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on Law and Economics |
| By: | Haar, Brigitte |
| Abstract: | The European Commission recently put forward a proposal for a regulation to amend and strengthen the 2009 version of the EU's rules on the regulation of credit rating agencies (CRA3). Among other things, Art. 35a of the draft proposal introduces strict liability for rating agencies. This liability proposal is at odds with the aim to strengthen competition in the rating sector and could have a chilling effect on capital markets. The paper analyses existing rules on civil liability of rating agencies under different legal systems. Subsequently, the provision under Art. 35a of the Draft Proposal is examinded more closely. Suggestions on possible improvemts of the proposal are made. -- |
| Keywords: | CRA3,Rating Agencies,contractual liability,regulation |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewh:1&r=law |
| By: | Friedrich Schneider; Alexandra Rudolph (Ruprecht-Karl-University Heidelberg) |
| Abstract: | Worldwide human trafficking (HT) is the third most often registered international criminal activity, ranked only after drug and weapon trafficking. The aim of the paper is to measure the extent of HT inflows to destination countries. It proposes the application of the Multiple Indicators Multiple Causes (MIMIC) structural equation model in order to include potential causes and indicators in one model and generate an index of the intensity of HT in destination countries. Thus, we account for the unobservable nature of the crime as well as for visible aspects that both shape the extent of it. By including both dimensions of the trafficking process the model is applied over a period of ten years. The resulting measure orders 142 countries between 2000 and 2010 according to their potential of being a destination country based on characteristics of the trafficking process. The results are that OECD countries are the most likely destination countries while developing countries are less likely. |
| Keywords: | Human trafficking, MIMIC models, latent variable, structural equation models |
| JEL: | C39 F22 K42 K49 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2013_25&r=law |
| By: | Igor Mouraviev (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | The article seeks to fill the gap between tacit and explicit collusion in a setting where firms observe only their own output levels and a common price, which includes a stochastic component. Without communication, firms fail to discriminate between random shocks and marginal deviations, which constrains the scope for collusion. By eliminating uncertainty about what has happened, communication facilitates detection of deviations but reduces collusive profi?ts due to the risk of exposure to legal sanctions. With the optimal collusive strategy, firms communicate only if the market price falls somewhat below the trigger price. Moreover, they tend to communicate more often as they become less patient, a cartel grows in size, or demand uncertainty rises. |
| Keywords: | Collusion, Communication, Imperfect Monitoring, Frequency of Meetings |
| JEL: | D82 L41 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:494&r=law |
| By: | Muehlenbachs, Lucija (Resources for the Future); Staubli, Stefan; Cohen, Mark A. |
| Abstract: | This paper provides new insights into the productivity of teams and the relationship between the inspector and the inspected party by examining data on inspections of oshore oil and gas platforms in the Gulf of Mexico. We exploit weather patterns that only influence the number of inspectors that are sent to inspect a platform and show that inspector group size matters; an additional inspector results in more severe sanctions being issued. We also exploit the agglomeration of two inspection offices to examine the effect of reducing the familiarity between an inspector and an inspected party; we find that reducing the inspector-offender relationship also results in more severe sanctions being issued. Combined, these findings are consistent with regulatory capture and related concerns about insulating inspectors from undue influence by those they are supposed to monitor. Using these shifts in sanction severity we also estimate the effectiveness of increasing enforcement on the deterrence of incidents, such as oil spills, res, injuries, or fatalities. We only find weak evidence that increasing sanction severity increases deterrence. |
| Keywords: | insepctions, enforcement, offshore oil, environmentl |
| JEL: | Q58 K42 |
| Date: | 2013–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-13-36&r=law |
| By: | Angelucci, Charles; Meraglia, Simone |
| Abstract: | We build a model to investigate the interaction between trade, the supply of law and order, and the nature of governing political institutions. To supply law and order necessary for a representative merchant to create wealth, a ruler (i) appoints officials capable of coercion and (ii) introduces a system of taxation. When potential gains from trade are important, the demand for law and order is high but appointing numerous officials capable of coercion may pave the way to arbitrary and distortive expropriation. Delegating the task of appointing offi- cials to the better-informed merchant lowers the cost of sustaining good market institutions, but exacerbates the latter's temptation to escape taxation. When gains from trade are instead low delegation never occurs. Our theory provides a rationale for the case of post-Norman Conquest England (1066-1307) where, in parallel with the rise of trade, kings increasingly give in to the citizens' desire of self-governance by granting Charters of Liberties. |
| Keywords: | Institutions, Law Enforcement, Trade, Delegation, Taxation, Bureaucracy |
| JEL: | D02 D23 D73 P14 P16 |
| Date: | 2013–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:27726&r=law |
| By: | Michelle Everson; Christian Joerges |
| Abstract: | This discussion of the ECJ in the context of a project on political representation in the EU responds to the Court’s changing functions in the integration process and also to the critique which the exercise of this function has provoked in recent years after the Court objected to constitutional provisions and legislation of constitutional status in particular in the sphere of labour law and social protection. The ECJ has been accused of partisanship with a neoliberal-monetarist agenda. These debates are bound to extend to the new functions which were assigned to the CJEU in the supervision of the budgetary discipline of Member States in the Euro zone. The problems that might arise in such a case have been foreshadowed by the recent jurisprudence on the legality of the European practices of crisis management. The judgments of the German Bundesverfassungsgericht of 12 September 1212 on the ESM Treaty and the Fiscal Compact and the CJEU Judgment of 27 November 2012 in the Pringle case are of exemplary importance. They document the difficulties both courts have with the defense of the autonomy of law against apparent functional necessities and concurring attitudes in the readiness to accept the primacy of the political. |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:63&r=law |
| By: | HAMAMOTO Shotaro |
| Abstract: | In treaty-based investment arbitration, tribunals quite often render their awards referring to the protection of the investor's legitimate expectations. A number of tribunals deal with this issue in the context of the application of the fair and equitable treatment clause and argue that the clause is (not) violated because the investor's legitimate expectations are (not) frustrated. Tribunals consider that such expectations are generated by conducts (or omissions) by the host State when the investor decides to make investment in reliance of such conducts by the host State. Early tribunals found a frustration of the investor's legitimate expectations in cases where the host State modified its domestic laws and regulations in reliance of which the investor had decided to make investment. However, recent tribunals tend to consider that a more specific representation by the host State is required to find a violation of the fair and equitable treatment clause. The question is how to justify such conclusion on the basis of the notoriously vague notion of fair and equitable treatment. An interesting explanation was furnished by Total v. Argentina (2010), in which the tribunal considered that relevant treaty provisions should be interpreted taking into account a general principle of law protecting the investor's legitimate expectations, in light of Article 31(3)(c) of the Vienna Convention on the Law of Treaties. Several comparative law studies reveal that this solution is quite valid. Furthermore, this approach will be an effective response to a number of questions and doubts manifested in respect of the legitimacy of treaty-based investment arbitration. Needless to say, there remain difficult theoretical and technical problems regarding the identification of general principles of law, which necessitate further research. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:14002&r=law |
| By: | Raffaella Sadun |
| Abstract: | Regulations aimed at curbing the entry of large retail stores have been introduced in many countries to protect independent retailers. Analyzing a planning reform launched in the United Kingdom in the 1990s, I show that independent retailers were actually harmed by the creation of entry barriers against large stores. Instead of simply reducing the number of new large stores entering a market, the entry barriers created the incentive for large retail chains to invest in smaller and more centrally located formats, which competed more directly with independents and accelerated their decline. Overall, these findings suggest that restricting the entry of large stores does not necessarily lead to a world with fewer stores, but one with different stores, with uncertain competitive effects on independent retailers. |
| JEL: | K2 L10 L51 L81 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19797&r=law |
| By: | Nose, Manabu |
| Abstract: | This paper constructs a large contract-level data set to examine factors that trigger breach of foreign investment contracts. Similar to the case of outright expropriation, political regime type is an important determinant of breach of contract. Furthermore, although investors'bargaining power becomes obsolete as contracts mature, contracts can be designed to mitigate the risk of breach of contract by involving multilateral organizations and creating buffers to absorb commodity price shocks. The paper examines the type of countries prone to contract breaches. After controlling for regional and sector fixed effects, less-democratic and resource-dependent governments are more likely to breach contracts, especially after large global shocks, notably natural disasters. |
| Keywords: | Debt Markets,Emerging Markets,Labor Policies,Contract Law,Investment and Investment Climate |
| Date: | 2014–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6738&r=law |
| By: | David Neumark (University of California, Irvine); Patrick Button (University of California, Irvine) |
| Abstract: | We examine whether stronger age discrimination laws at the state level moderated the impact of the Great Recession on older workers. We use a difference-in-difference-in-differences strategy to compare older workers in states with stronger and weaker laws, to their younger counterparts, both before, during, and after the Great Recession. We find very little evidence that stronger age discrimination protections helped older workers weather the Great Recession, relative to younger workers. The evidence sometimes points in the opposite direction, with stronger state age discrimination protections associated with more adverse effects of the Great Recession on older workers. We suggest that this may be because during an experience like the Great Recession, severe labor market disruptions make it difficult to discern discrimination, weakening the effects of stronger state age discrimination protections, or because higher termination costs associated with stronger age discrimination protections do more to deter hiring when future product and labor demand is highly uncertain. |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp287&r=law |
| By: | Tröger, Tobias H. |
| Abstract: | This paper analyzes the evolving architecture for the prudential supervision of banks in the euro area. It is primarily concerned with the likely effectiveness of the SSM as a regime that intends to bolster financial stability in the steady state. By using insights from the political economy of bureaucracy it finds that the SSM is overly focused on sharp tools to discipline captured national supervisors and thus underincentives their top-level personnel to voluntarily contribute to rigid supervision. The success of the SSM in this regard will hinge on establishing a common supervisory culture that provides positive incentives for national supervisors. In this regard, the internal decision making structure of the ECB in supervisory matters provides some integrative elements. Yet, the complex procedures also impede swift decision making and do not solve the problem adequately. Ultimately, a careful design and animation of the ECB-defined supervisory framework and the development of inter-agency career opportunities will be critical. The ECB will become a de facto standard setter that competes with the EBA. A likely standoff in the EBA's Board of Supervisors will lead to a growing gap in regulatory integration between SSM-participants and other EU Member States. Joining the SSM as a non-euro area Member State is unattractive because the current legal framework grants no voting rights in the ECB's ultimate decision making body. It also does not supply a credible commitment opportunity for Member States who seek to bond to high quality supervision. -- |
| Keywords: | prudential supervision,banking union,regulatory capture,political economy of bureaucracy,Single Supervisory Mechanism (SSM),European Central Bank (ECB),European Banking Authority (EBA) |
| JEL: | G21 G28 H77 K22 K23 L22 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:27&r=law |
| By: | Benjamin Kern (University of Marburg); Malte Ackermann (University of Marburg) |
| Abstract: | A merger between two innovation competitors is often suspected to reduce the variety of heterogeneous entities which are currently undertaking R&D or which are well situated to undertake R&D in a certain field. The consequential reduction of “diversity” can be detrimental to innovation because it reduces the number of independent sources for possible future innovations and might furthermore lead to an alignment of formerly different R&D programs. However, if “diversity” indeed benefits innovative performance, even merged firms should have an incentive to maintain it in-house. Therefore, this article aims to bring to light whether firms can indeed be expected to create or maintain “diversity” post-merger. By focusing on the strategic management and organizational science literature we will demonstrate that the creation/maintenance of independent entities is indeed considered as an important determinant for the innovativeness and general performance of firms. Nevertheless, we will also show that this strategy has several grave implementation problems and might be hampered by certain trade-offs. As a consequence, competition authorities cannot presume that a reduced “inter-firm diversity” will get substituted by an increased “intra-firm diversity” without fail. |
| JEL: | B52 K21 L4 M1 O31 O32 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201405&r=law |