New Economics Papers
on Law and Economics
Issue of 2013‒12‒15
seventeen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Negligence, Causation and Incentive for Care By Keith N. Hylton; Haizhen Lin
  2. Customary versus Civil Law within Old Regime France By Le Bris, David
  3. The Design and Implementation of Ethics-Related Administrative Law in Eastern Europe By Michael, Bryane; Bowser, Donald
  4. Fighting Crime with a Little Help from my Friends: Party Affiliation, Inter‐jurisdictional Cooperation and Crime in Mexico By Ruben Durante; Emilio Guterriez
  5. Negligence and Two-Sided Causation By Keith N. Hylton; Haizhen Lin; Hyo-Youn Chu
  6. Crackdown on Corruption: A Natural Experiment in Safe and Swing Districts By Bledi Celiku
  7. Does Owner-Occupied Housing Affect Neighbourhood Crime? By Lauridsen, Jørgen; Nannerup, Niels; Skak, Morten
  8. Spatial Nexus in Crime and Unemployment in Times of Crisis: Evidence from Germany By Povilas Lastauskas; Eirini Tatsi
  9. An anniversary to mark: the who, what, when, and why of California's trademark registration law of 1863 By Paul, Duguid
  10. Exclusive Dealing: Before Bork, and Beyond By J. Mark Ramseyer; Eric Rasmusen
  11. How will the court decide? Tax experts and the estimation of tax risk By Blaufus, Kay; Bob, Jonathan; Trinks, Matthias
  12. James M. Buchanan and the European Public Choice Movement: What Did We Learn from Him? By Friedrich Schneider
  13. The Impact of Formal Institutions on Knowledge Economy By Antonio R. Andrés; Simplice A. Asongu; Voxi Amavilah
  14. Is Pro-Labor Law Pro-Women? Evidence from India By Josef Montag
  15. Sarbanes Oxley, Non Audit Services (NAS) and the mandatory rotation of audit firms By Marianne, Ojo
  16. Damage rules and the patent hold-up problem : An analysis of Article L. 615-7 By Bertrand Chopard; Thomas Cortade; Eric Langlais
  17. Producing Higher Quality Jobs: Enforcement of Mandated Benefits across Brazilian Cities between 1996-2007 By Rita Almeida; Pedro Carneiro, Renata Narita

  1. By: Keith N. Hylton (Boston University Law School); Haizhen Lin (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: We present a new model of negligence and causation and examine the influence of the negligence test, in the presence of intervening causation, on the level of care. In this model, the injurer’s decision to take care reduces the likelihood of an accident only in the event that some nondeterministic intervention occurs. The effects of the negligence test depend on the information available to the court, and the manner in which the test is implemented. The key effect of the negligence test, in the presence of intervening causation, is to induce actors to take into account the distribution of the intervention probability as well as its expected value. In the most plausible scenario – where courts have limited information – the test generally leads to socially excessive care.
    Keywords: nnegligence, causation, proximate cause, factual causation, ex post negligence, optimal care
    JEL: D81 K00 K13 K41
    Date: 2013–07
  2. By: Le Bris, David
    Abstract: Law and finance theory emphasizes the negative consequences of civil law on financial and, subsequently, economic development. Before the Revolution, French territory was strictly divided according to the legal regime. Since the Middle-Ages, the southern part of France was under Justinian civil law and the north was under customary laws which, as with common law, gave more flexibility to judges and less right to the state. This dichotomy offers the unique opportunity to test the law and finance theory free from cross-country bias. Using fiscal revenues across 79 Departments from 1817-1821, we test if Departments under civil law, over the centuries and up to 15 years ago, exhibit lower financial and economic outcomes. We find that civil law Departments do exhibit lower economic performances but this difference is not robust when controlled for fundamental factors. The civil law appears even to have a positive effect in many specifications. Old Regime France does not confirm the law and finance theory.
    Keywords: Law and Finance, Economic development, France, history.
    JEL: N23 N43 O1 O43 P48
    Date: 2013
  3. By: Michael, Bryane; Bowser, Donald
    Abstract: How can senior policymakers use data in the design of ethics (anti-corruption) related legislation and regulations? In this paper, we describe how to draft subsidiary legislation (mainly executive agency regulations) based on explicit or implied competencies given by national legislation. We then discuss how to conduct the organisational, legal, economic and audit analysis needed to allocate ethics-related rights and obligations across-government and within the Agency. We illustrate with an example from Romania and use the tools we have presented to make recommendations for Hungary. We describe the roles that the human resource managers and internal auditors play in implementing the provisions of Agency-level ethics-related regulations. We conclude by encouraging policy makers to make greater use of ethics-related regulations.
    Keywords: anti-corruption, administrative law, codes of conduct
    JEL: M42 O29
    Date: 2013
  4. By: Ruben Durante (Département d'économie); Emilio Guterriez
    Abstract: We investigate the relationship between inter-jurisdictional cooperation and law enforcement in Mexico. Exploiting a Regression Discontinuity Design in close municipal elections, we study how improved opportunities for cooperation in crime prevention among neighboring municipalities - proxied by their degree of political alignment - may result in lower rates of violent crime. We find that municipalities in which the party in power in the majority of neighboring jurisdictions barely won experience significantly lower homicide rates during the mayor’s mandate than those in which it barely lost. This effect is sizeable and independent of which party is in power in the neighboring municipalities.
    Keywords: Crime; Mexico; Party Affiliation; Cooperation
    Date: 2013–10
  5. By: Keith N. Hylton (Boston University Law School); Haizhen Lin (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Hyo-Youn Chu (Kyung Hee University)
    Abstract: We extend the economic analysis of negligence and intervening causation to "two-sided causation" scenarios. In the two-sided causation scenario the effectiveness of the injurer's care depends on some intervention, and the risk of harm generated by the injurer's failure to take care depends on some other intervention. We find that the distortion from socially optimal care is more severe in the two-sided causation scenario than in the one-sided causation scenario, and generally in the direction of excessive care. The practical lesson is that the likelihood that injurers will have optimal care incentives under the negligence test in the presence of intervening causal factors is low.
    Keywords: negligence, causation, proximate cause, intervening causal factor, optimal care
    JEL: D81 K00 K13 K41
    Date: 2013–08
  6. By: Bledi Celiku
    Abstract: I investigate the theoretical and empirical effects of increased law enforcement on the equilibrium level of bribes for the case of Albania during the period of 2005-2010. My paper centers on "harassment" bribes, which consist of payments for public services that by law should be free. I model bribery behavior as a negotiation process between public oofficials and consumers. As enforcement increases, corruption prevalence can, in theory, increase or decrease. Recent policy changes in Albania oer a good natural experiment to test this empirically. Two events took place in 2007: local elections and an increase in fines against corruption. I examine how the 2007 fine increase for corrupt behavior impacts bribery. Data show that corruption is a bigger problem for poor people and since the left's political platform is more pro-poor, looking at the left-right governed district variation seems appropriate. Using a difference in difference methodology that compares safe left and right-governed districts, I find that a 10 percent increase in enforcement leads to a 4.38 percent drop in bribery frequency. As enforcement increases, quality of services does not improve and enforcement measures are less effective on the medical and education sectors.
    JEL: D73 K42 O12 P20
    Date: 2013–12–05
  7. By: Lauridsen, Jørgen (Department of Business and Economics); Nannerup, Niels (Department of Business and Economics); Skak, Morten (Department of Business and Economics)
    Abstract: Economic as well as sociological theory bring some support to the hypothesis that personal home ownership per se makes individuals more responsible to society values and hence less inclined to commit offences against property or commit other kinds of crimes. Departing from this hypothesis, the present study seeks to provide empirical evidence for a link between levels of crime and local residential ownership rates. In the framework of a linear regression model and based on Danish municipality data, we establish empirical evidence for a negative relationship between local home ownership rates and local crime rates even when controlling for a broad range of economic and demographic variables.
    Keywords: Housing market; Violence crime; Simple crime; Neighbourhood deprivation
    JEL: C21 C23 C33 K42 P25 R31
    Date: 2013–12–03
  8. By: Povilas Lastauskas; Eirini Tatsi
    Abstract: Space is important. The recent global financial crisis has vividly pointed to spatial patterns in economies’ reactions to the global economic shocks. This paper focuses on labor market responses and its interactions with criminal activities in a causal and spatial framework. We study the case of Germany as evidently this country’s economy has demonstrated resilience during the whirl of economic crisis. Our contribution is twofold: first, we lay down a parsimonious labor market model with search frictions, criminal opportunities, and, unlike earlier analyzes, productivity shocks which are important in explaining empirical regularity of criminal engagement. Second, we seek empirical support using data on the 402 German districts for 2009-2010, the years following the global financial crisis, in a setting that allows not only crime spatial multipliers but also inherent endogeneity of unemployment. Adverse income shocks clearly unfold a spatial nexus between unemployment and crime rates. More specifically, we find that youth unemployment plays a prominent role in explaining property crime, namely housing burglary. Our results are in line with previous research: neglecting endogeneity of unemployment understates its impact and employing the youth unemployment share instead of rate points to distinctive effects. The analysis offers important implications for countries that are currently undergoing fiscal consolidation and are experiencing high unemployment rates.
    Keywords: Crime, Unemployment, Spatial Econometrics, Economic Crisis
    JEL: C31 J64 K42 R10
    Date: 2013–09–12
  9. By: Paul, Duguid
    Abstract: In 1863, a one-term senator introduced a trademark bill to the California legislature that the Daily Alta California at first reported as of little more than parochial interest. In fact, when seen in local context, the bill might seem to have been aimed primarily at the senator's own business interests. Yet the ensuing law represents the first trademark registration law in the common law jurisdictions. As such, the law is particularly intriguing, because standard histories of law and business usually credit manufacturing interests and states for pioneering trademark law, and in 1863 California was hardly a classic manufacturing state. This essay thus attempts to explore the background of this law in order to answer the questions why California and why then?
    Keywords: trademark registration, California, Second Industrial Revolution, wine
    JEL: K0 L2 N4
    Date: 2013–10–27
  10. By: J. Mark Ramseyer (Harvard Law School); Eric Rasmusen (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: Antitrust scholars have come to accept the basic ideas about exclusive dealing that Bork articulated in The Antitrust Paradox. Indeed, they have even extended his list of reasons why exclusive dealing can promote economic efficiency. Yet they have also taken up his challenge to explain how exclusive dealing could possibly cause harm, and have modelled a variety of special cases where it does. Some (albeit not all) of these are sufficiently plausible to be useful to prosecutors and judges.
    JEL: L0 K21
    Date: 2013–10
  11. By: Blaufus, Kay; Bob, Jonathan; Trinks, Matthias
    Abstract: Tax accounting and tax law concern the probability thresholds that can require the taxpayer to estimate the likelihood that a tax position would be upheld by a court. Tax complexity and the consequent ambiguity results in a reliance by most taxpayers on a tax expert estimate of this likelihood. This study examines whether the tax experts are able to accurately forecast the outcome of tax court decisions and compares tax expert predictions to those of laymen. Our results reveal no significant differences with respect to the forecasting performance of professional tax advisors and laymen. Moreover, the tax advisors exhibit a significantly higher level of overconfidence compared to laymen and the degree of overconfidence increases with professional experience. A comparison of two groups of tax experts, tax advisors and revenue agents demonstrates that the tax advisors exhibit the highest level of overconfidence and form stronger appeal recommendations that indicate a type of advisor bias. --
    Keywords: tax risk,overconfidence,client advocacy,tax controversy,forecasting
    JEL: M40 K20 H20
    Date: 2013
  12. By: Friedrich Schneider
    Abstract: In this note, three major areas of Buchanan’s research are briefly described: (1) The ideas of Knut Wicksell on Buchanan’s work, (2) constitutional economics and the veil of ignorance, and (3) the role of government and/or the power to tax. It is shown that these three areas had a major influence on the European public choice movement, for example, at the European constitutional group.
    Keywords: Work of James Buchanan, constitutional economics, veil of ignorance, power to tax, European public choice Society, Knut Wicksell, role of government
    JEL: D78 E26 H2 H11 H26 K42 O5 O11 O16 O17
    Date: 2013–12
  13. By: Antonio R. Andrés (Eastern Mediterranean University, Department of Economics); Simplice A. Asongu (African Governance and Development Institute); Voxi Amavilah (Glendale College)
    Abstract: Using Kauffman, Kraay, and Mastruzzi governance indicators, this article analyzes the impact of formal institutions on the knowledge economy- by assessing how the enforcement of Intellectual Property Rights (IPRs) through good governance mechanisms affects the knowledge economy. The article also employs the World Bank’s four components of the knowledge economy index characteristic of its knowledge for development (K4D) framework. We estimate panel data models for 22 Middle East & North African and Sub-Sahara African countries over the period 1996-2010. The results show that for this group of countries the enforcement of IPR laws (treaties), although necessary, is not a sufficient condition for a knowledge economy. The results also suggest that other factors are more likely to determine the knowledge economies of these nations. Overall these findings have important implications for both policy and further research.
    Keywords: Formal institutions; Knowledge economy; Panel data; Principal component analysis (PCA)
    JEL: O10 O34 O38 P00 P48
    Date: 2013–07
  14. By: Josef Montag
    Abstract: I study the effects of state-level differences in labor regulation on labor market outcomes of women in India. Using a representative sample of urban households from 2005, I find that labor regulation has a large negative effect on women’s economic activity, mainly employment. My estimates suggest that a one standard deviation increase in the labor regulation measure decreases the probability of a woman being economically active by 3% to 4%—the implied decrease in female labor force is between 15% and 18%. The effects on men’s participation are around zero. I do not find labor regulation to have a significant effect on male wages or on the gender wage gap. Finally, labor regulation is associated with women having less say at home and a lower sex ratio.
    Keywords: gender gap; labor regulation; India;
    JEL: J16 J21 K31
    Date: 2013–08
  15. By: Marianne, Ojo
    Abstract: Whilst the benefits and potentials of the dual roles assumed by external auditors are emphasized, as well as the need to ensure that safeguards operating to guard against a compromise of objectivity and independence are in place, this paper also highlights the fact that even though such dual roles are appropriate in certain cases – as illustrated by justifications for limitations imposed by the Sarbanes Oxley Act and other relevant and applicable legislation – instances also persist where section 201 of Sarbanes-Oxley, with regard to internal audit outsourcing, may have been over-reactionary and may continue to hinder both companies and their auditors.
    Keywords: independence; objectivity; Sarbanes Oxley Act,; FSMA section 166; non audit services
    JEL: G21 G28 G3 K2 M4
    Date: 2013–11–07
  16. By: Bertrand Chopard; Thomas Cortade; Eric Langlais
    Abstract: This paper provides an analysis of two damage rules (Lost Pro…fit versus Unjust Enrichment) introduced in the French Code de la Propriété Intellectuelle in 2007 (Loi du 27 Octobre 2007, Art. L. 615-7). We use a simple sequential game where both the decisions to infringe and to enforce the patent, as well as the decisions to accomodate, settle or litigate the case, and the outputs decisions (Cournot competition) are endogenous. We characterize the equilibria associated with each rule, and compare their properties. We show that: 1/ the Unjust Enrichment rule provides Patentees with higher damages compensation than the Lost Pro…fit one; however, 2/ Lost Profi…t induces more deterrence of infringement, and is associated with less trials than Unjust Enrichment; 3/ Unjust Enrichment may deter the Patentee to enforce his right; 4/ when there is a positive probability that the case settles, Patentee's expected utility is higher under Lost Profi…t than under Unjust Enrichment.
    Keywords: lost profi…t rule, unjust enrichment rule, intellectual property rights, patent litigations, pretrial negotiations
    JEL: L1 L4 D8 K2 K4
    Date: 2013
  17. By: Rita Almeida; Pedro Carneiro, Renata Narita
    Abstract: There is an open debate on how governments can help the creation of higher quality jobs. This paper explores unique administrative data on the enforcement of labor market regulations across Brazilian cities between 1996 and 2006 to analyze this topic. We proxy job quality with several attributes going beyond wages and formality of the work contract. In the context of a strictly regulated labor market, we find robust evidence of (i) a strong trade-off between the provision of mandated non-wage benefits and wage levels, on the one hand, and the provision of optional job benefits on the other, and (ii) more formality leads to higher mean wages in the economy. We argue that enforcement policies can increase welfare depending on how workers value the benefits they get through formal channels vis-à-vis wages and optional benefits.
    Keywords: Enforcement of labor regulations; Informal sector; Job quality
    JEL: J2 J3 K31 O17
    Date: 2013–11–28

This issue is ©2013 by Eve-Angeline Lambert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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