soundness and policy relevance – the paper identifies key challenges for developing and using specific categories of compliance assurance outcome indicators and suggests several ways to improve their effectiveness. The review of a “toolbox” of existing outcome indicators and the analysis of their respective strengths and weaknesses suggests that it is not possible to identify a “best practice” approach or a universal optimal set of indicators. The functionality of individual outcome measures ultimately depends on their purpose (e.g. internal performance assessment or external accountability) and suitability for joint analysis with the enforcement authority’s resource (input) and activity (output) indicators. The report identifies several issues for further analysis.
    Keywords: environmental regulations, compliance assurance, compliance and enforcement, environmental authorities, environmental inspections, performance measurement, outcome indicators
    JEL: K32 K42 O57 Q56
    Date: 2010–06–10
  4. By: Daniel Mejía; Pascual Restrepo
    Abstract: This paper develops an incomplete information model wherein individuals face a trade-off between status and security when deciding the optimal amount of conspicuous consumption. On the one hand, we assume that individuals derive utility from status, which is obtained by signaling wealth through the consumption of an observable good. On the other hand, the increased consumption of observable goods also signals wealth to a criminal audience, thus increasing the chance of becoming target for criminal activities. The paper proposes an information channel through which crime distorts consumption decisions; this channel is different in nature from the channel whereby crime acts as a direct tax on observable and stealable consumption goods. More precisely, we argue that, in the presence of crime, individuals reduce their consumption of observable goods, not only because criminals may steal these goods, but also because it reveals information that could be used by criminals to target individuals’ wealth. We test our model’s predictions using U.S. data, and find that crime has a negative and significant impact on conspicuous consumption; also that this effect cannot be explained by the fact that some of these goods tend to be stolen by criminals. Finally, we show that this result is robust to different specifications and alternative measures of conspicuous consumption and crime.
    Date: 2010–11–08
  5. By: Veith, Tobias
    Abstract: The interplay of infrastructure supply and demand is of central interest in line with Web 2.0. As the role of customers turns from a service users' role to an information providers' role, the traffic on existing lines increases and, simultaneously, customers' demand for high-quality infrastructure. On the other hand, infrastructure providers carry investment risks but can hardly internalize the value provided for service providers. In consequence, politicians have to think about how to initiate adequate investment incentives. Using a two-equation estimation approach, a direct competition effect (more service competition increases the supply of infrastructure) can be disentangled from an indirect effect (more service competition increases the demand for infrastructure quality and, as a consequence, increases the supply of infrastructure). While the direct investment effect is only partially confirmed, the analysis provides evidence for an indirect investment effect for both fix and mobile infrastructure investments. Taking into account cross effects between fix line infrastructure markets and mobile phone infrastructure markets even broadens the view: While the indirect own-market competition effect is still found, the estimation results confirm the idea of asymmetric substitutability between telecommunication infrastructures. --
    Keywords: telecommunications,infrastructure supply and demand
    JEL: K23 L13 L43 L96
    Date: 2010

This issue is ©2010 by Jeong-Joon Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.