New Economics Papers
on Law and Economics
Issue of 2014‒03‒30
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. When police patrols matter. The effect of police proximity on citizens’ crime risk perception By Daniel Montolio; Simón Planells-Struse
  2. Sailing into a dilemma: An economic and legal analysis of an EU trading scheme for maritime emissions By Hermeling, Claudia; Klement, Jan Henrik; Koesler, Simon; Köhler, Jonathan; Klement, Dorothee
  3. A Microeconomic Analysis toward Building Liability Lawin the Post-Earthquake Era By Takayuki Oishi; Shin Sakaue
  4. Less Cash, Less Crime: Evidence from the Electronic Benefit Transfer Program By Richard Wright; Erdal Tekin; Volkan Topalli; Chandler McClellan; Timothy Dickinson; Richard Rosenfeld
  5. Are restrictions of competition by sports associations horizontal or vertical in nature? By Budzinski, Oliver; Szymanski, Stefan
  6. Why integrity still constitutes the driving force behind ethical standards, the Sarbanes Oxley Act and other legislation By Marianne, Ojo
  7. The political economy of child-related leave policies in OECD member states: key trends and the impact By Olivier Thévenon
  8. Corruption and Informality: Complements or Substitutes? Qualitative Evidence from Barranquilla, Colombia By Mehling, Maxie-Lina; Boehm, Frédéric
  9. What is the relationship between unemployment and rape? Evidence from a panel of European regions By Caruso, Raul
  10. Prospect theory and tax evasion: a reconsideration of the Yitzhaki puzzle By Amedeo Piolatto; Matthew D. Rablen
  11. Political environment a ground for public sector corruption? Evidence from a cross-country analysis By Kumara, Ajantha Sisira; Handapangoda, Wasana Sampath

  1. By: Daniel Montolio (Universitat de Barcelona & IEB); Simón Planells-Struse (Universitat de Barcelona & IEB)
    Abstract: Crime risk perception is known to be an important determinant of individual well-being. It is therefore crucial that we understand the factors affecting this perception so that governments can identify the (public) policies that might reduce it. Among such policies, public resources devoted to policing emerge as a key instrument not only for tackling criminal activity but also for impacting on citizens’ crime risk perception. In this framework, the aim of this study is to analyze both the individual and neighbourhood determinants of citizens’ crime risk perception in the City of Barcelona (Spain) focusing on the effect of police proximity and taking into account the spatial aspects of neighbourhood characteristics. After controlling for the possible problems of the endogeneity of police forces and crime risk perception and the potential sorting of individuals across neighbourhoods, the results indicate that crime risk perception is reduced when non-victims exogenously interact with police forces. Moreover, neighbourhood variables, such as proxies of social capital and the level of incivilities, together with individual characteristics have an impact on citizens’ crime risk perception.
    Keywords: Crime risk perception, police forces, multilevel ordered logit model
    JEL: C21 H50 K42
    Date: 2014
  2. By: Hermeling, Claudia; Klement, Jan Henrik; Koesler, Simon; Köhler, Jonathan; Klement, Dorothee
    Abstract: On the basis of a joint economic and legal analysis, we evaluate the effects of a 'regional' (European) emission trading scheme aiming at reducing emissions of international shipping. The focus lies on the question which share of emissions from maritime transport activities to and from the EU can and should be included in such a system. Our findings suggest that the attempt to implement an EU maritime ETS runs into a dilemma. It is not possible to design a system that achieves emission reductions in a cost efficient manner and is compatible with international law. --
    Keywords: emission trading,international shipping,maritime emissions,regional emission trading,international jurisdiction for emission trading schemes
    JEL: L91 Q58 R48
    Date: 2014
  3. By: Takayuki Oishi (Aomori public university); Shin Sakaue (Sophia University)
    Abstract: First, we investigate which type of the liability law that protects nuclear power plants against catastrophe is socially optimal. We show that when a firm with a few funds is managed under the strict liability, maximization of social welfare is impossible since the firm may not cope with the damage by a catastrophic disaster. On the other hand, when the government set suitable safety standards in the case where a firm has a few, funds, maximization of social welfare is possible by using the negligence rule. second, we investigate a normative analysis of liability problems that deal with how to share joint liability among agents. We axiomatize the Shapley value
    Keywords: the Great East Japan Earthquake, law and economics, catastrophic risk, liability game, the Shapley value
    JEL: C71 K32 Q54
    Date: 2014–03
  4. By: Richard Wright; Erdal Tekin; Volkan Topalli; Chandler McClellan; Timothy Dickinson; Richard Rosenfeld
    Abstract: It has been long recognized that cash plays a critical role in fueling street crime due to its liquidity and transactional anonymity. In poor neighborhoods where street offenses are concentrated, a significant source of circulating cash stems from public assistance or welfare payments. In the 1990s, the Federal government mandated individual states to convert the delivery of their welfare benefits from paper checks to an Electronic Benefit Transfer (EBT) system, whereby recipients received and expended their funds through debit cards. In this paper, we examine whether the reduction in the circulation of cash on the streets associated with EBT implementation had an effect on crime. To address this question, we exploit the variation in the timing of the EBT implementation across Missouri counties. Our results indicate that the EBT program had a negative and significant effect on the overall crime rate as well as burglary, assault, and larceny. According to our point estimates, the overall crime rate decreased by 9.8 percent in response to the EBT program. We also find a negative effect on arrests, especially those associated with non-drug offenses. EBT implementation had no effect on rape, a crime that is unlikely to be motivated by the acquisition of cash. Interestingly, the significant drop in crime in the United States over several decades has coincided with a period of steady decline in the proportion of financial transactions involving cash. In that sense, our findings serve as a fresh contribution to the important debate surrounding the factors underpinning the great American crime decline.
    JEL: H53 I38 J22 K42
    Date: 2014–03
  5. By: Budzinski, Oliver; Szymanski, Stefan
    Abstract: In this paper, we discuss from an economic perspective two alternative views of restrictions of competition by sports associations. The horizontal approach views such restrictions as an agreement among the participants of a sports league with the sports association merely representing an organization executing the horizontal cooperation. In contrast, the vertical approach views the sports association as being a dominant upstream firm enjoying a monopoly position on the market stage for competition organizing services, an important input for the actual product - the sports game. Taking the recent financial fair play (FFP) initiative by UEFA (the Union of European Football Associations) as an example, we demonstrate that the different views lead to different assessments of restrictive effects and, thus, matter for competition policy decisions. The economic story of the potential restrictive effect of FFP on players' and player agents' income may fit more plausibly to the horizontal approach, whereas the potentially anticompetitive foreclosure and deterrence effects of FFP may be economically more soundly reasoned by taking the vertical view. --
    Keywords: European competition policy,sports economics,financial fair play,horizontal agreements,vertical restrictions,European football,antitrust
    JEL: K21 L41 L42 L44 L83
    Date: 2014
  6. 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: G2 G28 G3 K2
    Date: 2014–02–04
  7. By: Olivier Thévenon (INED)
    Abstract: Abstract: A widespread expansion of leave entitlements has taken place over the past decades in OECD countries. Basic rights, set initially for mothers, have been complementedwith entitlements for both parents. This considerably prolonged the time period covered byparental leave entitlements, of which mothers remain the main users. As a consequence, cross-national differences in leave duration increased until the late 1990s, but they havedecreased slightly since the early 2000s without radically changing the picture. Yet, one main change has occurred with the provision of father-specific rights granted in a growing numberof countries. The effect of the recession has been quite limited, since cutbacks in leave-related benefits have observed up to now in a minority of countries. Against this background, weanalyse the effect of economic and political factors on the prolongation of maternity and parental leave, as well as on the provision of father-specific entitlements. We show that thedifferent types of leave respond differently to these factors, which suggests that a different rationale guides their respective evolution. Finally, we discuss the merits of the greaterflexibility introduced in the legislation of parental leave systems.
    Date: 2014
  8. By: Mehling, Maxie-Lina; Boehm, Frédéric
    Abstract: We present results of a qualitative study based on interviews with informal vendors and experts on informality carried out in Barranquilla, Colombia, in order to investigate whether corruption and informality are complements or substitutes. It was found that it is necessary to distinguish between bureaucratic and political corruption when examining the relation with informality, as the results can be opposite. In Barranquilla, bureaucratic corruption and informality seem to be substitutes, while political corruption and informality complement each other.
    Keywords: Corruption, Informality, Colombia
    JEL: K42 O17
    Date: 2014–03
  9. By: Caruso, Raul
    Abstract: This paper analyzes the relationship between unemployment and rape in a panel of European regions. In particular, this paper is intended to test whether an ‘opportunity perspective’ holds for rape. The ‘opportunity perspective’ interprets the level of unemployment as an indicator of ‘social inactivity’, so that a negative relationship between violent crime and unemployment is predicted. Results show that rape and unemployment are positively associated so not confirming the opportunity perspective. Results are robust using alternative dependent variables, namely (i) the count of rape; (ii) the rape rate per 100,000 people.
    Keywords: rape, sexual assault, violent crime, opportunity perspective, unemployment, youth unemployment, intimate and spousal violence.
    JEL: I29 J12 J18 J64 K42
    Date: 2014–03
  10. By: Amedeo Piolatto (Universitat de Barcelona & IEB); Matthew D. Rablen (Brunel University)
    Abstract: The standard expected utility model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki puzzle). The existing literature disagrees on whether prospect theory overturns the puzzle. We disentangle four distinct elements of prospect theory and find loss aversion and probability weighting to be redundant in respect of the puzzle. Prospect theory fails to reverse the puzzle for various classes of endogenous specification of the reference level. These classes include, as special cases, the most common specifications in the literature. New specifications of the reference level are needed, we conclude.
    Keywords: Prospect theory, tax evasion, Yitzhaki puzzle, stigma, diminishing sensitivity, reference dependence, endogenous audit probability, endogenous reference level
    JEL: H26 D81 K42
    Date: 2014
  11. By: Kumara, Ajantha Sisira; Handapangoda, Wasana Sampath
    Abstract: This study employs the instrumental variable two-stage least squares regression approach for the data for 121 countries to explore the impact of a country’s political environment on its level of corruption. The study provides strong evidence that a higher degree of rule of law, press freedom, readiness and capacity to handle e-governance practices, and urbanization are associated with a lower level of public sector corruption across all 121 countries. The colonial dummies and having a presidential government are found to be valid instruments for rule of law in addressing the issue of endogeniety embedded in it. Further, to a certain degree, landlocked countries are relatively more corrupt than costal countries. Finally, policy implications are discussed based on the findings of the study.
    Keywords: Corruption, Political Environment, Endogeniety, Public Sector
    JEL: D72 D73 H11 K42
    Date: 2014–03–22

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