New Economics Papers
on Law and Economics
Issue of 2011‒06‒25
four papers chosen by
Jeong-Joon Lee, Towson University

  1. The Shadow Economy and Shadow Economy Labor Force: What Do We (Not) Know? By Schneider, Friedrich
  2. The Cost of Railroad Regulation: The Disintegration of American Agricultural Markets in the Interwar Period By Giovanni Federico; Paul Sharp
  3. Evidence disclosure and severity of punishments By Turkay, Evsen
  4. Democratic Dividends: Stockholding, Wealth and Politics in New York, 1791-1826 By Eric Hilt; Jacqueline Valentine

  1. By: Schneider, Friedrich (University of Linz)
    Abstract: In this paper the main focus lies on the development and the size of the shadow economy and of undeclared work (or shadow economy labor force) in OECD, developing and transition countries. Besides informal employment in the rural and non-rural sector also other measures of informal employment like the share of employees not covered by social security, own account workers or unpaid family workers are shown. The most influential factors on the shadow economy and/or shadow labor force are tax policies and state regulation, which, if they rise, increase both. Furthermore the discussion of the recent literature underlines that economic opportunities, the overall situation on the labor market, and unemployment are crucial for an understanding of the dynamics of the shadow economy and especially the shadow labor force.
    Keywords: shadow economy, undeclared work, shadow labor force, tax morale, tax pressure, state regulation
    JEL: K42 H26 D78
    Date: 2011–06
  2. By: Giovanni Federico (European University Institute, Firenze); Paul Sharp (Department of Economics, University of Copenhagen)
    Abstract: We investigate the costs of transportation regulation using the example of agricultural markets in the United States. Using a large database of prices by state of agricultural commodities, we find that the coefficient of variation (as a measure of market integration between states) falls for many commodities until the First World War. We demonstrate that this reflected changes in transportation costs which in turn in the long run depended on productivity growth in railroads. 1920 marked a change in this relationship, however, and between the First and Second World Wars we find considerable disintegration of agricultural markets, ultimately as a consequence of the 1920 Transportation Act. We argue that this benefited railroad companies in the 1920s and workers in the 1930s, and we put forward an estimate of the welfare losses for the consumers of railroad services (i.e. agricultural producers and final consumers).
    Keywords: market integration; price convergence; United States; agriculture; transportation regulation
    JEL: K23 L51 N5 N7
    Date: 2011–06
  3. By: Turkay, Evsen
    Abstract: The relationship between legal offenses and punishment is well studied by scholars of sociology, economics and law. Economists contend that punishment is a cost of committing an offense, hence an increase in the severity of punishments should decrease incentives to commit legal offenses. And the efficiency of legal punishments are studied generally from this perspective: giving efficient incentives to commit legal offense. This paper studies the relationship between punishment and evidence disclosure in a game theoretical model. A defendant is trying to persuade a judge by presenting evidence to take a favorable legal action rather than less favorable ones on his case. I show that the equilibrium disclosure of the defendant is not affected by a change in the scale of legal actions when there is no uncertainty on how the judge evaluates evidence. With uncertainty, however, the defendant can be induced to disclose more information by decreasing the severity ratio of the most unfavorable legal action to the most favorable one. This shows that in the more realistic case of uncertainty the severity of punishments has an effect on evidence disclosure and efficiency of punishment schedule should be analyzed by internalizing its effect on evidence disclosure as well.
    Keywords: Law and Economics; Evidence Disclosure; Legal Punishments
    JEL: K0 C72
    Date: 2011–06–13
  4. By: Eric Hilt; Jacqueline Valentine
    Abstract: This paper analyzes the early history of corporate shareholding, and its relationship with political change. In the late eighteenth century, corporations were extremely rare and were dominated by elites, but in the early nineteenth century, after American politics became significantly more democratic, corporations proliferated rapidly. Using newly collected data, this paper compares the wealth and status of New York City households who owned corporate stock to the general population there both in 1791, when there were only two corporations in the state, and in 1826, when there were hundreds. The results indicate that although corporate stock was held principally by the city’s elite merchants in both periods, share ownership became more widespread over time among less affluent households. In particular, the corporations created in the 1820s were owned and managed by investors who were less wealthy than the stockholders of corporations created in earlier, less democratic periods in the state’s history.
    JEL: K22 N21 N41
    Date: 2011–06

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