New Economics Papers
on Law and Economics
Issue of 2013‒09‒28
six papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Primary Seat-Belt Laws and Driver Behavior: Evidence from Accident Data By Bae, Yong-Kyun
  2. Labor Market Institutions and The Effect of Immigration on National Employment By Almosova, Anna
  3. Taxing Immovable Property Revenue Potential and Implementation Challenges By John Norregaard
  4. Property Rights and Intra-Household Bargaining By Shing-Yi Wang
  5. Corruption, Entry and Pollution By Eleni Stathopoulou; Dimitrios Varvarigos
  6. The Effects of Mandatory Auditor Rotation on Low Balling Behavior and Auditor Independence By Christopher Bleibtreu; Stephan Ulrike Stefani

  1. By: Bae, Yong-Kyun
    Abstract: This paper investigates the offsetting effect theory, using individual-level accident data to analyze how drivers respond to seat-belt laws. I find that drivers drive their vehicles more carefully when more stringent seat-belt laws are in effect. I also find that careful driving is not associated with pedestrian involvement in accidents. Using synthetic panel data, I find that the change in the laws results in an increased number of careful drivers and a decreased number of careless drivers in accidents. The results show that the offsetting effects are weaker than expected or may not exist in accidents.
    Keywords: Offsetting Behavior, Safety Regulation, Seat Belt Laws, Vehicle Accidents
    JEL: D01 L51 L91
    Date: 2013–09–14
  2. By: Almosova, Anna
    Abstract: Integration processes in Europe resulted in intensification of migration flows. Immigrants account now for a large share of population in many European countries. A point of view that immigrants take jobs form natives is quite widespread. The European Monitoring Centre on Racism and Xenophobia published a special analysis of the attitudes towards minorities in EU countries Eurobarometer 2000. They found that one in two EU citizens worry about competing with immigrants for the same vacancies and afraid of losing their jobs because of presence of foreign workers. Different measures and institutions which protect native workers have nevertheless an ambiguous effect. On the one hand labor protective institutions such as minimal wage, replacement rate or firing restrictions will protect existing workers and reduce a firing rate. On the other hand, firms will take into consideration these additional costs of firing and will be less likely to employ new workers. At the same time, it is argued that immigrants are probably less likely to be covered by these institutions. These facts imply that protective institutions cover mostly natives and therefore make immigration labor force comparatively less costly. Labor market protection may therefore amplify a negative effect of immigrants on native employment if it exists.This paper attempts to evaluate the effect of immigration in flow on employment level of natives and reveal whether this effect changes in different institutional environments using EU-countries data. In addition to static specification it uses a dynamic specification to draw conclusions about long-term and short-term effects separately. The results show no long-run effect of immigration inflow. Short-term effect of is found to be positive. Protective labor market institutions fulfill their function of protecting existing workers.The results are also different for men and women.
    Keywords: Immigration, Labor Market Institutions, Displacement Effect
    JEL: J30 J61 J65
    Date: 2013–03–29
  3. By: John Norregaard
    Abstract: The tax on immovable property has been characterized as probably the most unpopular among tax instruments, in part because it is salient and hard to avoid. But economists continue to emphasize the virtues of the property tax owing to its relatively low efficieny costs, benign impact on growth, and high score on fairness. It is, therefore, generally considered to be underutilized in most countries. This paper takes stock of the arguments for using real property taxation, and presents an updated data-set for high-and middle income countries to illustrate its use. It also reflects the renewed and widespread interest in property tax reform globally, and discusses the many policy and administrative issues that must be carefully considered as prerequisites for successful property tax reform.
    Keywords: Property taxes;Developing countries;Transition economies;Tax revenues;Tax reforms;immovable property tax, recurrent property tax
    Date: 2013–05–29
  4. By: Shing-Yi Wang
    Abstract: This paper examines whether an individual-level transfer of property rights increases the individual's bargaining power within the household. The question is analyzed in the context of a housing reform that occurred in China that gave existing tenants the opportunity to purchase the homes that they had been renting from their state employers. The rights to each housing unit were granted to a particular employee, so property rights were defined at the individual level rather than the household level. The results indicate that transferring ownership rights to men increased household consumption of some male-favored goods and women's time spent on chores. Transferring ownership rights to women decreased household consumption of some male-favored goods.
    JEL: O1
    Date: 2013–09
  5. By: Eleni Stathopoulou; Dimitrios Varvarigos
    Abstract: We model an economy where imperfectly competitive firms choose whether to employ a dirty technology and pay an emission tax or employ a clean technology and incur the cost of its adoption. Bureaucrats who are entrusted with the task of monitoring the emissions of each firm, are corruptible in the sense that they may accept bribes in order to mislead authorities on the firms’ actual emissions. Market entry is an important element in the relation between corruption and pollution. Particularly, the incidence of corruption increases the number of entrants in the market, while the bureaucrats’ incentives to be corrupt are higher in a market with more competitors. We find multiple equilibria where both corruption and pollution are either high or low.
    Keywords: Corruption; Pollution; Market entry
    JEL: L13 Q53 Q58
    Date: 2013–09
  6. By: Christopher Bleibtreu (Department of Economics, University of Konstanz, Germany); Stephan Ulrike Stefani (Department of Economics, University of Konstanz, Germany)
    Abstract: Accounting Oversight Board have suggested the implementation of the external audit firm rotation. The aims of this proposal are to increase auditor independence and to decrease the high level of supplier concentration in the audit market. However, proponents of this regulation raise the concern that learning effects are destroyed, which causes inefficiencies in terms of both audit quality and audit fees. In the present paper, we use a market matching model adopted from Salop (1979) to analyze the effects of the external rotation. In particular, we assume that both industry expertise (i.e., the audit firm's specialization in auditing clients with specific characteristics) and the auditor's experience with a certain client (i.e., learning cost effects) determine an audit firm's direct audit costs. Our model allows determining the optimal matching between audit firms and clients in a situation with and without the existence of the mandatory audit firm rotation rule. Our results indicate that mandatory auditor changes decrease audit firms' profit contributions derived from clients the audit firm is quite well specialized in. The decrease in these profit contributions is particularly severe if learning costs play a dominant role. For clients the audit firm is less specialized in, however, the implementation of the external rotation even increases audit firms’ profit contributions, since it can demand comparably high audit fees when the most efficient audit firm is precluded from auditing these clients due to its cooling-off. (1) If audit firms have strong time preferences, audit firms will choose a lowballing strategy; audit firms may regard the external rotation as favorable only if learning costs are sufficiently low. If, in contrast, learning effects are important, audit firms' total profit contributions decrease, and the equilibrium number of audit firms also decreases. An increase in supplier concentration, however, is clearly in contrast to the aims of the EU Commission. (2) If audit firms apply low discount rates and thus follow a waiting strategy, the external rotation increases audit firms' total profit contributions and indeed decreases supplier concentration. With respect to our audit quality measure, we find that audit firm rotation increases audit quality only if audit firms try to re-acquire their clients as fast as possible, i.e., if they use a lowballing strategy for clients they are not well specialized in (i.e., if the discountrate is high). If, in contrast, audit firms are patient enough to wait until the maximum duration of their competitors has expired, audit quality is predicted to decrease due to the implementation of the external rotation.
    Keywords: Auditing, Mandatory Auditor Rotation, Auditor Independence, Low Balling, Audit Market Concentration
    JEL: D43 L11 M42
    Date: 2013–09–12

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