New Economics Papers
on Law and Economics
Issue of 2011‒03‒26
two papers chosen by
Jeong-Joon Lee, Towson University

  1. Gov-aargh-nance - "even criminals need law and order" By Olaf J. de Groot; Matthew D. Rablen; Anja Shortland
  2. Workers’ Risk Underestimation and Occupational Health and Safety Regulation By Drakopoulos, Stavros A.; Theodossiou, Ioannis

  1. By: Olaf J. de Groot; Matthew D. Rablen; Anja Shortland
    Abstract: We present a theoretical model postulating that the relationship between crime and governance is "hump-shaped" rather than linearly decreasing. State failure, anarchy and a lack of infrastructure are not conducive for the establishment of any business. This includes illegal businesses, as criminals need protection and markets to convert loot into consumables. At the bottom end of the spectrum, therefore, both legal business and criminal gangs benefit from improved governance, especially when this is delivered informally. With significant improvements in formal governance criminal activities decline. We use data from the International Maritime Bureau to create a new dataset on piracy and find strong and consistent support for this non-linear relationship. The occurrence, persistence and intensity of small-scale maritime crime are well approximated by a quadratic relationship with governance quality. Organised crime benefits from corrupt yet effective bureaucrats, and informally governed areas within countries.
    Date: 2011–02
  2. By: Drakopoulos, Stavros A.; Theodossiou, Ioannis
    Abstract: The standard treatment of occupational risk in the labour market is conducted in terms of the theory of compensating wage differentials, the basic characteristic of which is that workers can fully estimate actual occupational risks. However, research in cognitive psychology, and recent advances in economic psychology, suggest that individuals consistently underestimate risks associated with accidents. In this paper, we discuss the case when the workers systematically underestimate job risks. After presenting the standard treatment of occupational risks, and of health and safety at work regulation, we then proceed to incorporate the idea of job risk underestimation. The paper discusses the types and impact of regulation on health and safety effort in a simple framework in which workers’ beliefs concerning accident risks also play a role. The paper shows that a particular type of regulatory intervention is necessary for the risk underestimating workers not to suffer a welfare loss.
    Keywords: Job Risk; Occupational Health and Safety
    JEL: K32 J81 I18
    Date: 2011–03

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