New Economics Papers
on Law and Economics
Issue of 2013‒11‒16
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Why Plaintiffs' Attorneys Use Contingent and Defense Attorneys Fixed Fee Contracts By Winand Emons; Claude Fluet
  2. Economic Models of Law: Introduction By Thomas J. Miceli; Matthew J. Baker
  3. Legal tradition and quality of institutions : is colonization by french law countries distinctive ? By Kirat, Thierry
  4. Compulsory Non-binding ADR By Nathalie Chappe
  5. The influence of wages on public officials' corruptibility: A laboratory investigation By van Veldhuizen, Roel
  6. Patent Value and Citations: Creative Destruction or Strategic Disruption? By David S. Abrams; Ufuk Akcigit; Jillian Popadak
  7. Seatbelt Use Following Stricter Drunk Driving Regulations By Scott Adams; Chad Cotti; Nathan Tefft
  8. Discretionary enforcement and strategic interactions between firms, regulatory agency and justice department: a theoretical and empirical investigation By Germani, Anna Rita; Morone, Andrea; Morone, Piergiuseppe; Scaramozzino, Pasquale
  9. The Incapacitation Effect of Incarceration: Evidence from Several Italian Collective Pardons? By Alessandro Barbarino; Giovanni Mastrobuoni
  10. Women's movements, plural legal systems and the Botswana constitution: how reform happens By Hasan, Tazeen; Tanzer, Ziona
  11. Strengthening economic rights and women's occupational choice : the impact of reforming Ethiopia's family law By Hallward-Driemeier, Mary; Gajigo, Ousman
  12. The indirect effects of auditing taxpayers By Ratto, Marisa; Thomas, Richard; Ulph, David
  13. Moral Hazard and Economies of Scope in Physician Ownership of Complementary Medical Services By Brian K. Chen; Paul J. Gertler; Chuh-Yuh Yang

  1. By: Winand Emons; Claude Fluet
    Abstract: Victims want to collect damages from injurers. Cases differ with respect to the judgment. Attorneys observe the expected judgment, clients do not. Victims need an attorney to sue; defense attorneys reduce the probability that the plaintiff prevails. Plaintiffs’ attorneys offer contingent fees providing incentives to proceed with strong and drop weak cases. By contrast, defense attorneys work for fixed fees under which they accept all cases. Since the defense commits to fight all cases, few victims sue in the first place. We thus explain the fact that in the US virtually all plaintiffs use contingency while defendants tend to rely exclusively on fixed fees.
    Keywords: Litigation, contingent fees, fixed fees, expert services
    JEL: D82 K41
    Date: 2013
  2. By: Thomas J. Miceli (University of Connecticut); Matthew J. Baker (Hunter College)
    Abstract: This introductory chapter to Economic Models of Law (forthcoming, Edward Elgar) discusses the use of economic models for understanding law. It also provides a survey of the contents of the volume, which consist of twenty-one previously published articles in the areas of torts, contracts, property, and legal process.
    Keywords: Economic models of law
    JEL: K1
    Date: 2013–11
  3. By: Kirat, Thierry
    Abstract: Recent literature argues that legal traditions of nations, i.e. their belonging to the world of common law or civil law, are not neutral in terms of economic or institutional performance, especially with regard to key opportunities in developing countries out of poverty. We present the results of an exploratory exploitation of the “institutional profiles database” provided by DGTPE (French Ministry of Economy and Finance) and French Development Agency (survey 2009) supplemented by data on legal origin and other variables from La Porta et al. We highlight specificities of developing countries having inherited the French law (relative to those of English law). A reflection on political power and the state finds a strong contrast between the ideal-typical model of French law and the empirical findings. This contrast is consistent with the notion rather than real state in the former French colonies.
    Keywords: Colonisation; Pays en voie de développement; Influence française; Droit;
    JEL: O52 F54 B52
    Date: 2013
  4. By: Nathalie Chappe (CRESE, Université de Franche-Comté)
    Abstract: This article focuses on compulsory non-binding ADR when third parties have reputation concerns that make them dislike their decision be rejected by the adversary parties who in this event decide to insist on a court verdict. The third party is assumed to trade-off deviations from her favored decision and the possibility that her recommendation might be rejected by the parties. Given that non binding ADR takes place in the shadow of a court verdict, the third party's award might be diverted from her preferred outcome in the direction of the likely court ruling.
    Keywords: litigation, non-binding, arbitration, reputation, Alternative Dispute Resolution.
    JEL: K31 K41
    Date: 2013–10
  5. By: van Veldhuizen, Roel
    Abstract: Previous studies have proposed a link between corruption and wages in the public sector. The present paper investigates this link using a laboratory experiment. In the experiment, public officials have the opportunity to accept a bribe and can then decide between a neutral and a corrupt action. The corrupt action benefits the briber but poses a large negative externality on a charity. The results show that increasing public officials' wages greatly reduces their corruptibility. In particular, low-wage public officials accept 91% of bribes on average, whereas high-wage public officials accept 38%. Moreover, high-wage public officials are less likely to choose the corrupt option. Additionally, the results suggest that a positive monitoring rate may be necessary for these effects to arise. --
    Keywords: Bribery,corruption,experimental economics,laboratory experiment
    JEL: D73 C91 K42
    Date: 2013
  6. By: David S. Abrams (Penn Law School & Wharton Business Economics & Public Policy Department, University of Pennsylvania,); Ufuk Akcigit (Department of Economics, University of Pennsylvania & NBER); Jillian Popadak (Wharton Business Economics & Public Policy Department, University of Pennsylvania)
    Abstract: Prior work suggests that more valuable patents are cited more and this view has become standard in the empirical innovation literature. Using an NPE-derived dataset with patent-specific revenues we find that the relationship of citations to value in fact forms an inverted-U, with fewer citations at the high end of value than in the middle. Since the value of patents is concentrated in those at the high end, this is a challenge to both the empirical literature and the intuition behind it. We attempt to explain this relationship with a simple model of innovation, allowing for both productive and strategic patents. We find evidence of greater use of strategic patents where it would be most expected: among corporations, in fields of rapid development, in more recent patents and where divisional and continuation applications are employed. These findings have important implications for our basic understanding of growth, innovation, and intellectual property policy.
    Keywords: productive innovation, defensive innovation, patents, creative destruction, citations, patent value, competition, intellectual property, entrepreneurship, strategic patenting, defensive patenting, patent thickets, fencing patents.
    JEL: O3 L2 K1
    Date: 2013–11–05
  7. By: Scott Adams (University of Wisconsin - Milwaukee); Chad Cotti (University of Connecticut); Nathan Tefft (University of Washington)
    Abstract: We present evidence from the Fatality Analysis Reporting System and Behavioral Risk Factor Surveillance System that shows increased seat-belt use following the enactment of stricter BAC thresholds in states where seat-belt laws are primarily enforced. This suggests that inebriated drivers may use their seat-belts more judiciously to avoid being identified as a drunk driver by law enforcement. The interactive effect of stricter drunk driving laws and primary seat-belt laws are also shown to be more effective than either law passed in isolation in terms of reducing traffic fatalities.
    Keywords: seatbelts, drunk driving
    JEL: K4 I18
    Date: 2013–10
  8. By: Germani, Anna Rita; Morone, Andrea; Morone, Piergiuseppe; Scaramozzino, Pasquale
    Abstract: This paper presents a game theoretic morphological analysis of the U.S. environmental authorities’ (i.e., EPA and DOJ) behavioural mechanisms, based on strategic interactions among the players. The models explore the role of discretion that such authorities enjoy, either in deciding how to pursue environmental violations (investigative and prosecutorial discretion) or in judging them (judicial discretion). The purpose is to identify both the optimal firms’ behaviour in terms of compliance, and the DOJ’s and EPA’s optimal strategies in terms of enforcement actions to undertake. Consistent with the setting of the game theory models, the role of EPA and DOJ in deterring firms from polluting is, then, empirically tested, by means of a laboratory experiment. Laboratory evidence on compliance behaviour of firms when faced with enforcement conditions predicted by the theoretical models set up is discussed for the different experimental treatments performed.
    Keywords: environmental enforcement, discretion, game theory, experimental economics.
    JEL: D8 D80 D81 K0 K32 K42 Q5 Q50 Q52
    Date: 2013–09
  9. By: Alessandro Barbarino; Giovanni Mastrobuoni
    Abstract: We estimate the “incapacitation effect” on crime using variation in Italian prison population driven by eight collective pardons passed between 1962 and 1990. The prison releases are sudden, within one day, very large, up to 35 percent of the entire prison population and happen nationwide. Exploiting this quasi-natural experiment we break the simultaneity of crime and prisoners and, in addition, use the national character of the pardons to separately identify incapacitation from changes in deterrence. The elasticity of total crime with respect to incapacitation is between -17 and -30 percent. A cost-benefit analysis suggests that Italy’s prison popu lation is below its optimal level.
    Date: 2013–11–13
  10. By: Hasan, Tazeen; Tanzer, Ziona
    Abstract: Collective action by women's networks has been a strong driver of legislative change in many countries across the world. Women's groups in Botswana have used advocacy tools such as testing the implementation of gender equality principles in the national court system. In 1992, women's legal networks in the Unity Dow case successfully challenged discriminatory statutory citizenship laws. This victory triggered far-reaching reforms of the citizenship law, family law, and even the Constitution itself. Two decades later, another successful"test"case, the Mmusi case, has challenged the customary law practice of favoring male heirs as contrary to constitutional principles of equality. The paper explores the role that judges and national courts play in implementing gender equality principles and upholding state commitments to the Convention on the Elimination of Discrimination against Women. The paper also highlights the role of governments in taking on the concerns of their citizens and cementing the principle of equality in national legal frameworks. The backdrop to this process is a plural legal system where both customary and statutory laws and courts exist side by side. How women negotiate their rights through these multiple systems by coalition building and using"good practice"examples from other countries is important to understand from a policy perspective and how this"bottom-up"approach can contribute to women's economic empowerment in other national contexts.
    Keywords: Gender and Law,Legal Products,Gender and Development,Population Policies,Children and Youth
    Date: 2013–11–01
  11. By: Hallward-Driemeier, Mary; Gajigo, Ousman
    Abstract: This paper evaluates the impact of strengthening legal rights on the types of economic opportunities that are pursued. Ethiopia changed its family law, requiring both spouses'consent in the administration of marital property, removing the ability of a spouse to deny permission for the other to work outside the home, and raising women's minimum age of marriage. Thus both access to resources and the removal of restrictions on employment served to strengthen women's bargaining position within the household and their ability to pursue economic opportunities. Although this reform now applies nationally, it was initially rolled out in the two chartered cities and three of Ethiopia's nine regions. Using nationally representative household surveys from just prior to the reform and five years later allows for a difference-in-difference estimation of the reform's impact. The analysis finds that women were relatively more likely to work in occupations that require work outside the home, employ more educated workers, and in paid and full-time jobs where the reform had been enacted, controlling for time and location effects. As the relative increase in women's participation in these activities was 15-24 percent higher in areas where the reform was carried out, the magnitude of the impact is significant too.
    Keywords: Gender and Law,Access to Finance,Population Policies,Gender and Development,Labor Policies
    Date: 2013–11–01
  12. By: Ratto, Marisa; Thomas, Richard; Ulph, David
    Abstract: In this paper we focus on the effects of investigations on tax compliance. Results from empirical studies suggest that the effects of audits are not only in terms of recovered unpaid tax (direct effects), but there are also indirect effects in terms of future better compliance in the rest of the community. The evidence suggests that such indirect effects tend to outweigh the direct effect. However, current policy decisions of how to allocate investigation resources across different groups of taxpayers generally neglect the indirect effects, generating a potential resource misallocation issue. With the aim to clarify a possible mechanism through which the indirect effects work and hence to inform any policy recommendations, we model tax compliance as a social norm and decompose the total effect of an increase in the audit probability into a direct effect (increased expected fine) and a multiplier effect due to taxpayers’ interdependencies.
    Keywords: optimal audit rule; tax evasion; social norm; opportunities to evade;
    JEL: D81 H26 H30 K42
    Date: 2013–05
  13. By: Brian K. Chen; Paul J. Gertler; Chuh-Yuh Yang
    Abstract: When physicians own complementary medical service facilities such as clinical laboratories and imaging centers, they gain financially by referring patients to these service entities. This situation creates an incentive for the physician to exploit the consumers’ trust by recommending more services than they would demand under full information. This moral hazard cost, however, may be offset by gains in economies of scope if the complementary services are integrated into the physician’s practice. We assess the extent of moral hazard and economies of scope using data from Taiwan, which introduced a “separating” policy, similar to the Stark Law in the US, that restricts physician ownership of pharmacies unless they are fully integrated into the physician’s practice. We find that physicians who own pharmacies prescribe 7.6% more drugs than those who do not own pharmacies. Overall, we find no evidence of economies of scope from integration in the treatment of patients with acute respiratory infections, diabetes, or hypertension. Overall the separating policy was ineffective at controlling drug costs as a large number of physicians choose to integrate pharmacies into their practices in order to become exempt from the policy.
    JEL: I11 I12 K23 L22
    Date: 2013–11

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