New Economics Papers
on Law and Economics
Issue of 2013‒07‒28
six papers chosen by
Jeong-Joon Lee, Towson University

  1. The Effects of Punishment of Crime in Colombia on Deterrence, Incapacitation, and Human Capital Formation By Arlen Guarín; Carlos Medina; Jorge Andrés Tamayo
  2. The fight against cartels: a transatlantic perspective By E. Dargaud; A. Mantovani; C. Reggiani
  3. Patents in the University: Priming the Pump and Crowding Out By Suzanne Scotchmer
  4. Technology Flexibility and Stringency for Greenhouse Gas Regulations By Burtraw, Dallas; Woerman, Matt
  5. “Piggyback” Lawsuits and Deterrence: Can Frivolous Litigation Improve Welfare? By Thomas J. Miceli; Michael P. Stone
  6. The Color of Law: An Economic Theory of Legal Boundaries By Thomas J. Miceli

  1. By: Arlen Guarín; Carlos Medina; Jorge Andrés Tamayo
    Abstract: Based on individual data on the population of those arrested in Medellín, we assess whether the change in punishment at age 18, mandated by law, has a deterrent effect on arrests. No deterrent effect was found on index, violent or property crimes, but a deterrence effect was found on non-index crimes, specifically those related to drug consumption and trafficking. This implies an elasticity of arrests with respect to punishment that varies between -1.0 and -6.7 percent. The number of days that arrested individuals take to recidivate is 300, higher for index crimes if they are arrested right after, rather than before, reaching 18 years of age, in which case they are less likely to recidivate in any type of crime. The change in criminal penalties at 18 years of age does not explain future differences in human capital formation among the population that had been arrested immediately after versus immediately before reaching 18 years of age. There is no evidence that the longer length of time to recidivate on the part of individuals arrested for the first time immediately after reaching 18 implies future differences in human capital formation. This suggest that our estimated incapacitation effect would not be explained by the impossibility of the arrested population to recidivate due to their having been imprisoned, but rather by a specific deterrence effect resulting from the harsher experience while in prison of those arrested right after, rather than before, reaching 18.
    Keywords: Crime, Deterrence, Regression Discontinuity. Classification JEL: K42, H56, C21
    Date: 2013–07
  2. By: E. Dargaud; A. Mantovani; C. Reggiani
    Abstract: The fight against cartels is a priority for antitrust authorities on both sides of the Atlantic. What differs between the EU and the US is not the basic toolkit for achieving deterrence, but to whom it is targeted. In the EU, pecuniary sanctions against the firm are the only instruments available to the Commission, while in the US criminal sanctions are also widely employed. The aim of this paper is to compare two different types of fines levied on managerial firms when they collude. We consider a profit based fine as opposed to a delegation based fine, with the latter targeting the manager in a more direct way. Under the assumption of revenue equivalence, we find that the delegation based fine, although distortive, is more effective in deterring cartels than the profit based one. When evaluating social welfare, a trade-off between deterrence and output distortion can arise. However, if the antitrust authority focuses on consumer surplus, then the delegation based fine is to be preferred.
    JEL: K21 L44 K42 L21
    Date: 2013–07
  3. By: Suzanne Scotchmer
    Abstract: The Bayh-Dole Act allows universities to exploit patents on their federally sponsored research. University laboratories therefore have two sources of funds: direct grants from sponsors and income from licensing. Tax credits for private R&D also contribute, because they increase the profitability of licensing. Because Bayh-Dole profits are a source of funds, the question arises how subsidies and Bayh-Dole profits fit together. I show that subsidies to the university can either "prime the pump" for spending out of Bayh-Dole funds, or can crowd it out. Because of crowding out, if the sponsor wants to increase university spending beyond the university's own target, it will end up funding the entire research bill, just as if there were no profit opportunities under the Bayh-Dole Act. A subsidy system that requires university matching can mitigate this problem.
    JEL: K0 L00 O34
    Date: 2013–07
  4. By: Burtraw, Dallas (Resources for the Future); Woerman, Matt
    Abstract: The Clean Air Act provides the primary regulatory framework for climate policy in the United States. Tradable performance standards (averaging) emerge as the likely tool to achieve flexibility in the regulation of existing stationary sources. This paper examines the relationship between flexibility and stringency. The metric to compare the stringency of policies is ambiguous. The relevant section of the act is traditionally technology based, suggesting an emissions rate focus. However, a specific emissions rate improvement averaged over a larger set of generators reduces the actual emissions change. A marginal abatement cost criterion to compare policy designs suggests cost-effectiveness across sources. This criterion can quadruple the emissions reductions that are achieved, with net social benefits exceeding $25 billion in 2020, with a 1.3 percent electricity price increase. Under the act, multiple stringency criteria are relevant. EPA should evaluate state implementation plans according to a portfolio of attributes, including effectiveness and cost.
    Keywords: climate policy, efficiency, EPA, Clean Air Act, coal, compliance flexibility, regulation
    JEL: K32 Q54 Q58
    Date: 2013–07–23
  5. By: Thomas J. Miceli (University of Connecticut); Michael P. Stone (Quinnipiac University)
    Abstract: Previous literature on frivolous lawsuits has focused on litigation costs and the optimal settlement-trial decision of defendants, but has not examined how they affect deterrence. This paper examines whether there are circumstances under which frivolous suits might actually increase deterrence, and thereby possibly improve welfare. The reason this is possible is that in a costly legal system, injurers will generally be underdeterred because they will ignore the litigation costs of plaintiffs. The fact that some uninjured plaintiffs will succeed in obtaining settlements may therefore affect the care and activity choices of injurers in a socially valuable way.
    Keywords: Frivolous lawsuits, care, activity level, deterrence
    JEL: K13 K41
    Date: 2013–07
  6. By: Thomas J. Miceli (University of Connecticut)
    Abstract: This paper presents an economic theory of property, tort, and contract law based on the goal of efficiently governing economic exchange relationships. In the theory, legal boundaries emerge endogenously in response to exogenous differences in the nature of the underlying transaction concerning the possible existence of unforeseen or non-contractible contingencies, and/or the desire of one of the parties to make non-salvageable investments prior to trade. The analysis asks whether, in this context, the transaction is best governed by property, tort, or contract principles. The conclusions are illustrated by a discussion of several cases that occupy the “boundaries” between the various areas.
    Keywords: Property, torts, contracts, legal boundaries
    JEL: K10 K11 K12 K13
    Date: 2013–07

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