New Economics Papers
on Law and Economics
Issue of 2013‒09‒13
seventeen papers chosen by

  1. Collective Responsibility By Thomas J. Miceli
  2. The Effects of Drug Enforcement on Violence in Colombia 1999-2010: A Spatial Econometric Approach By Botero Degiovanni, Hernan
  3. Impact of Renewable Energy Policy and Use on Innovation: A Literature Review By Felix Groba; Barbara Breitschopf
  4. Tax Policy and Tax Reform in the People's Republic of China By Bert Brys; Stephen Matthews; Richard Herd; Xiao Wang
  5. Does State Antitrust Enforcement Drive Establishment Exit? By Robert M. Feinberg; Thomas A. Husted; Florian Szücs
  6. Distortive Effects of Dividend Taxation By Lindhe, Tobias; Södersten, Jan
  7. A primer on damages of cartel suppliers: Determinants, standing US vs. EU and econometric estimation By Bueren, Eckart; Smuda, Florian
  8. Spending Biased Legislators - Discipline Through Disagreement By Facundo Piguillem; Alessandro Riboni
  9. Parental benefits improve parental well-being: evidence from a 2007 policy change in Germany By Mikko Myrskylä; Rachel Margolis
  10. Energy market liberalisation and renewable energy policies in oecd countries By Francesco Vona; Francesco Nicolli
  11. As-Efficient Competitor Test in Exclusionary Prices Strategies: Does Post-Danmark Really Pave the Way towards a More Economic Approach? By Frédéric Marty
  12. Does Placing Children in Foster Care Increase Their Adult Criminality? By Lindquist, Matthew J.; Santavirta, Torsten
  13. Elected vs appointed public law enforcers By Eric Langlais; Marie Obidzinski
  14. The Tax Policy Landscape Five Years after the Crisis By Pierre LeBlanc; Stephen Matthews; Kirsti Mellbye
  15. Health-Related Life Cycle Risks and Public Insurance By Daniel Kemptner
  16. Merger Externalities in Oligopolistic Markets By Klaus Gugler; Florian Szücs
  17. Grenzausgleichsinstrumente bei unilateralen Klimaschutzmaßnahmen. Eine ökonomische und WTO-rechtliche Analyse By Daniel Becker; Magdalena Brezskot; Wolfgang Peters; Ulrike Will

  1. By: Thomas J. Miceli (University of Connecticut)
    Abstract: The concept of collective responsibility, or group punishment, for crimes or other harmful acts was a pervasive feature of ancient societies, as exemplified by the Greek notion of “pollution” and the Roman doctrines of noxal liability and quasi-delicts. This chapter briefly surveys historical examples of collective responsibility, which have largely given way to the modern concept of individual responsibility, though vestiges of collective responsibility remain in modern culture and law (notably in the form of vicarious liability). The chapter then lays out a theoretical analysis of the choice between collective and individual responsibility that highlights those circumstances in which each is preferred as a law enforcement strategy.
    Keywords: Collective responsibility, individual punishment, group punishment, liability
    JEL: K14 K42 N40
    Date: 2013–08
  2. By: Botero Degiovanni, Hernan
    Abstract: In this paper paper, I use Mejia and Restrepo's(2011d} strategy to disentangle the causal relationship between drug enforcement and violence. To test this relationship, I use information on Colombian municipalities during the period 1999-2010. Due to technological reasons related to the quality of terrain, climate, and locational characteristics of the Colombian territory, cocaine production is more productive at low altitudes. Using the altitude of each municipality and distance from capital cities as sources of exogenous variation, I estimate the effect of drug enforcement on violence in Colombia. To control for a possible omitted-variable bias in the estimations, I run a Panel Data Spatial Durbin Model (SDM). Additionally, I construct a set of indices with comparable units of measure which allows me to determine which percentage of the Colombian violence data is explained by drug enforcement. The results indicate that the Colombian government's enforcement activities increased in 0.98% the homicide rate and in 1.24% the displacement rate and the war among drug dealers increased in 4.00% the homicide rate and 0.16% the displacement rate in the period 1999-2010.
    Keywords: War, Criminal Law, Enforcement, Drugs
    JEL: H56 K14 K42 L65
    Date: 2013–09–01
  3. By: Felix Groba; Barbara Breitschopf
    Abstract: Technological changes in renewable energy technologies play an important role in the context of climate change as they contribute to a reduction of technology costs and lead to an increasing market penetration of emission reducing technologies. This paper provides a comprehensive literature review highlighting numerous motivations and necessities underlying the introduction of renewable energy policies. Starting with a brief overview on the induced innovation hypothesis, we show that policy intervention has been an effective tool to change relative prices, thus, incentivizing innovation, but that also various influencing factors are at play. We show that the literature agrees on the need for specific renewable energy policies in order to overcome concomitant market failures and barrier. We highlight that technology specific policies are generally understood as necessary complements to environmental non-technology specific policies in order to generate <br /> <br /> adequate demand in energy markets. However, in that respect, we outline the ongoing debate on the effectiveness of different technology specific policies on the demand-pull side and the role of technology-push policies. Additionally we provide a summary on methodological approaches to measure policy efforts and technological change respecting different impact levels and stages within the technological change process. Finally, by focusing on international competitiveness and technology cost we highlight two aspects of the effects renewable technology innovation and respective policy support.
    JEL: N70 O31 O32 O57
    Date: 2013
  4. By: Bert Brys; Stephen Matthews; Richard Herd; Xiao Wang
    Abstract: This paper compares the tax system in China with the tax system in OECD countries and the tax reforms China and OECD countries have implemented in the past. The analysis focuses on those taxes and tax issues which are currently on China’s reform agenda, including the consumption taxes (especially the integration of the “business tax” into the VAT), environmentally-related taxes, the personal income tax, fiscal relations between the central and sub-central levels of government and property taxes. The paper provides a (preliminary) analysis of the tax-to-GDP ratio and the tax mix in China as well as the average and marginal tax wedge on labour income, by applying the OECD’s Revenue Statistics and Taxing Wages methodology. Although a country’s culture, traditions and legal system play an important part in shaping its tax regime and how it can be reformed, the paper also reviews the general design issues on how to make the tax system in China more growth-friendly, simple and transparent, less distortive and fairer. The paper contains a detailed discussion and evaluation of each tax and considers possible directions for future tax reform in China.<P>Politique et réformes fiscales en République Populaire de Chine<BR>Ce document compare le système fiscal en Chine avec celui des pays de l’OCDE en tenant compte des réformes que ces pays ont mis en oeuvre par le passé. L’analyse se concentre sur les impôts et les questions fiscales pour lesquels la Chine envisage une réforme, y compris les impôts sur la consommation (notamment l’intégration de « la taxe d’affaires » dans la TVA), les taxes liées à l’environnement, l’impôt sur le revenu des personnes physiques, les relations budgétaires entre l’administration centrale et les administrations infranationales, ainsi que les impôts fonciers. Ce document présente une analyse (préliminaire) du ratio impôts/PIB et de la structure fiscale en Chine, ainsi que du coin fiscal moyen et marginal sur les revenus du travail, en appliquant la méthodologie utilisée dans les publications de l’OCDE Statistiques des recettes publiques et Les impôts sur les salaires. Bien que la culture, les traditions et le système juridique d’un pays jouent un rôle important pour façonner son régime fiscal et influent sur les possibilités de réforme, ce document aborde également des questions générales de conception en vue de déterminer comment faire en sorte que le système fiscal en Chine soit plus favorable à la croissance, simple, transparent et équitable, et induise moins de distorsions. Ce document examine et évalue chaque impôt en détail et réfléchit aux orientations possibles de la future réforme fiscale en Chine.
    Keywords: tax reform, tax policy, China, réforme fiscale, politique fiscale, Chine
    JEL: H2 H7
    Date: 2013–09–04
  5. By: Robert M. Feinberg; Thomas A. Husted; Florian Szücs
    Abstract: Previous work has shown that state-level antitrust enforcement activity may have impacts on entry and relocation behavior by U.S. firms. Significant state-level antitrust activity may be an indicator of a perceived adverse business environment and it is found to deter establishment entry, particularly for larger firms in the retail and wholesale sectors. An obvious question is whether establishment exit is affected in a symmetric way, or whether sunk costs of market entry may lead to a smaller impact in terms of the exit decisions. We first combine US Census establishment exit panel data with data for 1998?2006 on US state-level antitrust activity and other measures of state-level business activities that may affect establishment exit. We also consider establishment exit across different broad industry types -- manufacturing, retail and wholesale -- and several firm size categories. Local business cycle factors seem to be the primary driver of exit, though there is some evidence of political and antitrust determinants as well. In another approach, we examine firmlevel exit decisions and the extent to which these respond to state antitrust enforcement, with some indication of antitrust enforcement effects here as well, especially in the wholesale and retail sectors.
    Keywords: antitrust enforcement, state level, firm exit
    JEL: K21 L41 L60 L81
    Date: 2013
  6. By: Lindhe, Tobias (Uppsala Center for Fiscal Studies); Södersten, Jan (Uppsala Center for Fiscal Studies)
    Abstract: This paper examines how the distortions caused by dividend taxation depend on whether or not shareholders can recover their original equity injections without being subject to the dividend tax. We point out the alternative assumptions in the literature on this, and we compare two different tax regimes, one where it is impossible for the firm to pay cash to its shareholders that is not taxed as dividends, the other where the shareholders are allowed a tax-free return of the original capital contributed through new issues. Our analysis shows that the regimes imply a substantial difference to our perceptions of the distortive effects of dividend taxation.
    Keywords: dividend taxation; share repurchases; equity trap; cost of capital; nucleus theory; growth path
    JEL: H24 H25 H32
    Date: 2013–09–02
  7. By: Bueren, Eckart; Smuda, Florian
    Abstract: While private actions for damages by customers against price-cartels receive much attention, the treatment of other groups affected by such conspiracies is largely unresolved. This article narrows the research gap with respect to suppliers to a downstream price cartel. First, we show that such suppliers incur losses driven by a direct quantity, a price and a cost effect. We then analyze whether suppliers are entitled to claim these losses as damages in the two leading competition law regimes. We find that, while the majority view in the US denies standing, the emerging position in the EU and important member states is to grant supplier standing. We argue that this can indeed be justified in view of the different institutional context and the goals assigned to the right to damages in the EU. We finally present an econometric approach based on residual demand estimation that allows to quantify all determinants of cartel suppliers' damages, thereby showing that supplier damage claims are a viable option in practice that can contribute to full compensation and greater cartel deterrence. --
    Keywords: Competition policy,cartels,suppliers,damage quantification,standing,private enforcement,comparative law
    JEL: L41 K21
    Date: 2013
  8. By: Facundo Piguillem (EIEF); Alessandro Riboni (Ecole Polytechnique)
    Abstract: This paper studies politicians who have a present-bias for spending; they want to increase current spending and procrastinate spending cuts. We argue that legislators' bias is more severe in economies with low institutional quality. We show that disagreement in legislatures leads to policy persistence and that this attenuates the temptation to overspend. Depending on the environment, legislators' decisions to be fiscally responsible may either complement or substitute other legislator's decisions. In economies with weak institutions, politicians' actions are strategic complements. Thus, institutional changes that induce fiscal responsibility are desirable, they generate a positive responsibility multiplier and reduce inefficient spending. However, in economies with better institutions, the same institutional change would induce some legislators to free ride on others' responsibility and may lead to more inefficient spending.
    Date: 2013
  9. By: Mikko Myrskylä (Max Planck Institute for Demographic Research, Rostock, Germany); Rachel Margolis
    Abstract: Family policies aim to influence fertility and labor force participation, and support families. However, often only fertility and labor supply are considered in policy evaluations. For example, the 2007 extension of parental leave benefits in Germany is generally considered unsuccessful because changes in fertility and labor force participation were modest. However, parental wellbeing is also important, in itself and as a determinant of child well-being. This paper is the first to consider the effect of parental leave policies on parental well-being. We analyze the German 2007 parental benefits reform and find that the extension of benefits strongly increased parental well-being around the birth of a child. The effect is observed for first and second births and for various sub-populations. A placebo test using data from Britain where there was no policy change supports the causal interpretation. Our results cast the success of the German 2007 policy change in new light. Parental leave benefits have an important direct impact on parental wellbeing.
    Keywords: Germany, parenthood
    JEL: J1 Z0
    Date: 2013–08
  10. By: Francesco Vona (Ofce sciences-po, Skema Business School); Francesco Nicolli (Ceris/Cnr, University of Ferrara)
    Abstract: We analyse the impact of market liberalisation on renewable energy policies in OECD countries. To this end, we first develop an aggregated indicator of renewable energy policies using principal components analysis and then examine its determinants through panel data techniques. Our results are consistent with the predictions of political-economy models of environmental policies, as brown lobbying, proxied by entry barriers in the energy sector, and citizens preferences have the expected effects on policy. Brown lobbying has a negative effect on the policy indicator, even when accounting for endogeneity in its effects in a dynamic panel specification and using different policy indicators.Reducing income inequality,the ratification of the Kyoto protocol and stronger green parties all positively affect the approval of more ambitious policies but with less robust results.
    Keywords: Renewable energy policy,Energy market liberalisation,Political economy.
    JEL: Q42 Q48 D72 O38
    Date: 2013–07
  11. By: Frédéric Marty
    Abstract: The Post Danmark judgment may cast the light on the interpretations by the EU Court of Justice of crucial dimensions of the competition policy as: selective price cuts, above-cost rebates, costs test for exclusionary abuses with common costs. As we see one of the main interests of the decision lies on the cost criteria used by the Court to determine if a given price practice may exclude a competitor as efficient as the incumbent. In other words, does Post Danmark constitutes a real step towards the appropriation by the Court of Justice of the more economic approach promoted by the Commission and, more broadly, is really the logic of the Court coherent with an effects-based approach? Does Post Danmark conciliates the traditional decisional practice of the Court with the new principles of competition policy enforcement advocated by the Commission since the issuance of its February 2009 guidelines, relative to the exclusionary practices of dominant undertakings?
    Keywords: exclusionary practices, abuse of dominant position, predatory pricing, as-efficient competitor test
    JEL: K21 L43 L44 L97
    Date: 2013–07
  12. By: Lindquist, Matthew J. (Swedish Institute for Social Research, Stockholm University); Santavirta, Torsten (Swedish Institute for Social Research, Stockholm University)
    Abstract: -
    Keywords: -
    Date: 2013–08–19
  13. By: Eric Langlais (EconomiX, UMR CNRS 7235 and University of Paris Ouest-Nanterre-La Défense); Marie Obidzinski (CRESE, Université de Franche-Comté)
    Abstract: This paper revisits the issue of law enforcement and the design of monetary sanctions when the public law enforcer's incentives depart from those of a benevolent authority, which is the most frequent assumption made in the literature on crime deterrence. We first consider the case an elected enforcer. We find that when the harm generated by offenses is quite small relative to the average private benefits, equilibrium with weak enforcement/low sanction prevails. Instead, when the harm generated by offenses is high relative to the average private benefits, it is the equilibrium with strong enforcement/high sanctions that prevails. Therefore, we provide an explanation for the empirical puzzle highlighted by Lin(2007): elected enforcers punish major (minor) crimes more (less) severely than the benevolent social planer. The case of an appointed enforcer prone to rent seeking is also considered. The monetary sanction under rent seeking is closer to the utilitarian level, as compared with the one under election.
    Keywords: law enforcement, deterrence, monetary sanctions, punishment, electoral competition, democracy, rent seeking, dictature.
    JEL: D72 D73 H1 K14 K23 K4
    Date: 2013–09
  14. By: Pierre LeBlanc; Stephen Matthews; Kirsti Mellbye
    Abstract: The height of the economic and financial crisis is now well past, but its aftermath remains wide-ranging, with many OECD countries still some way from restoring strong and sustainable economic growth. Even before the Great Recession OECD economies faced a range of challenges, most notably from globalisation, but also other challenges such as climates change, growing inequality and population ageing. Against this background, this paper discusses how tax policies have responded to fiscal and macroeconomic developments over the past five years and these longer-term structural economic developments.<P>Le paysage des politiques fiscales, cinq ans après la crise<BR>Le paroxysme de la crise économique et financière est loin derrière nous, mais les séquelles restent multiples, et de nombreux pays de l’OCDE ont encore du chemin à parcourir avant de retrouver une croissance économique forte et durable. Avant même la Grande récession, les économies de l’OCDE se heurtaient déjà à un éventail de problématiques telles que, notamment, les incidences de la mondialisation, mais aussi à des défis comme le changement climatique, le creusement des inégalités et le vieillissement de la population. Dans ce contexte, ce rapport explique comment les politiques fiscales se sont adaptées face aux évolutions budgétaires et macroéconomiques de ces cinq dernières années et face à ces bouleversements économiques structurels de plus long terme.
    Date: 2013–09–04
  15. By: Daniel Kemptner
    Abstract: This paper proposes a dynamic life cycle model of health risks, employment, early retirement, and wealth accumulation in order to analyze the health-related risks of consumption and old age poverty. In particular, the model includes a health process, the interaction between health and employment risks, and an explicit modeling of the German public insurance schemes. I rely on a dynamic programming discrete choice framework and estimate the model using data from the German Socio-Economic Panel. I quantify the health-related life cycle risks by simulating scenarios where health shocks do or do not occur at different points in the life cycle for individuals with differing endowments. Moreover, a policy simulation investigates minimum pension benefits as an insurance against old age poverty. While such a reform raises a concern about an increase in abuse of the early retirement option, the simulations indicate that a means test mitigates<br /> the moral hazard problem substantially.
    Keywords: dynamic programming, discrete choice, health, employment, early retirement, consumption, tax and transfer system
    JEL: C61 I14 J22 J26
    Date: 2013
  16. By: Klaus Gugler; Florian Szücs
    Abstract: We quantify externalities on profitability and market shares of competing firms in oligopolistic markets through the transition from an n to an n - 1 player oligopoly after a merger. Competitors are identified via the European Commission's market investigations and our methodology allows us to distinguish the externality due to the change in market structure from the merger effect. We obtain results consistent with the predictions of standard oligopoly models: rivals expand their output and increase their profits, whereas merging firms are negatively affected. This indicates that on average the market power effects of large mergers outweigh the efficiencies.
    JEL: L13 L40 G34
    Date: 2013
  17. By: Daniel Becker (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Magdalena Brezskot (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Wolfgang Peters (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Ulrike Will (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: ENGLISH SUMMARY This paper examines to what extent the disadvantages of unilateral climate policy can be reduced by border adjustments. The disadvantages are primarily a competitive disadvantage for the domestic industry and the potential (over-) compensation of CO2 savings from increased emissions in other countries (carbon leakage). We investigate a CO2 tax as the climate policy tool that can be supported by a Border Tax Adjustment (BTA). In the economic part of the analysis a partial equilibrium trade model is used to demonstrate the impact on the competitive position and on global CO2 emissions if a CO2 tax and a BTA are analyzed. It is shown that is makes a difference whether these measures are introduced separately or as a package. In the legal part of the analysis, the WTO compatibility of a climate-policy motivated BTA is then examined. One possibility is to design a BTA that is consistent with the national treatment rule. Another one is to claim an exception based on Article XX GATT. The idea of a package solution of a CO2 tax and a BTA is reconsidered in our legal analysis. It may help to ease the justification of the proposed interventions into the world trading system. Finally, based on the economic and legal considerations, different design options to implement a BTA are presented. One proposal is a Carbon Added Tax in combination with a BTA similar to that for the VAT. Alternatively, the calculation of the BTA could be based on the carbon footprint, which would be more ambitious from a climate policy perspective. The advantages and disadvantages of both strategies are discussed. ZUSAMMENFASSUNG Diese Arbeit untersucht, inwieweit die Nachteile unilateraler Klimaschutzpolitik durch Grenzausgleichsinstrumente verringert werden können. Die Nachteile bestehen vor allem in einem Wettbewerbsnachteil für die eigene Industrie und der möglichen (Über-)kompensation von CO2- Einsparungen durch erhöhte Emissionen im Ausland (Carbon Leakage). Als klimaschutzpolitisches Instrument untersuchen wir eine CO2-Steuer, die durch einen Grenzsteuerausgleich (Border Tax Adjustment, BTA) flankiert werden kann. Im ökonomischen Teil der Analyse wird mit Hilfe eines partialanalytischen Handelsmodells gezeigt, wie sich die Wettbewerbsposition und die globalen CO2-Emissionen verändern, wenn eine CO2-Steuer und ein BTA analysiert werden. Hierbei ergibt sich ein wichtiger Unterschied, je nachdem, ob diese Maßnahmen getrennt oder als Paket eingeführt werden. Im juristischen Teil der Analyse wird dann die Kompatibilität mit dem Recht der Welthandelsorganisation (WTO) eines klimapolitisch motivierten BTA geprüft. Eine Möglichkeit ist, ein BTA so auszugestalten, dass das WTO-rechtliche Gebot der Inländergleichbehandung gewahrt ist. Eine weitere ist es, die Ausnahmeklausel des Art. XX GATT in Anspruch zu nehmen. Die Idee einer Paketlösung aus CO2-Steuer und BTA wird in der WTO-rechtlichen Prüfung aufgenommen und kann die Rechtfertigung der Eingriffe in das Handelssystem vereinfachen. Schließlich ergeben sich aus den ökonomischen und WTO-rechtlichen Überlegungen verschiedene Gestaltungsmöglichkeiten für ein BTA. Vorgeschlagen wird zum einen eine Carbon Added Tax in Kombination mit einem BTA ähnlich demjenigen zur Mehrwertsteuer. Alternativ könnte auch die klimapolitisch ambitioniertere Kalkulation des BTA auf Basis des Carbon Footprint verfolgt werden. Für beide Strategien werden die Vor- und Nachteile diskutiert.
    Keywords: Leakage, Border Tax Adjustment, Carbon Added Tax, Carbon Footprint, World Trade Organization
    JEL: F13 F18 K33
    Date: 2013–08

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