New Economics Papers
on Law and Economics
Issue of 2014‒06‒02
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Why Plaintiffs' Attorneys Use Contingent and Defense Attorneys Fixed Fee Contracts By Emons, Winand; Fluet, Claude
  2. Standardized Enforcement: Access to Justice vs. Contractual Innovation By Gennaioli, Nicola; Perotti, Enrico C; Ponzetto, Giacomo AM
  3. Crime and the Depenalization of Cannabis Possession: Evidence from a Policing Experiment By Adda, Jerome; McConnell, Brendon; Rasul, Imran
  4. Fight Cartels or Control Mergers? On the Optimal Allocation of enforcement Efforts within Competition Policy By Andreea Cosnita; Jean-Philippe Tropeano
  5. Time Preferences and Criminal Behavior By Akerlund, David; Golsteyn, Bart H.H.; Grönqvist, Hans; Lindahl, Lena
  6. Key Players in Co-Offending Networks By Lindquist, Matthew; Zenou, Yves
  7. The Importance of Family Background and Neighborhood Effects as Determinants of Crime By Hederos Eriksson, Karin; Hjalmarsson, Randi; Lindquist, Matthew; Sandberg, Anna
  8. Trust and In-Group Favoritism in a Culture of Crime By Meier, Stephan; Pierce, Lamar; Vaccaro, Antonino
  9. Should drug policy be aimed at cartel leaders? Breaking down a peaceful equilibrium By Juan Camilo Castillo

  1. By: Emons, Winand; Fluet, Claude
    Abstract: Victims want to collect damages from injurers. Cases differ with respect to the judgment. Attorneys observe the expected judgment, clients do not. Victims need an attorney to sue; defense attorneys reduce the probability that the plaintiff prevails. Plaintiffs' attorneys offer contingent fees providing incentives to proceed with strong and drop weak cases. By contrast, defense attorneys work for fixed fees under which they accept all cases. Since the defense commits to fight all cases, few victims sue in the first place. We thus explain the fact that in the US virtually all plaintiffs use contingency while defendants tend to rely exclusively on fixed fees.
    Keywords: contingent fees; expert services; fixed fees; litigation
    JEL: D82 K41
    Date: 2013–11
  2. By: Gennaioli, Nicola; Perotti, Enrico C; Ponzetto, Giacomo AM
    Abstract: We model the effect of contract standardization on the development of markets and the law. In a setting in which biased judges can distort contract enforcement, we find that the introduction of a standard contract reduces enforcement distortions relative to reliance on precedents, exerting two effects: i) it statically expands the volume of trade, but ii) it crowds out the use of open-ended contracts, hindering legal evolution. We shed light on the large-scale commercial codification undertaken in the nineteenth century in many countries (even common-law ones) during a period of booming commerce and long-distance trade.
    Keywords: contracts; imperfect enforcement; legal evolution; precedents; standardization
    JEL: D86 K12 K40 K41
    Date: 2014–02
  3. By: Adda, Jerome; McConnell, Brendon; Rasul, Imran
    Abstract: We evaluate the impact on crime of a localized policing experiment that depenalized the possession of small quantities of cannabis in the London borough of Lambeth. Such a policy can: (i) impact the demand for cannabis in Lambeth as users move there to purchase cannabis; (ii) enable the Lambeth police to reallocate effort towards other types of crime. We investigate whether the depenalization policy impacts the level and composition of crime, using administrative records on criminal offences by drug type, and for seven types of non-drug crime. We find that depenalization in Lambeth led to significant increases in cannabis possession offences that persisted well after the policy experiment ended. We find evidence that the policy caused the police to reallocate effort towards crimes related to the supply of Class-A drugs, as well as reallocating effort towards non-drug crime: there are significant reductions in five types of non-drug crime, and significant improvements in police effectiveness against such crimes as measured by arrest and clear-up rates. Despite the overall fall in crime attributable to the policy, we find the total welfare of local residents likely fell, as measured by house prices. These welfare losses are concentrated in Lambeth zip codes where the illicit drug market was most active. Finally, we shed light on what would be the impacts on crime of a citywide depenalization policy, by developing and calibrating a structural model of the market for cannabis and crime, accounting for the behavior of police and cannabis users. This highlights that many of the gains of the policy can be retained, and some of the deleterious consequences ameliorated, if all jurisdictions depenalized cannabis possession. These results provide new insights for the current policy debate on the regulation of illicit drug markets.
    Keywords: cannabis; crime; depenalization; police behavior
    JEL: H75 J18 K42
    Date: 2014–03
  4. By: Andreea Cosnita (EconomiX - CNRS : UMR7166 - Université Paris X - Paris Ouest Nanterre La Défense); Jean-Philippe Tropeano (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper deals with the optimal enforcement of competition law between merger and anti-cartel policies. We examine the interaction between these two branches of antitrust, given the budget constraint of the public agency, and taking into account the ensuing incentives for firms in terms of choice between cartels and mergers. To the extent that a tougher anti-cartel action triggers more mergers and vice-versa, we show that the two antitrust branches are complementary. However, if the merger's coordinated effect is taken into account, then for a sufficiently large such effect the agency may optimally have to refrain from controlling mergers and instead spend all resources on fighting cartels.
    Date: 2013–06–01
  5. By: Akerlund, David (SOFI, Stockholm University); Golsteyn, Bart H.H. (Maastricht University); Grönqvist, Hans (SOFI, Stockholm University); Lindahl, Lena (SOFI, Stockholm University)
    Abstract: One main motive behind lengthy prison terms for serious crime is to deter potential offenders from engaging in crime. Yet, economic theory predicts that the scope for punishment as acting as a deterrent depends on how much individuals discount future events when balancing the immediate utility of the crime and the costs of a potential future punishment. If criminals have short time horizons, then it is hard to imagine punishment acting as a key deterrent. This paper provides the first empirical investigation of the link between time preferences and criminal behavior. Our study is made possible by access to a unique Swedish longitudinal dataset that links individual measures of time preferences collected at age 13 to various crime indicators from administrative registers spanning over 18 years. Our results show that high discount rates significantly predict criminal involvement. The magnitude of the relationship is substantial and corresponds to roughly one third of the association between intelligence and crime. Although high discount rates significantly predict the onset of criminal involvement, it is less strongly correlated with crime at the intensive margin. The link is more pronounced for property crime and among males with low intelligence. We also find that part of the association can be explained by high discount rates being associated with lower human capital accumulation.
    Keywords: time discounting, impatience, intertemporal choice, crime
    JEL: K4 D03 D90
    Date: 2014–05
  6. By: Lindquist, Matthew; Zenou, Yves
    Abstract: We study peer effects in crime by analyzing co-offending networks. We first provide a credible estimate of peer effects in these networks equal to 0.17. This estimate implies a social multiplier of 1.2 for those individuals linked to only one co-offender and a social multiplier of 2 for those linked to three co-offenders. We then provide one of the first empirical tests of the key player policy in a real world setting. This policy defines a micro-founded strategy for removing the criminal from each network that reduces total crime by the largest amount. Using longitudinal data, we are able to compare the theoretical predictions of the key player policy with real world outcomes. By focusing on networks for which the key player has disappeared over time, we show that the theoretical predicted crime reduction is close to what is observed in the real world. We also show that the key player policy outperforms other reasonable police policies such as targeting the most active criminals or targeting criminals who have the highest betweenness or eigenvector centrality in the network. This indicates that behavioral-based policies can be more efficient in reducing crime than those based on algorithms that have no micro-foundation.
    Keywords: Crime; crime policies; key player; peer effects; social multiplier; social networks
    JEL: A14 K42 Z13
    Date: 2014–03
  7. By: Hederos Eriksson, Karin; Hjalmarsson, Randi; Lindquist, Matthew; Sandberg, Anna
    Abstract: We quantify the importance of family background and neighborhood effects as determinants of criminal convictions and incarceration by estimating sibling and neighborhood correlations. At the extensive margin, factors common to siblings account for 24 percent of the variation in criminal convictions and 39 percent of the variation in incarceration. At the intensive margin, these factors typically account for slightly less than half of the variation in prison sentence length and between one-third and one-half of the variation in criminal convictions, depending on crime type and gender. Neighborhood correlations, on the other hand, are quite small. We, therefore, conclude that these large sibling correlations are most likely generated by family influences and not by neighborhood influences. Further analysis shows that parental criminality and family structure contribute more to sibling similarities in crime than parental income and education or neighborhood characteristics. The lions’ share of the sibling crime correlations, however, are unexplained by these factors. Finally, sibling spacing also matters – more closely spaced siblings are more similar in their criminal behavior.
    Keywords: crime; family background; incarceration; neighborhood correlation; neighborhood effects; sibling correlation
    JEL: J13 J62 K42
    Date: 2014–03
  8. By: Meier, Stephan (Columbia University); Pierce, Lamar (Washington University, St. Louis); Vaccaro, Antonino (University of Navarra)
    Abstract: We use experiments in high schools in two neighborhoods in the metropolitan area of Palermo, Italy to experimentally demonstrate that the historical informal institution of organized crime can undermine current institutions, even in religiously and ethnically homogeneous populations. Using trust and prisoner's dilemma games, we found that students in a neighborhood with high Mafia involvement exhibit lower generalized trust and trustworthiness, but higher in-group favoritism, with punishment norms failing to resolve these deficits. Our study suggests that a culture of organized crime can affect adolescent norms and attitudes that might support a vicious cycle of in-group favoritism and crime that in turn hinders economic development.
    Keywords: organized crime, trust, in-group favoritism, Mafia
    JEL: C91 C92
    Date: 2014–05
  9. By: Juan Camilo Castillo
    Abstract: Experience from the last decade in Colombia and Mexico suggests that violence increases when governments achieve their objective of beheading and fragmenting drug trafficking organizations (DTOs). In this paper I provide a theoretical framework to understand this behavior. Drawing elements from industrial organization, I model DTOs as firms that collude by not attacking each other in order to increase their profits. DTOs always collude when they interact repeatedly; thus, previous analyses focusing on a static Nash equilibrium miss an important part of the dynamics between DTOs. I show that a peaceful equilibrium arises if there are only a few DTOs that care enough about the future. Policies resulting either in a larger number of DTOs or in more impatient leaders increase violence between DTOs without reducing supply. On the other hand, policies that reduce the productivity of DTOs, without directly attacking their leaders and fragmenting them, are more desirable since they can curb supply, although this comes at the cost of increased violence if the elasticity of demand is below a certain threshold. I calculate this threshold, which is a refinement of the value suggested by Becker et al. (2006) for consumer markets.
    Keywords: War on Drugs, Illegal Drug Markets, Violence, Supply Reduction
    JEL: D74 K42
    Date: 2013–08–27

This issue is ©2014 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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