New Economics Papers
on Law and Economics
Issue of 2013‒03‒16
twelve papers chosen by
Jeong-Joon Lee, Towson University

  1. The economic consequences of crime in Italy By O.A. Carboni; Claudio Detotto
  2. Trial experience, satisfaction and incentive to bring another lawsuit: Does aspiration level influence winners and losers? By Eiji Yamamura
  3. The Impact of State Lotteries and Casinos on State Bankruptcy Filings By Kent Grote; Victor Matheson
  4. School Starting Age and Crime By Landersø, Rasmus; Nielsen, Helena Skyt; Simonsen, Marianne
  5. Mixture and Continuous 'Discontinuity' Hypotheses: An Earnings Management Model with Auditor-Required Adjustment By Yim, Andrew
  6. Guilt aversion and peer effects in crime: experimental and empirical evidence from Bangladesh By Shoji, Masahiro
  7. Crime, health and wellbeing – Longitudinal evidence from Mexico By Braakmann, Nils
  8. Deterrence and age thresholds in punishment in British criminal law By Braakmann, Nils
  9. Objectivity and independence: the dual roles of external auditors and forensic accountants By Di Gabriele, James; Ojo, Marianne
  10. Open Access, Social Norms & Publication Choice By Migheli Matteo; Ramello, Giovanni B.
  11. Litigation as a Measure of Well-Being By Eisenberg, Theodore; Kalantry, Sital; Robinson, Nick
  12. Immigration Status and Criminal Behavior By Georgios Papadopoulos

  1. By: O.A. Carboni; Claudio Detotto
    Abstract: This paper employs provincial data to study the relationship between several crime typologies, namely murder, theft, robbery and fraud, and economic output in Italy. We employ a spatial econometric approach where the spatial proximity is defined by a measure of physical distance between locations, in order to take into account possible spill-over effects. The model used here combines a spatial autoregressive model with autoregressive disturbances. In modelling the outcome for each location depends on a weighted average of the outcomes of other locations. Outcomes are determined simultaneously. The results of the spatial two stage least square estimation suggest that the homicide rate has a negative impact on Italian gross domestic product while theft, robbery and fraud do not affect economic output and that there are beneficial spill-overs from neighbouring provinces.
    Keywords: spatial weights; spatial models; growth; crime; crowding-out effect
    JEL: K10 R11 O18 C31
    Date: 2013
  2. By: Eiji Yamamura
    Abstract: This paper used individual level data in Japan to explore how a complainant’s past trial experience influences their satisfaction and incentive to bring a future lawsuit. Controlling for kinds of incidents and a complainant’s individual characteristics, the major findings were; (1) there is a positive relationship between the experience and satisfaction for winners, whereas there is a significant negative relationship for losers, and (2) experience exerts a positive effect on the intention to bring a future lawsuit, not only for winners but also for losers. These results imply that, for losers, a past experience enhances the incentive to bring a future lawsuit, although the experience decreases a complainant’s satisfaction.
    Keywords: Trial experience, lawsuit satisfaction, future lawsuit, winner.
    JEL: K40 K41 L52
    Date: 2013–01–03
  3. By: Kent Grote (Department of Economics and Business, Lake Forest College); Victor Matheson (Department of Economics, College of the Holy Cross)
    Abstract: Over the past half century, there has been an increasing prevalence of legalized gambling in the US. At the same time there is a general recognition, empirically supported in the economics literature, that spending on lottery and gaming products tends to be regressive in nature. In addition, gambling addiction is a widely acknowledged social problem. This raises the question of whether the increased presence of casinos and state lotteries results in relatively more bankruptcy filings in the states that offer them. This paper adds to the existing literature by comparing the relative impact of the presence of lotteries to that of casinos on both personal and business bankruptcies. States that adopted lotteries and casinos prior to 1995 experienced significantly higher personal bankruptcy rates while the effect of lottery and casino adoption on personal bankruptcies has disappeared since that time.
    Keywords: lotto, lottery, public finance, gambling
    JEL: K35 H71 L83
    Date: 2013–02
  4. By: Landersø, Rasmus (Rockwool Foundation Research Unit); Nielsen, Helena Skyt (Aarhus University); Simonsen, Marianne (Aarhus University)
    Abstract: This paper investigates the effects of school starting age on crime while relying on variation in school starting age induced by administrative rules; we exploit that Danish children typically start first grade in the calendar year they turn seven, which gives rise to a discontinuity in children's school starting age. Analyses are carried out using register-based Danish data. We find that higher age at school start lowers the propensity to commit crime, but that this reduction is caused by incapacitation while human capital accumulation is unaffected. Importantly, we also find that the individuals who benefit most from being old-for-grade are those with high latent abilities whereas those with low latent ability seem to be unaffected by being old-for-grade in school.
    Keywords: old-for-grade, school start, criminal charges, violence, property crime
    JEL: I21 K42
    Date: 2013–02
  5. By: Yim, Andrew
    Abstract: A model emphasizing cookie-jar earnings management and the effect of auditor-required adjustment is formulated, with the optimal misreporting strategy generally characterized and the closed-form solutions for particular functional form assumptions derived. Using simulation results based on the model, I show that the widely documented discontinuity in the earnings triplet distributions (i.e., earnings, earnings change, and earnings surprise) can be partly due to a steep increase in density appearing like a discontinuity when a continuous distribution is plotted in terms of frequency counts in histogram bins. Additionally, I point out the puzzling volcano shape of the earnings triplet distributions that can be found in prior studies. Simulation results show that the model is capable of accommodating this phenomenon, which can arise from the mixture of a spiky distribution of managed earnings with a bell-shaped distribution of unmanaged earnings. This mixture is due to the auditor’s adjustment decision, which seems stochastic from the public’s or client firm’s perspective. Taken together, the results of this paper provide a unified explanation to two perplexing, salient features of the earnings triplet distributions. Potential applications of the model are suggested, including the construction of an earnings manipulation measure distinct from but complementary to abnormal accruals.
    Keywords: Misreporting, Earnings Manipulation, Cookie-jar Accounting, Benchmark Reference, Auditor-client Interaction
    JEL: K42 M41 M42
    Date: 2013–03–02
  6. By: Shoji, Masahiro
    Abstract: I conducted an artefactual field experiment to identify whether guilt reduces crime, and how the crime reduction effects of guilt change due to peer effects. Guilt aversion predicts the occurrence of peer effects caused by changes in guilt sensitivity and belief. I found supporting evidence of changes in belief. My experiment is novel in that it develops an approach to elicit guilt sensitivity. Using this data, I show behavioural patterns consistent with guilt aversion but not with pure altruism or trustworthiness. The external validity of guilt sensitivity is also shown.
    Keywords: Guilt aversion; crime; experiment; external validity; peer effects; broken windows theory
    JEL: C91 C93 D63 K42
    Date: 2013–03–05
  7. By: Braakmann, Nils
    Abstract: This paper uses variation in victimization probabilities between individuals living in the same community to shed new light on the costs of crime. I use panel data from the Mexican Family Life Survey for 2002 and 2005 and look at the impact of within-community differences in victimization risk on changes in self-rated and mental health. My results from fixed effects and instrumental variable estimations point towards substantial negative health effects of actual victimization, which might help to explain the existence of compensating differentials in wages or house prices found in earlier studies.
    Keywords: cost of crime; victimization; health
    JEL: H40 I10 I12 K00 K42 R23
    Date: 2013–01–21
  8. By: Braakmann, Nils
    Abstract: This paper investigates the impact of three age thresholds in British criminal law on self-reported offending: the possibility of custody at age 15, the switch from juvenile to adult law at age 18 and the switch from young offender institutions to adult prisons at age 21. Using longitudinal data from 2003 to 2006 I find strong evidence of discontinuous drops in self-reported crime at age 18 and 21. The effects are robust to various specifications of the age-crime relationship and to the inclusion of a wide range of controls, including arrests, court appearances and imprisonment.
    Keywords: deterrence; economic model of crime; juvenile law; severity of punishment; crime
    JEL: K14 K42
    Date: 2013–01–15
  9. By: Di Gabriele, James; Ojo, Marianne
    Abstract: This paper is aimed at illustrating that certain capacities exist whereby the dual role of the external auditor (in undertaking internal audit roles as well as skilled persons roles) could be exercised to the optimal and maximum benefit of an entity or organisation. It also aims to accentuate on why a return to and focus on traditional auditing techniques, as well as auditing techniques which focus on internal controls is a much needed move. In so doing, it contributes to the extant literature by highlighting why such a move should be facilitated, as well as proposing means whereby such a move would be facilitated - namely, through a focus on benefits which could be derived where the external auditor is able to incorporate certain internal audit responsibilities. The paper also draws attention to safeguards which require due consideration if the ever important attributes of objectivity and independence are not to be compromised. Risks associated with the overlapping roles of testifying and consulting experts in Forensic Accounting will also be considered in this paper. Whilst the benefits and potentials of the dual roles assumed by external auditors are emphasized, as well as the need to ensure that safeguards operating to guard against a compromise of objectivity and independence are in place, authors' opinions in support of dual roles also take into consideration the utmost priority of ethical values. The paper hence also highlights the fact that such dual roles are appropriate in certain cases – as illustrated by justifications for limitations imposed by the Sarbanes Oxley Act and other relevant and applicable legislation – even though instances also persist where section 201 of Sarbanes-Oxley, with regard to internal audit outsourcing, may have been over-reactionary and may continue to hinder both companies and their auditors.
    Keywords: independence; objectivity; Sarbanes Oxley Act; FSMA section 166; ISA 610; Amended Rule 26 (Federal Rules of Civil Procedure Rule 26)
    JEL: K2 M41 M42
    Date: 2013–03–11
  10. By: Migheli Matteo; Ramello, Giovanni B.
    Abstract: The aim of this paper is to shed light on scholarly communication and its current trajectories by examining academics’ perception of Open Access, while also providing a reference case for studying social norm change. In this respect, the issue of publication choice and the role of Open Access journals casts light on the changes affecting the scientific community and its institutional arrangements for validating and circulating new research. The empirical investigation conducted also offers a useful vantage point for gauging the importance of localised social norms in guiding and constraining behaviour.
    Keywords: Open Access, Scholarly Publication, Social Norms, Academics' Behavior, Economics of Science
    JEL: K19 Z13 O33 L17
    Date: 2013–02
  11. By: Eisenberg, Theodore; Kalantry, Sital; Robinson, Nick
    Abstract: The common perception is that high or growing litigation rates in a country are a sign of societal pathology. Studies of litigation rates, however, consistently report that lawsuit filings per capita increase with economic prosperity, thus suggesting that litigation rates are a natural consequence of prosperity and not necessarily evidence of an overly litigious populace. India’s substantial interstate variation in litigation rates and in economic and noneconomic measures of well-being provide an opportunity to evaluate the relation between well-being and litigation rates. Using many years of data on civil filings in India’s lower courts and High Courts, we present evidence that more prosperous states have higher civil litigation rates. We also report the first evidence that accounting for noneconomic well-being, as measured by the education and life expectancy components of the Human Development Index, explains litigation rate patterns better than using a purely economic measure of well-being, GDP per capita. Despite India’s continuing economic growth, we present data that indicates India’s enormous and growing civil case backlog has discouraged civil case filings in recent years. These findings raise the question whether India’s future economic growth will be compromised if courts at all levels, particularly lower courts, do not resolve disputes more quickly.
    Keywords: litigation, well being, India
    JEL: K41 K49 P59
    Date: 2013–03
  12. By: Georgios Papadopoulos (University of East Anglia)
    Abstract: This paper studies the individual level relationship between immigration and property crime in England and Wales using crime self-reports from the Crime and Justice Survey. Binary and count data models that account for under-reporting of criminal activity are used, since under-reporting is a major concern in self-reported crime data. The results indicate that under-reporting is considerably large, but, if anything, immigrants are less likely to under-report than natives. They also reveal that, once controlling for under-reporting and for basic demographic characteristics, even though not statistically significant, the effect of being an immigrant on crime is robustly negative across all model specifications (and statistically significant in some of those specifications). This might suggest that the negative association actually exists in the population, but the nature of the regression models in combination with the data in hand do not allow to estimate the relationship more precisely. We finally find that the effect of immigration status on property crime differs across regions and across ethnic groups.
    Date: 2013–03

This issue is ©2013 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.
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