New Economics Papers
on Law and Economics
Issue of 2011‒02‒26
seven papers chosen by
Jeong-Joon Lee, Towson University

  1. Macroeconomic Analysis of Corruption in Developing Economies By James P. Gander
  2. Status-Seeking in Criminal Subcultures and the Double Dividend of Zero-Tolerance By Dur, Robert; van der Weele, Joël
  3. Duo Cum Faciunt Idem, Non Est Idem. Evidence from Austrian Pain and Suffering Verdicts By Leiter, Andrea M.; Thöni, Magdalena; Winner, Hannes
  4. Spreading the Word: Geography, Policy and University Knowledge Diffusion By Sharon Belenzon; Mark Schankerman
  5. The Relationship between Common Management and Ecotourism Development: Tragedy or Triumph of the Commons? A Law and Economics Answer By Samà, Danilo
  6. Freedom to Trade and the Competitive Process By Edlin, Aaron; Jennings, Richard; Farrell, Joseph
  7. Greenhouse Gas Regulation under the Clean Air Act: A Guide for Economists By Burtraw, Dallas; Fraas, Arthur G.; Richardson, Nathan

  1. By: James P. Gander
    Abstract: Based on empirical data, a two-equation game-type corruption reaction function model was developed. A “data to model” approach was used rather than the usual a priori approach. The general hypothesis tested was the “monkey see, monkey do” principle. The latest data on corruption among developing countries was obtained from the Enterprise Surveys done by the World Bank Group in 2010. The key variables were the percent of domestic firms expecting to make informal payment to public officials to “get things done,” and the percent of foreign firms doing like wise. The time span is from 2002-2010. A variety of econometric methods were used. In general, the statistical results were quite good and supported the hypothesis. Both reaction equations were positively sloped. Time had a reducing effect on the frequency of domestic corruption, yet it had an increasing effect on foreign corruption. Variations in the frequency of corruption across regions of countries were generally not significant.
    Keywords: Firm, Corruption, Game Model, Developing Countries JEL Classification: C51; D81; E60; K49; M29
    Date: 2011
  2. By: Dur, Robert (Erasmus University Rotterdam); van der Weele, Joël (Goethe University Frankfurt)
    Abstract: This paper offers a new argument for why a more aggressive enforcement of minor offenses ('zero-tolerance') may yield a double dividend in that it reduces both minor offenses and more severe crime. We develop a model of criminal subcultures in which people gain social status among their peers for being 'tough' by committing criminal acts. As zero-tolerance keeps relatively 'gutless' people from committing a minor offense, the signaling value of that action increases, which makes it attractive for some people who would otherwise commit more severe crime. If social status is sufficiently important in criminal subcultures, zero-tolerance reduces crime across the board.
    Keywords: status concerns, street crime, subcultures, penalties, zero-tolerance, broken windows policing
    JEL: K14 K42
    Date: 2011–02
  3. By: Leiter, Andrea M. (Department of Economics and Statistics, University of Innsbruck); Thöni, Magdalena (Department for Human and Economic Sciences, University of Health Sciences, Medical Informatics and Technology (UMIT)); Winner, Hannes (University of Salzburg)
    Abstract: We analyze the pricing of pain and suffering and, in particular, whether the corresponding compensations are affected by a court’s approach to value such damages. For this purpose, we use data on pain and suffering verdicts in Austria, where courts are generally free to choose between a per diem and a lump sum scheme to assess payments on damages for pain and suffering. We find significant higher payments under the lump sum regime, which are not vanishing even after controlling for individual- and injury-specific characteristics. Our evidence suggests that the observed difference between lump sum and per diem schemes mainly appears if the victims are female and exposed to multiple injuries and, to a lesser extent, to intensive past pain days.
    Keywords: Tort Law; Per Diem Pain and Suffering Damages; Lump Sum Pain and Suffering Damages
    JEL: K13 K41
    Date: 2011–02–17
  4. By: Sharon Belenzon; Mark Schankerman
    Abstract: Using new data on citations to university patents and scientific publications, and measures of distance based on Google maps, we study how geography affects university knowledge diffusion. We show that knowledge flows from patents are localized in two respects: they decline sharply with distance up to about 100 miles, and they are strongly constrained by state borders, controlling for distance. While distance also constrains knowledge spillovers from publications, the state border does not. We investigate how the strength of the state border effect varies with university and state characteristics. It is larger for patents from public, as compared to private, universities and this is partly explained by the local development policies of universities. The border effect is larger in states with stronger non-compete laws that affect intra-state labor mobility, and those with greater reliance on in-state educated scientists and engineers. We confirm the impact of non-compete statutes by studying a policy reform in Michigan that introduced such restrictions.
    Keywords: knowledge spillovers, diffusion, geography, university technology transfer, patents, scientific publications
    JEL: K41 L24 O31 O34
    Date: 2010–08
  5. By: Samà, Danilo
    Abstract: Since its origin, ecotourism development has been at the centre of controversial and heated debates within the environmental and scientific society. On one hand, it has been considered as a model of responsible and sustainable tourism with the capacity to guarantee the conservation of the current biodiversity level and cultural identity, to educate the tourists about preservation and to improve the economic activity and the standard of living of the populations affected. On the other hand, it has been criticized for actually being a mere instrument in the hands of capitalist and western firms to commercially exploit the natural resources available in the less developed countries. Thus, are the ecotourism projects more likely to be profitable and successful in territories where the common resources are controlled by the state or managed by private firms? Considered the most frequent and spontaneous solution noticed in the ordinary daily life of the emerging countries, meaning natural resources owned communally by local institutions, does ecotourism impede or reinforce this management function of coordinating and controlling? The empirical researches conducted in literature tried to answer to some of the above-mentioned questions and offered the opportunity for a Law and Economics assessment of the problem related to the common-pool resources.
    Keywords: Common-Pool Resources; Commons Management; Development; Ecology; Environment; Governance; Property Rights; Sustainability; Tragedy of the Commons
    JEL: K32 K11 Q57
    Date: 2011
  6. By: Edlin, Aaron; Jennings, Richard; Farrell, Joseph
    Abstract: Although antitrust courts sometimes stress the competitive process, they have not deeply explored what that process is. Inspired by the theory of the core, we explore the idea that the competitive process is the process of sellers and buyers forming improving coalitions. Much of antitrust can be seen as prohibiting firms’ attempts to restrain improving trade between their rivals and customers. In this way, antitrust protects firms’ and customers’ freedom to trade to their mutual betterment.
    Keywords: Antitrust, Industrial Organization, Competition Policy, Law and Economics, Trade Regulation, Trade Restraints, Monopoly JEL Class: D2, 4; K2; L2, 4, 5; M2.
    Date: 2011–02–01
  7. By: Burtraw, Dallas (Resources for the Future); Fraas, Arthur G. (Resources for the Future); Richardson, Nathan (Resources for the Future)
    Abstract: Until recently, most attention to U.S. climate policy has focused on legislative efforts to introduce a price on carbon through cap and trade. In the absence of such legislation, the Clean Air Act is a potentially potent alternative. Decisions regarding existing stationary sources will have the greatest effect on emissions reductions. The magnitude is uncertain, but plausibly 10 percent reductions in greenhouse gas emissions from 2005 levels could be achieved at moderate costs by 2020. This is comparable to the reductions that would have been achieved under the Waxman-Markey legislation in the domestic economy. These measures do not include the switching of fuels, which could yield further reductions. The ultimate cost of regulation under the act hinges on the stringency of standards and the flexibility allowed. A broad-based tradable performance standard is legally plausible and would provide incentives comparable to the proposed legislation, at least in the near term.
    Keywords: climate policy, efficiency, EPA, Clean Air Act, NAAQS, coal
    JEL: K32 Q54 Q58
    Date: 2011–02–09

This issue is ©2011 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.