New Economics Papers
on Law and Economics
Issue of 2013‒02‒16
three papers chosen by
Jeong-Joon Lee, Towson University

  1. The Effect of Adult Criminals’ Spillovers On the Likelihood of Youths Becoming Criminals By Carlos Medina; Jorge Andrés Tamayo; Christian Posso
  2. Untangling Searchable and Experiential Quality Responses to Counterfeits By Yi Qian; Qiang Gong; Yuxin Chen
  3. Retreating into Doubt: Tainted Finance, Civil Devices and the Rule of Law By M.M.Gallant

  1. By: Carlos Medina; Jorge Andrés Tamayo; Christian Posso
    Abstract: We use a unique data set at the individual level to estimate an empirical model explaining the probability of young individuals to become criminals as a function of the presence of adult criminals in their neighborhoods, an a complete set of control variables, including census sector fixed effects. We use the census of criminals captured in Medellín between 2000 and 2010 to construct our peer’s variables, and find a strong and robust positive effect of the presence of adult criminal neighbors on the probability of becoming criminal. The result is robust across different specifications of the presence of criminals, and with respect to the probability of committing different types of crimes, even controlling for contextual and group effects. Both modeling peer effects as the sum of friends’ efforts and modeling them as deviations from the means, affect the likelihood to become criminal, although with differential importance by type of crime.
    Keywords: Crime, Social Interactions. Classification JEL: C31, K40, K42
    Date: 2013–02
  2. By: Yi Qian; Qiang Gong; Yuxin Chen
    Abstract: In this paper, we untangle the searchable and experiential dimensions of quality responses to entry by counterfeiters in emerging markets with weak intellectual property rights. Our theoretical framework analyzes the market equilibria under competition with non-deceptive counterfeiting and deceptive counterfeiting, respectively, as well as under monopoly branding. A key theoretical prediction is that emerging markets can be self-corrective with respect to counterfeiting issues in the following sense: First, counterfeiters could earn positive profits by pooling with authentic brands only when consumers have good faith in the market (believe in a low probability that any product is a counterfeit). When the proportion of counterfeits in the market exceeds a cutoff value, brands would invest in self-differentiation from the competitive fringe counterfeiters. Second, to attain a separating equilibrium with counterfeiters, branded incumbents upgrade the searchable quality (e.g. appearance) of their products more and improve the experiential quality (e.g. functionality) less, as compared to monopoly equilibrium. This prediction uncovers the nature of product differentiation in the searchable dimension and helps in analyzing the real-world innovation strategies employed by authentic firms in response to entries by counterfeit entities. In addition, the welfare analyses hint at a non-linear relationship between social welfare and intellectual property enforcement.
    JEL: K42 O31 O34
    Date: 2013–02
  3. By: M.M.Gallant (Faculty of Law, University of Manitoba, Winnipeg, Manitoba, Canada, R3T 2N2)
    Abstract: In confronting the financial aspect of crime, states place increasing reliance on civil, in contrast to criminal, legal processes. Sometimes called non-conviction based approaches, civil devices greatly facilitate the assault on finance since they operate in accordance with conventional civil legal principles rather than the norms of the criminal law. Accordingly since the legal ordering governing criminal manners is more exacting that the processes, rights or evidential understandings that apply to civil matters, a civil tool more ably captures tainted finance than any criminal device*. Drawing principally on developments in select common law jurisdictions, particularly Canada, this article offers a critical appraisal of modern civil tools aimed at criminal finance. Part 1 locates the civil strategy within the international anti-criminal finance project. Part 2 introduces the central attributes of the civil mechanisms. Part 3 lays out the essential theoretical tenets of the civil approach and Part 4 examines whether civil devices conform to the rule of law. Part 5 examines taxation as a discrete civil tool.
    Keywords: forfeiture, taxation, proceeds of crime, criminal finance
    Date: 2013–02

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