New Economics Papers
on Law and Economics
Issue of 2014‒01‒10
fifteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The soundness of judicial argumentation By Alexander E. Chuvilin
  2. The Construction of Morals By Daniel L. Chen; Susan Yeh
  3. Electronic Identity in Europe: Legal challenges and future perspectives By Norberto Andrade; Shara Monteleone; Aaron Martin
  4. Financial Crisis as a Catalyst of Legal Reforms : The Case of Asia By Masahiro Kawai; Henrik Schmiegelow
  5. Assessing access problems in online media platforms By Valcke, Peggy; Wahyuningtyas, Sih Yuliana; Graef, Inge
  6. Role of regulation in micro finance: application of the Micro Savings Requirement Scheme in informal sectors By Marianne, Ojo
  7. Human Trafficking and Regulating Prostitution By Lee, Samuel; Persson, Petra
  8. Regulatory fallacies in global telecommunications: The case of international mobile roaming By Knieps, Günter; Zenhäusern, Patrick
  9. Role of labour regulation and reforms in India : country case study on labour market segregation By Papola, Trilok Singh
  10. Swedish Wealth Taxation, 1911–2007 By Du Rietz, Gunnar; Henrekson, Magnus
  11. Audits, audit quality and signalling mechanisms: concentrated ownership structures By Marianne, Ojo
  12. Portuguese labour law and industrial relations during the crisis By Rosário Palma Ramalho, Maria do
  13. CFC legislation, passive assets and the impact of the ECJ’s Cadbury-Schweppes decision By Martin Ruf; Alfons J. Weichenrieder
  14. Electronic communications regulation in Europe: An overview of past and future problems By Parcu, Pier Luigi; Silvestri, Virginia
  15. “OLD TESTAMENT” MORALITY AND THE “TRADITIONAL” FAMILY By Konstantin Yanovskiy; Sergey Shulgin

  1. By: Alexander E. Chuvilin (National Research University Higher School of Economics)
    Abstract: One of the main aims for the argumentation theorists around the world is to define standards for the soundness of argumentation. Many authors, such as Chaim Perelman or Steven Toulmin, have emphasized the role that the field of argumentation plays in defining such standards. Judicial argumentation is strongly connected with legal procedure and substantive laws. But can we say that some rules of judicial argumentation are vested in legal rules? Can we derive standards of judicial argumentation from substantive and procedural laws? This paper answers these questions on the basis of Russian and US legislation. The present treatise is aimed at outlining the main aspects of the problem and elaborating directions for future research
    Keywords: Courts, Russian civil procedure, US civil procedure, legal argumentation, standards of soundness
    JEL: K40
    Date: 2013
  2. By: Daniel L. Chen (ETH Zurich); Susan Yeh (George Mason University School of Law)
    Abstract: When do policies generate expressive or backlash effects? Recent economic models suggest that where a proscribed activity is prevalent, permissive laws liberalize attitudes toward partakers while increasing utility. The opposite occurs in communities where the proscribed activity is rare. To test these predictions, we randomize data entry workers to transcribe newspaper summaries of liberal or conservative court decisions about obscenity. We find that liberal obscenity decisions liberalize individual and perceived community standards and increase utility. Yet religious workers become more conservative in their values, identify as more Republican, view community standards as becoming more liberal, and report lower utility. Workers update beliefs about the prevalence of sexual activities differently in response to liberal or conservative decisions. These results provide causal evidence for the law having indirect social effects that may amplify or attenuate deterrence effects and suggest that legitimacy of law can affect utility and self-identification. Length: 58
    Keywords: obscenity law, belief updating, values, norms, sexual risk
    JEL: D83 K1 K42 Z1
    Date: 2013–11
  3. By: Norberto Andrade (European Commission – JRC - IPTS); Shara Monteleone (European Commission – JRC - IPTS); Aaron Martin (European Commission – JRC - IPTS)
    Abstract: This deliverable presents the work developed by the IPTS eID Team in 2012 on the large-encompassing topic of electronic identity. It is structured in four different parts: 1) eID: Relevance, Legal State-of-the-Art and Future Perspectives; 2) Digital Natives and the Analysis of the Emerging Behavioural Trends Regarding Privacy, Identity and Their Legal Implications; 3) The "prospective" use of social networking services for government eID in Europe; and 4) Facial Recognition, Privacy and Identity in Online Social Networks. In the following, the main findings and arguments related to each of these parts are summarized.
    Keywords: electronic identity, data protection, privacy, European regulation, interoperability, social networks, anonymity, digital natives, impact assessment, security, profiling.
    JEL: K32 K36 K42 L96 M48 O20 O33
    Date: 2013–12
  4. By: Masahiro Kawai (Asian Development Bank Institute (ADBI)); Henrik Schmiegelow
    Abstract: This paper discusses how financial crises in emerging Asia and Japan worked as catalysts for legal reforms. The responses of six Asian countries with different legal histories to financial crises that posed similar challenges are of both legal and economic interest. We first provide a theoretical framework that focuses on law and economics. We then review the basic approaches adopted by the Asian countries affected by financial crises in 1997–1998 to bank and corporate restructuring and to legal and other reforms. Finally we examine indicators that measure the quality of legal institutions (regulatory quality, rule of law, and control of corruption) for the six countries to determine whether these indicators show improvement over time. We find that all six countries pursued significant legal and judicial reforms, but the indicators exhibit mixed results : the Republic of Korea shows clear improvements in all aspects, while the Philippines exhibits clear deterioration and Indonesia indicates a steep decline followed by remarkable improvement. We argue that reforms of the economic laws alone cannot improve the quality of entire legal and judicial systems of countries. What matters is the enforcement of substantive law by procedural law, the efficiency of the justice system, and other political and social factors. In the case of Indonesia, Malaysia, and the Philippines, the colonial “transplant effect†of Western legal systems may have made the implementation of laws a significant challenge. In Thailand, implementation was affected by the “yellow shirts†(anti-Thaksin) versus “red shirts†(pro-Thaksin) conflict. Long time lags, perhaps of several decades, may be needed to observe how de jure changes to substantive laws lead to de facto improvements of legal institutions.
    Keywords: Financial crises, legal reforms, Japan, emerging Asia, the quality of legal institutions, regulatory quality, rule of law, and control of corruption`
    JEL: G01 G28 G33 K40 O16 O43
    Date: 2013–11
  5. By: Valcke, Peggy; Wahyuningtyas, Sih Yuliana; Graef, Inge
    Abstract: [Introduction] Since several years companies in the internet economy have been offering online media platforms such as YouTube, Google and Facebook. These platforms are multi-sided markets. Instead of targeting one customer group, platform providers are competing for users, advertisers and developers. The fact that the platforms are offered exclusively on the internet, distinguishes them from other multi-sided markets such as the newspaper industry. Furthermore, contrary to ‘traditional’ companies in the information technology sector like Intel and Microsoft, platform providers do not bring their technology to the market but rely on deriving benefits from valuable information they collect about their users. By preventing users from exporting their data to competing platforms and by blocking competitors from accessing the user data on their platforms, these providers may gain such a powerful position allowing them to control the market to the detriment of effective competition and consumer welfare. This paper aims to analyze how European competition law may intervene to redress access problems in these multi-sided markets. In the first part of the paper, economic literature on two-sided markets will be studied in order to analyze how the multi-sided nature of online media platforms impacts the legal assessment of anticompetitive behaviour. The analysis on competition law issues will highlight market definition for multi-sided platforms, multi-sided nature and access to users, and merger assessment. In the second part of the paper, a comparative law approach will be used to study how European competition law can approach access issues in online media platforms. While there is no decision or judgment on these issues yet in the European Union, a few private antitrust cases dealing with these problems have already occurred in the United States. The US cases will be discussed and it will be analyzed whether EU competition authorities and courts will take the same approach. --
    Date: 2013
  6. By: Marianne, Ojo
    Abstract: This paper not only addresses how linkages, direct and facilitating linkages, can benefit microfinance institutions – and particularly in jurisdictions where the Savings Group Outreach involvement is particularly low, but also illustrates ways and means whereby group lending and other more recent innovative methods used by micro lenders to secure repayments, could increase the desired effects, efficiency and impact of microfinance in selected jurisdictions. In so doing, it addresses some of the existing and persisting problems of micro finance in rural areas. An innovative aspect of the paper is evidenced through its recommendation of the Micro-Savings Requirement Scheme - which offers numerous benefits – as will be highlighted in this paper.
    Keywords: microfinance; regulation; agency theory; micro-savings requirement scheme.
    JEL: D8 G2 K2
    Date: 2013–11–06
  7. By: Lee, Samuel (New York University); Persson, Petra (Research Institute of Industrial Economics (IFN))
    Abstract: We study sex trafficking in a marriage market model of prostitution. When traffickers can coerce women to sell sex, trafficked prostitutes constitute a non-zero share of supply in any unregulated market for sex. We ask if regulation can eradicate trafficking and restore the equilibrium that would arise in an unregulated market without traffickers. While all existing approaches – criminalization of prostitutes (“the traditional model”), licensed prostitution (“the Dutch model”), and criminalization of johns (“the Swedish model”) – fail to accomplish this goal, we show that there exists an alternative regulatory model that does. Political support for regulation hinges on the level of gender income inequality.
    Keywords: Prostitution; Trafficking; Contemporary slavery; Marriage; Illegal goods
    JEL: D10 J16 J47 J49 K14 K23
    Date: 2013–12–13
  8. By: Knieps, Günter; Zenhäusern, Patrick
    Abstract: International mobile roaming cartel agreements prompted the EU to intervene, firstly encompassing competition law measures by a cartel exemption, then initiating several competition proceedings based on the accusation of abuse of a dominant market position, and finally applying price regulations of increasing scope. The paper exposes the temporary market power regulations, including the designated local break out measures, as insufficient and misleading. The solution is to solve the cartel problem at its root, permitting visiting customers the freedom of choosing between their home operator and alternative carriers from the visited country by the implemention of carrier portability. --
    JEL: K21 L51 L96
    Date: 2013
  9. By: Papola, Trilok Singh
    Keywords: labour market, labour market segmentation, labour flexibility, labour legislation, comment, India, marché du travail, segmentation du marché du travail, flexibilité du travail, législation du travail, commentaire, Inde, mercado de trabajo, segmentación del mercado de trabajo, flexibilidad del trabajo, legislación del trabajo, comentario, India
    Date: 2013
  10. By: Du Rietz, Gunnar (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: This paper studies the evolution of modern Swedish wealth taxation since its introduction in 1911 until it was abolished in 2007. It offers a thorough description of the rules concerning valuation of assets, deductions/exemptions and tax schedules to characterize effective wealth tax schedules for the period 1911–2006. These rules and schedules are used to calculate marginal and average wealth tax rates for the whole period for a number of differently endowed owners of family firms and individual fortunes. The overall trend in the direct wealth tax was rising until 1971 for owners of large and middle-sized firms and for individuals of similar wealth consisting of non-corporate assets. Average direct wealth tax rates were low until 1934, except for 1913 when a temporary extra progressive defense tax was levied. There were three major tax hikes: in 1934, when the wealth tax was more than doubled, in 1948 when tax rates doubled again and in 1971 for owners of large firms and similarly sized non-corporate fortunes. Effective tax rates peaked in 1973 for owners of large firms and in 1983 for individuals with large non-corporate wealth. Reduction rules limited the wealth tax rates from 1934 for fortunes with high wealth/income ratios. The wealth tax on unlisted net business equity was abolished in 1991. Tax rates for wealthy individuals were decreased in 1991 and in 1992 and then remained at 0.51 percent until 2006, depending on whether the reduction rule was applicable. Tax rates for small-firm owners and small individual fortunes were substantially lower, but the tax difference was much smaller when owners of large fortunes could benefit from the reduction rules. The effective wealth tax was much greater if firm owners had to finance wealth tax payments through additional dividend payouts. In such cases the effective total wealth taxes were affected by high marginal income tax rates and peaked at extremely high levels in the 1970s and 1980s. Towards the end of the wealth tax regime, aggregate wealth tax revenues were relatively small: it never exceeded 0.4 percent of GDP in the postwar period and amounted to 0.16 percent of GDP in 2006.
    Keywords: Wealth tax; Tax avoidance; Entrepreneurship
    JEL: D31 H20 K34
    Date: 2014–01–02
  11. By: Marianne, Ojo
    Abstract: Do jurisdictions with concentrated ownership structures require less reliance on audits as corporate governance mechanisms and devices? Why do concentrated ownership structures still prevail in certain jurisdictions which are considered to be “market based corporate governance systems”? More importantly, if failures and causes of recent financial crises are principally attributable to the fact that market based corporate governance mechanisms, such as financial regulators, are not optimally performing their functions, why is the role of audits still paramount in such jurisdictions? These are amongst some of the questions which this paper attempts to address. The ever increasing growth of institutional investors in jurisdictions – particularly those jurisdictions with predominantly concentrated ownership structures, with their increased stakes in corporate equity, also raises the issue of accountability and the question as regards whether increased accountability is fostered where institutional investors assume a greater role – as opposed to position which exists where increased stake of family holdings (family controlled structures) arises.
    Keywords: audit quality; corporate governance; concentrated ownership structures; capital market economies; institutional investors
    JEL: D8 E5 G3 K2 M4
    Date: 2013–12–28
  12. By: Rosário Palma Ramalho, Maria do
    Keywords: labour relations, social dialogue, collective bargaining, employment, labour legislation, comment, economic recession, Portugal, relations de travail, dialogue social, négociation collective, emploi, législation du travail, commentaire, récession économique, Portugal, relaciones laborales, diálogo social, negociación colectiva, empleo, legislación del trabajo, comentario, recesión económica, Portugal
    Date: 2013
  13. By: Martin Ruf (Eberhard Karls Universität Tübingen); Alfons J. Weichenrieder (Goethe Universität Frankfurt)
    Abstract: In its Cadbury-Schweppes decision of 12 September 2006 (C-196/04), the ECJ decided that the UK CFC rules, which were implemented to subject low taxed passive income of foreign affiliates to UK corporate tax, implied an infringement of the freedom of establishment. Consequently, many EU countries including Germany changed their legislation. The paper discusses to which extent the ECJ ruling has impacted on the allocation of passive assets in German multinationals. Using firm level data we find evidence for an increased preference for low-tax European countries compared to non-European countries.
    Keywords: European Court of Justice, corporation tax, foreign direct investment, CFC regulation, passive investment
    JEL: H25 H73
    Date: 2013
  14. By: Parcu, Pier Luigi; Silvestri, Virginia
    Abstract: For many years electronic communications has been one of the most important areas of policy intervention for the European Union. Liberalisation and privatisation of the telecommunications industry have been very important topics of the policy debate in the two decades starting from 1990 to 2010. In these years the EU developed a sophisticated regulatory framework inspired to the principle of favouring entrance of new players in the sector and characterised by a strong pro-competition flavour. More recently, however, the necessity to mobilise important investments for the creation of new Next Generation Networks, capable of delivering to European citizens all the benefits of the digital revolution, has shed doubts on the validity of the established framework. This paper discusses the solutions adopted during the liberalisation process and summarizes some of the key future challenges to the existing regulatory framework. --
    JEL: K23 L43 L51 L96
    Date: 2013
  15. By: Konstantin Yanovskiy (Gaidar Institute for Economic Policy); Sergey Shulgin (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: In this paper we consider questions of morality as a factor impacting trust in society, as an important element of the “soft” infrastructure. Morality is the institution which, if it is maintained in an appropriate condition, is capable of significantly raising the efficacy level of the basal institutions, including the institution of private property. Morality is often gestured toward in political and research discussions, for instance, for purposes of eliminating or establishing artificial borders and constraints upon freedom of discussion. Morality raises the level of trust among market agents, both among those directly acquainted with each other and among those who have never met each other before but hold the same moral views in common. Besides, morality lowers the costs of constructing and implementation of formal institutions which protect private property, as well as institutions friendly to the market. The Government’s pushing out the institution of the family and societal morality is largely bound up with the common mechanism for transferring individual responsibility to society, and the responsibility of society to the Government. The Government is interested in maximum resource use and maximal control. Bringing Government controls to a maximum possible level runs counter to the existence of any limitations, among which morality is the most powerful and most stable one. The foundation of the “liberation” of the individual from responsibility and from morality hails from the stimuli spawned by the institution of universal suffrage.
    Keywords: soft infrastructure, universal moral values, to support private property, to deter redistribution; moral arguments vs. economic efficiency.
    JEL: B41 B52 J12 K36 H56 Z12
    Date: 2013

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