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on Law and Economics |
| By: | Michael Bradley; Irving Arturo De Lira Salvatierra; G. Mitu Gulati |
| Abstract: | The claim that lawyers act as gatekeepers or certifiers in financial transactions is widely discussed in the legal literature. There has, however, been little empirical examination of the claim. We test the hypothesis that law firms have replaced investment banks as the gatekeepers of the market for sovereign debt. Our results suggest that hiring outside law firms sends a negative signal to the market regarding the pending issuance; a finding that is inconsistent with the thesis that outside law firms primarily play a certification role in the sovereign debt market. |
| Keywords: | Lawyers, Gatekeepers, Reputational Intermediaries, Sovereign Debt |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:duk:dukeec:13-25&r=law |
| By: | Leonid Polishchuk (Department of Economics and Laboratory for Applied Analysis of Institutions and Social Capital, NRU Higher School of Economics (Moscow, Russia)); Georgiy Syunyaev (Department of Economics and Laboratory for Applied Analysis of Institutions and Social Capital, NRU Higher School of Economics) |
| Abstract: | We provide a theory and empirical evidence showing that the rotation of ruling elites in combination with elites' asset ownership could improve property rights protection, and that such association holds for non-democratic political regimes when it is based on elites' concerns about security of their own property rights in the event they lose power. Such incentives provide a solution to the credible commitment problem in maintaining secure property rights when institutional restrictions on expropriation are weak or absent. |
| Keywords: | Endogenous property rights, credible commitment, ``stationary bandit'' |
| JEL: | K11 O17 P14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:43/ec/2013&r=law |
| By: | Arguedas, Carmen (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Earnhart, Dietrich (Department of Economics, University of Kansas); Rousseau, Sandra (Center of Economic Studies, K.U.Leuven, Naamsestraat 69, B-3000 Leuven, Belgium,) |
| Abstract: | Effluent limits are frequently based on a uniform emission standard, which applies to all polluting facilities within a single industry. However, the implementation of many environmental protection laws does not lead to uniform effluent limits due to considerations of local environmental conditions. In this paper, we theoretically examine the relationships among the stringency of effluent limits imposed on individual polluting facilities, environmental protection agencies’ monitoring decisions, and the ambient quality of the local environment. We then extend the theoretical analysis by exploring the establishment of effluent limits when (1) the national emission standard represents only an upper bound on the local issuance of limits and (2) negotiation efforts expended by both regulated polluting facilities and environmentally concerned citizens play a role. We find that the negotiated discharge limit depends on the political weight enjoyed and the negotiation effort costs faced by both citizens and the regulated facility, along with the stringency of the national standard and local ambient quality conditions. |
| Keywords: | effluent limits; monitoring; inspections; environmental permits; wastewater; compliance. |
| JEL: | K42 L51 Q53 Q58 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:uam:wpaper:201308&r=law |
| By: | McIntyre, Stuart G |
| Abstract: | Becker (1968) and Stigler (1970) provide the germinal works for an economic analysis of crime, and their approach has been utilised to consider the response of crime rates to a range of economic, criminal and socioeconomic factors. Until recently however this did not extend to a consideration of the role of personal indebtedness in explaining the observed pattern of crime. This paper uses the Becker (1968) and Stigler (1970) framework, and extends to a fuller consideration of the relationship between economic hardship and theft crimes in an urban setting. The increase in personal debt in the past decade has been significant, which combined with the recent global recession, has led to a spike in personal insolvencies. In the context of the recent recession it is important to understand how increases in personal indebtedness may spillover into increases in social problems like crime. This paper uses data available at the neighbourhood level for London, UK on county court judgments (CCJ's) granted against residents in that neighbourhood, this is our measure of personal indebtedness, and examines the relationship between a range of community characteristics (economic, socio-economic, etc), including the number of CCJ's granted against residents, and the observed pattern of theft crimes for three successive years using spatial econometric methods. Our results confirm that theft crimes in London follow a spatial process, that personal indebtedness is positively associated with theft crimes in London, and that the covariates we have chosen are important in explaining the spatial variation in theft crimes. We identify a number of interesting results, for instance that there is variation in the impact of covariates across crime types, and that the covariates which are important in explaining the pattern of each crime type are largely stable across the three periods considered in this analysis. |
| Keywords: | Spatial econometrics, Theft crime, Personal debt default, Economic conditions, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:524&r=law |
| By: | Lofstrom, Magnus (Public Policy Institute of California); Raphael, Steven (University of California, Berkeley) |
| Abstract: | We evaluate the effect of perhaps the largest exogenous decline in a state's incarceration rate in U.S. history on local crime rates. We assess the effects of a recent reform in California that caused a sharp and permanent reduction in the state's incarceration rate. We exploit the large variation across California counties in the effect of this reform on county-specific prison incarceration rates. We find very little evidence of an effect of the large reduction in incarceration rates on violent crime and evidence of modest effects on property crime, auto theft in particular. These effects are considerably smaller than existing estimates in the literature based on panel data for periods of time when the U.S. incarceration rate was considerably lower. We corroborate theses cross-county results with a synthetic-cohort analysis of state crime rates in California. This state-wide analysis confirms our findings from the county-level analysis. In conjunction with existing published research, the results from this study support the hypothesis of a crime-prison effect that diminishes with the scale of incarceration. |
| Keywords: | crime, incapacitation, incarceration, prison, realignment, reform |
| JEL: | K40 K42 H11 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7838&r=law |
| By: | Enrico Alemani; Caroline Klein; Isabell Koske; Cristiana Vitale; Isabelle Wanner |
| Abstract: | This paper presents the new OECD competition law and policies (CLP) indicators which measure the strength and scope of competition regimes in 49 jurisdictions (OECD and non-OECD). The indicators cover areas for which there is a broad consensus among member countries on what constitutes ‘good’ practice for competition regimes. The results suggest that competition regimes are broadly similar across countries in these areas because most countries have adopted all or a large number of the ‘good’ policy settings captured by the indicators. On average, the design of competition laws and policies appears to be closer to best practice in OECD countries than in non-OECD countries. Jurisdictions differ relatively more on the enforcement of competition law than on the competition law itself. Nouveaux indicateurs des lois et politiques de la concurrence en 2013 pour les pays de l'OCDE et non-OCDE Cet article présente les nouveaux indicateurs des lois et politiques de la concurrence (CLP) de l'OCDE portant sur la solidité et la portée des régimes de concurrence dans 49 juridictions (OCDE et non-OCDE). Les indicateurs couvrent des domaines pour lesquels il existe un large consensus entre les pays membres sur ce qui constitue une «bonne» pratique pour les régimes de concurrence. Les résultats suggèrent que les régimes de concurrence sont globalement similaires dans ces domaines parce que la plupart des pays ont adopté la totalité ou une grande partie des « bonnes » pratiques captées par les indicateurs. En moyenne, la conception des lois et des politiques de la concurrence semble se rapprocher davantage des bonnes pratiques dans les pays de l'OCDE que dans les pays non membres. Les juridictions diffèrent relativement plus sur l'application du droit de la concurrence que sur le droit de la concurrence per se. |
| Keywords: | competition law and policy, indicators, lois et politiques de la concurrence, indicateurs |
| JEL: | K21 L4 |
| Date: | 2013–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1104-en&r=law |
| By: | Liang, H.; Renneboog, L.D.R. (Tilburg University, Center for Economic Research) |
| Abstract: | Abstract: We investigate the roles of legal origins and political institutions – believed to be the fundamental determinants of economic outcomes – in corporate social responsibility (CSR). We argue that CSR is an essential path to economic sustainability, and document strong correlations between country-level sustainability ratings and various extensive firm-level CSR ratings with global coverage. We contrast the different views on how legal origins and political institutions affect corporations’ tradeoff between shareholder and stakeholder rights. Our empirical evidence suggest that: (a) Legal origins are more fundamental sources of CSR adoption and performance than firms’ financial and operational performance; (b) Among different legal origins, the English common law – widely believed to be mostly shareholder-oriented – fosters CSR the least, (c) Within the civil law countries, firms of countries with German legal origin outperform their French counterparts in terms of ecological and environmental policy, but the French legal origin firms outperform German legal origin companies in social issues and labor relations. Companies under the Scandinavian legal origin score highest on CSR (and all its subfields); (d) Political institutions – democratic rules and constraints to political executives – are not preconditions for CSR and sustainability, and sometimes even hinder CSR implementation. Our results are robust after controlling for corporate governance, culture, firm-level financial performance and constraints, and different indices of political institutions. |
| Keywords: | Corporate social responsibility;sustainability;legal origins;political institutions;shareholder orientation;stakeholder orientation |
| JEL: | G30 K22 M14 O10 O57 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2013070&r=law |
| By: | Christmann, Robin (Helmut Schmidt University, Hamburg) |
| Abstract: | Judges become ambitious decision makers when they face appellate review. This paper applies a contract theoretic perspective to the behavior of self-interested trial judges in a two-level court system and analyzes the consequences for contracting in “the shadow of” the court. Confronted with the factual ambiguity of an assigned case, rational judges pursue an (privately) optimal strategy to conclude the dispute and tip the scales of the trial outcome. We show that even if judges generally dislike errors and have no personal preference for a specific party, these effects of judicial agency manipulate the implemented court accuracy and degrade the contract outcome. Our implications put into perspective the traditional function of appellate courts to foster the accuracy of enforcement and identify the need for a complex measurement of judicial performance. The model also reveals that a judicial tendency to conclude lawsuits in the conciliatory hearing may overly strain contract output. |
| Keywords: | court error; judicial behavior; reputation; contract theory |
| JEL: | C72 K12 K41 |
| Date: | 2013–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:ris:vhsuwp:2013_137&r=law |
| By: | Yuzhe Zhang (Texas A&M University); Matthew Mitchell (University of Toronto) |
| Abstract: | We study how best to reward innovators whose work builds on earlier innovations. Incentives to innovate are obtained by offering innovators the opportunity to profit from their innovations. Since innovations compete, awarding rights to one innovator reduces the value of the rights to prior innovators. We show that the optimal allocation involves shared rights, where more than one innovator is promised a share of profits from a given innovation. We interpret such allocations in three ways: as patents that infringe on prior art, as licensing through an optimally designed ever-growing patent pool, and as randomization through litigation. We contrast the rate of technological progress under the optimal allocation with the outcome if sharing is prohibitively costly, and therefore must be avoided. Avoiding sharing initially slows progress, and leads to a more variable rate of technological progress. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed013:678&r=law |
| By: | Enamorado, Ted; Lopez-Calva, Luis F.; Rodriguez-Castelan, Carlos |
| Abstract: | Scholars have often argued that crime deters growth, but the empirical literature assessing such effect is scarce. By exploiting cross-municipality income and crime data for Mexico -- a country that experienced a high increase in crime rates over the past decade -- this study circumvents two of the most common problems faced by researchers in this area. These are: (i) the lack of a homogenous, consistently comparable measure of crime and (ii) the small sample problem in the estimation. Combining income data from poverty maps, administrative records on crime and violence, and public expenditures data at the municipal level for Mexico (2005-2010), the analysis finds evidence indicating that drug-related crimes indeed deter growth. It also finds no evidence of a negative effect on growth from crimes unrelated to drug trafficking. |
| Keywords: | Crime and Society,Public Sector Corruption&Anticorruption Measures,Achieving Shared Growth,International Terrorism&Counterterrorism,Corruption&Anticorruption Law |
| Date: | 2013–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6730&r=law |
| By: | Julie Bower; Howard Cox |
| Abstract: | We present an historic industry study of the consolidation of the UK alcoholic beverages firms to inform debates in organisation studies relating to co-evolution and the dynamics of internationalisation. We distinguish behavioural and structural co-evolutionary factors in firms’ strategic intent, mirroring the two types of remedies that competition authorities can impose on merging firms. We test this theoretical construct in an empirical investigation of the consolidating UK alcoholic beverages firms between 1985 and 2005. In this era Diageo was formed from the landmark merger of Grand Metropolitan and Guinness. Subsequently Diageo acquired the former international spirits empire of Seagram in partnership with a major competitor. Successful implementation of Diageo’s merger strategy owed much to an ability to navigate the evolving multijurisdictional co-ordinated oversight of cross-border mergers and acquisitions. The formation of novel deal structures as well as co-operation with competitors to circumvent policy intervention were significant co-evolutionary mechanisms that have featured more generally in subsequent international mergers as others have copied these deal structures to achieve similar regulatory outcomes. |
| Keywords: | Alcoholic beverages; Co-evolution; Competition policy; Merger regulation |
| JEL: | K21 L22 L66 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cgs:wpaper:48&r=law |
| By: | Olympia Bover (Banco de España); Jose Maria Casado (Banco de España); Sonia Costa (Banco de Portugal); Philip Du Caju (National Bank of Belgium, Research Department); Yvonne McCarthy (Central Bank of Ireland); Eva Sierminska (CEPS / INSTEAD Research Institute); Panagiota Tzamourani (Bank of Greece; Deutsche Bundesbank); Ernesto Villanueva (Banco de España); Tibor Zavadil (National Bank of Slovakia) |
| Abstract: | The aim of this paper is twofold. First, we present an up-to-date assessment of the differences across euro area countries in the distributions of various measures of debt conditional on household characteristics. We consider three different outcomes: the probability of holding debt, the amount of debt held and, in the case of secured debt, the interest rate paid on the main mortgage. Second, we examine the role of legal and economic institutions in accounting for these differences. We use data from the first wave of a new survey of household finances, the Household Finance and Consumption Survey, to achieve these aims. We find that the patterns of secured and unsecured debt outcomes vary markedly across countries. Among all the institutions considered, the length of asset repossession periods best accounts for the features of the distribution of secured debt. In countries with longer repossession periods, the fraction of people who borrow is smaller, the youngest group of households borrow lower amounts (conditional on borrowing), and the mortgage interest rates paid by low-income households are higher. Regulatory loan-to-value ratios, the taxation of mortgages and the prevalence of interest-only or fixed-rate mortgages deliver less robust results. |
| Keywords: | Household debt and interest rate distributions, Time to Foreclose, Taxation, Loan-to-Value ratios, Fixed rate mortgages, Financial literacy |
| JEL: | D14 G21 G28 K35 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201312-252&r=law |