New Economics Papers
on Law and Economics
Issue of 2012‒07‒29
five papers chosen by
Jeong-Joon Lee, Towson University

  1. Who Benefits from Customary Justice? Rent-seeking, Bribery and Criminality in Sub-Saharan Africa By Olivier STERCK; Olivia D’AOUST
  2. Market Integration and Economic Efficiency at Conflict? Commitments in the Swedish Interconnectors Case By Sadowska, M.; Willems, Bert
  3. Endogenising Detection in an Asymmetric Penalties Corruption Game By Dominic Spengler
  4. Standardized Enforcement: Access to Justice vs. Contractual Innovation By Nicola Gennaioli; Enrico Perotti
  5. Is there an electoral-motivated crime rate cycle? Evidence from Argentina By Meloni, Osvaldo

  1. By: Olivier STERCK (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Olivia D’AOUST (UNIVERSITE LIBRE DE BRUXELLES, ECARES)
    Abstract: In many Sub-Saharan countries, customary and statutory judicial systems co-exist. Customary justice is exercised by clan leaders or local courts, and based on restorative principles. By contrast, statutory justice is mostly retributive and administered by magistrates’ courts. As the jurisdiction of the customary and the statutory systems often overlap, victims can choose which judicial system to refer to, which may lead to contradictions between rules and inconsistencies in judgments. In this essay, we construct a model representing a dual judicial system. We show that the overlap of competence encourages rent-seeking and bribery, and yields to high rates of petty crimes and civil disputes. We recommend the subsidization of the statutory judicial system, as it efficiently improves deterrence and incapacitation in the dual judicial system while minimizing corruption of customary judges. We illustrate our theoretical predictions by discussing the functioning of the Ugandan dual judicial system.
    Keywords: Custom, Justice, Criminal Behavior, Informal Institutions
    JEL: K40 O17 D70
    Date: 2012–07–06
  2. By: Sadowska, M.; Willems, Bert (Tilburg University, Tilburg Law and Economics Center)
    Abstract: Abstract: According to the European Commission, Svenska Kraftnät, the Swedish network operator, might have violated competition rules by limiting cross-border transmission capacity to relieve congestion within Sweden. Eventually, the case was settled and Svenska Kraftnät offered commitments to address the Commission’s concerns. As an interim remedy, it committed to reduce transmission flow of electricity on internal network bottlenecks primarily by introducing national measures and by not reducing interconnection capacity. As a final remedy, Svenska Kraftnät agreed to split the Swedish market into multiple price zones. Congestion within Sweden would then be solved by adjusting the prices of those zones. We analyse the economic effects of the alleged abuse and the remedy package. We make three observations. Firstly, it might be socially optimal to reduce cross-border capacity in response to internal congestion. Hence, without an in-depth economic analysis the Commission risked preventing efficient behaviour. Secondly, the interim remedy of handling internal congestion primarily by national measures is not socially optimal, and it cannot be ruled out that it reduces overall welfare. Thirdly, even though splitting the market into price zones may improve allocative efficiency within Sweden, it does not prevent Svenska Kraftnät from potential manipulation of cross-border transmission capacity.
    Keywords: European energy markets;transmission congestion;competition policy;Article 102 TFEU;Swedish network.
    JEL: K21 K42 L43 L44 L94
    Date: 2012
  3. By: Dominic Spengler
    Abstract: We construct a one-shot corruption game with three players, a briber who can decide to bribe or not, an official who can reciprocate or not and an inspector who can decide to inspect or not. We employ four penalties that can be distributed asymmetrically, making it possible to punish bribing and bribe-taking as well as reciprocating and accepting considerations to different degrees. Penalties apply if corruption is detected. The probability of detection is endogenised, as it depends on inspection. The model differs from other inspection games in that the offence (corruption) can only be completed in a joint effort between two of the players. This leads to surprising results, especially in conjunction with asymmetric penalties. First, in contrast to Tsebelis' counterintuitive results, we find confirmed that with endogenous detection, higher penalties do reduce the overall rate of offence. Second, this result holds only if the penalty for reciprocating on the official is raised. Surprisingly, and unlike other asymmetric penalty prescriptions in the corruption literature, higher penalties on on the briber have the opposite effect. They may reduce the probability of bribery, but they also increase the probability of reciprocation to the extent that the overall probability of reciprocated bribery is increased.
    Keywords: Inspection game, Corruption, Asymmetric penalties, Endogenising detection
    JEL: K42 H00 C72 O17
    Date: 2012–07
  4. By: Nicola Gennaioli; Enrico Perotti
    Abstract: We model the different ways in which precedents and contract standardization shape the development of markets and the law. In a setup where more resourceful parties can distort contract enforcement to their advantage, we find that the introduction of a standard contract reduces enforcement distortions relative to precedents, exerting two effects: i) it statically expands the volume of trade, but ii) it crowds out the use of innovative contracts, hindering contractual innovation. We shed light on the large scale commercial codification occurred in the 19th century in many countries (even Common Law ones) during a period of booming commerce and long distance trade.
    Keywords: contracting, standardization, inequality, legal evolution
    JEL: K12 K41 G3
    Date: 2012–06
  5. By: Meloni, Osvaldo
    Abstract: In the last three decades Argentina tripled its crime rate boosting safety at the top of mayor concerns of Argentineans which leaves open the question about the behavior of incumbent governors of the 23 provinces about anti-crime measures in the proximity of elections. How do incumbent governors react to escalating crime as elections come closer? This paper investigates electorally-motivated crime rate fluctuations in Argentina for the period 1984-2007. District–level dynamic panel data reveals the existence of an electoral cycle in the total crime rate as well as in property crimes.
    Keywords: Crime; Electoral cycles; Dynamic Panel Data; Argentina
    JEL: K42 D72 P16
    Date: 2012–06–19

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