New Economics Papers
on Law and Economics
Issue of 2013‒06‒24
four papers chosen by
Jeong-Joon Lee, Towson University

  2. Enforcing Regulation: The Impact of Violating Drinking Water Standards on Infant Health at Birth in the US By Harding, Matthew
  3. The effect of foreclosure regulation: Evidence for the US mortgage market at state level By Fernando López Vicente
  4. Do cartel breakdowns induce mergers? Evidence from EC cartel cases By Hüschelrath, Kai; Smuda, Florian

  1. By: Feng, Juan; Lichtenberg, Erik; Ding, Chengri
    Abstract: We examine how the system of “federalism, Chinese style” functions in the context of land allocation. China’s land laws give provision of land a central role in local officials’ growth promotion strategies. Requisitions of farmland by local authorities have engendered significant rural unrest. In response, the central government has attempted to re-establish control over the pace of urban land expansion by enacting regulations limiting conversion of rural land to urban uses. We derive theoretically the conditions under which non-compliance with such regulations is optimal. An econometric investigation shows that legal restrictions on farmland conversion had no effect on rates of farmland loss but did limit urban spatial growth rates in some regions. Our econometric evidence suggests very limited enforcement of those legal limits on farmland conversion.
    Keywords: China, urbanization, land development, farmland conversion, land use, decentralization, fiscal federalism, Community/Rural/Urban Development, International Development, Land Economics/Use, Public Economics, R52, R14, Q15, H77,
    Date: 2013
  2. By: Harding, Matthew
    Abstract: This paper documents the impact of different drinking water violations on infant health outcomes at a national level net of the impact of existing regulations. It shows that while avoidance behavior such as buying drinking water is significant, it cannot fully offset the health impact of water contaminants. Moreover, consumers only respond to the most salient contaminants and fail to appreciate the risks associated with water contamination. Once exposure has occurred medica, medical treatment is not sufficient to compensate for the damage to fetal health. This paper also shows that enforcement activities can be very effective at minimizing exposure even when enforcement is informal and does not make use of the full extent of the law.
    Keywords: Health Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2013
  3. By: Fernando López Vicente (Banco de España)
    Abstract: Do laws to protect borrowers curb foreclosures? This question is addressed by analysing the impact of foreclosure laws on default rates at state level in the US mortgage market. Using panel data techniques, we find a statistically significant effect of regulation on the different stages of the foreclosure process. More precisely, we analyse the effect of regulation on 60- day delinquencies and foreclosure starts, with a focus on three protective elements commonly found in state foreclosure laws, namely requiring a judicial process, granting a redemption period and banning a deficiency judgment. We find that, whereas protective states exhibit, on average, lower 60-day delinquency rates, more protection does not ultimately bring about lower foreclosure rates. Lenders seem to ration credit to mitigate costly protective laws, thereby reducing delinquency rates; but this effect is overshadowed by a moral hazard problem since, once borrowers are delinquent, they have incentives to take advantage of the protection due to the lower costs of foreclosure. We also find that the recent housing market crisis has exacerbated that behaviour. Finally, we show that lengthening the foreclosure process is no cure for the foreclosure crisis
    Keywords: foreclosure laws, borrower protection, credit rationing, moral hazard
    JEL: E44 G21 G28 K11 R20 R30
    Date: 2013–05
  4. By: Hüschelrath, Kai; Smuda, Florian
    Abstract: We investigate the impact of cartel breakdowns on merger activity. Merging information on cartel cases decided by the European Commission (EC) between 2000 and 2011 with a detailed data set of worldwide merger activity, we find that, first, the average number of all merger transactions increase by up to 51 percent when comparing the three years before the cartel breakdowns with the three years afterwards. Second, for the subset of horizontal mergers, merger activity is found to increase even more - by up to 83 percent - after the cartel breakdowns. Our results not only suggest that competition authorities should consider mergers as potential 'second-best' alternative to cartels but also imply that resource (re)allocations in competition authorities, law practices and economic consultancies may become necessary to handle the increase in merger cases. --
    Keywords: antitrust policy,cartels,mergers,cartel breakdown,European Union
    JEL: L41 K21
    Date: 2013

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