New Economics Papers
on Law and Economics
Issue of 2014‒06‒14
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Economic Models of Law By Thomas J. Miceli
  2. A General Rationale for a Governmental Role in the Relief of Large Risks By Steven Shavell
  3. The Market for Mules: Risk and Compensation of Cross-Border Drug Couriers By Bjerk, David; Mason, Caleb
  4. The Nature of Corruption - An Interdisciplinary Perspective By Eugen Dimant
  5. Employment Effects of the EU Temporary and Agency Workers Directive in Sweden By Westéus, Morgan
  6. From Rome to Lisbon and Beyond: Member States' Power, Efficiency, and Proportionality in the EU Council of Ministers By Nikolaos Antonakakis; Harald Badinger; Wolf Heinrich Reuter
  7. Third-country relations in the directive establishing a framework for the recovery and resolution of credit institutions By María J. Nieto
  8. The impact of retail mergers on food prices: evidence from France By Marie-Laure Allain; Claire Chambolle; Stéphane Turolla; Sofia Villas-Boas
  9. Debt, Managers and Cartels By Salvatore Piccolo; Giancarlo Spagnolo
  10. Do U.S. State Firearms Laws Affect Firearms Manufacturing Location? By Jurgen Brauer; Daniel Montolio; Elisa Trujillo
  11. Impact of Economic Freedom, Regulatory Quality, and Taxation on the Per Capita Real Income: An Analysis for OECD Nations and Non-G8 OECD Nations By Cebula, Richard; Clark, Jeff

  1. By: Thomas J. Miceli (University of Connecticut)
    Abstract: This essay discusses the use of economic models for understanding law. It begins by describing the nature of economic models in general, and then turns to the specific application of economic models to law. The discussion distinguishes between “economic analysis of law”— which concerns the use of economic theory for describing the incentive effects of legal rules (positive analysis) and for prescribing better rules (normative analysis); and “law and economics”—which concerns the relationship between law and markets as alternative institutions for organizing economic activity. The essay concludes with some comments on the actual process of building economic models of law.
    Keywords: Economic models, economic analysis of law, law and economics
    JEL: K00
    Date: 2014–05
  2. By: Steven Shavell
    Abstract: The government often provides relief against large risks, such as disasters. A simple, general rationale for this role of government is considered here that applies even when private contracting to share risks is not subject to market imperfections. Specifically, the optimal private sharing of risks will not result in complete coverage against them when they are sufficiently large. Hence, when such risks eventuate, the marginal utility to individuals of governmental relief may exceed the marginal value of public goods. Consequently, social welfare may be raised if the government reduces public goods expenditures and directs these freed resources toward individuals who have suffered losses.
    JEL: D6 D8 K2
    Date: 2014–06
  3. By: Bjerk, David (Claremont McKenna College); Mason, Caleb (Miller Barondess, LLP)
    Abstract: This paper uses a unique dataset to examine the economics of cross-border drug smuggling. Our results reveal that loads are generally quite large (median 30 kg), but with substantial variance within and across drug types. Males and females, as well as U.S. citizens and non-U.S. citizens are all well represented among mules. We also find that mule compensation is substantial (median $1,313), and varies with load characteristics. Specifically, for mules caught with cocaine and meth, pay appears to be strongly correlated to expected sentence if caught, while pay appears to be primarily correlated with load size for marijuana mules, who generally smuggle much larger loads than those smuggling cocaine and meth. We argue that our results suggest that this underground labor market generally acts like a competitive labor market, where a risk-sensitive, reasonably well-informed, and relatively elastic labor force is compensated for higher risk tasks.
    Keywords: illegal markets, compensating wage differentials, drug smuggling, sentencing
    JEL: K42
    Date: 2014–05
  4. By: Eugen Dimant (University of Paderborn)
    Abstract: Republished as CIE Working Paper 2014-06
    Keywords: Bribery, Corruption, Development, Interdisciplinarity, Public Economics, Survey
    JEL: D73 H1 O17 K42
    Date: 2013–10
  5. By: Westéus, Morgan (Department of Economics, Umeå School of Business and Economics)
    Abstract: This paper analyses possible effects on total employment, and the distribution between agency work and regular contracts as a consequence of the implementation of the EU Temporary and Agency Workers Directive in Sweden in a dual labour market Mortensen-Pissarides search model. The directive states that the agency worker compensation must be equal to the compensation for similar work at the client firm, and that all parties should actively facilitate the transition from agency employment to employment directly at the firm. The results suggest an overall negative net effect on total employment, but also that an increased transition into regular employment from the agency sector could help to offset this effect.
    Keywords: Labour law; EU directive implementation; temporary agency work; unemployment
    JEL: E24 J21 J42 J48 J64 K31
    Date: 2014–06–11
  6. By: Nikolaos Antonakakis (Department of Economics, Vienna University of Economics and Business; Department of Economics and Finance, University of Portsmouth); Harald Badinger (Department of Economics, Vienna University of Economics and Business; Austrian Institute of Economic Research (WIFO)); Wolf Heinrich Reuter (Department of Economics, Vienna University of Economics and Business)
    Abstract: This paper provides a comprehensive assessment of the evolution of EU member states' power, the EU's capability to act (efficiency), and the proportionality of the voting system in the Council of Ministers from the treaties of Rome in 1958 till the Treaty of Lisbon in 2009 and beyond, using a wide range of alternative power indices. Moreover, it considers explicitly the relevance of additional legal provisions (such as the 'Luxembourg Compromise', the 'Demographic Clause', and the 'Ioannina Compromise') and the implications of novel, more recently introduced voting rules such as reverse qualified majority voting.
    Keywords: Council, Enlargement, Efficiency, EU, Member States, Power Index
    JEL: D72 K33 E61
    Date: 2014–05
  7. By: María J. Nieto (Banco de España)
    Abstract: This article presents a critical analysis of the principles behind the scope and forms of cooperation between EU Member States and third-country resolution authorities in the context of the 2014 Bank Recovery and Resolution Directive. The article also explores the future responsibilities of the prospective Single Resolution Authority regarding relations between the euro area and third-country resolution authorities.
    Keywords: European Union, banks, international economics, bankruptcy
    JEL: F39 G18 G33 G38 K33 L51
    Date: 2014–05
  8. By: Marie-Laure Allain (Ecole Nationale Polytechnique); Claire Chambolle (Alimentation et Sciences Sociales); Stéphane Turolla (Structures et Marchés Agricoles, Ressources et Territoires, INRA); Sofia Villas-Boas (ARE, University of California, Berkeley)
    Abstract: Using consumer panel data, we analyze the impact of a merger in the retail sector on food prices in France. In order to capture the local dimension of retail competition, we define local markets as catchment areas around each store. We develop a difference-in-differences analysis to compare price changes in local markets where the merger did modify the ownership structure (treated group) to price changes in local markets where the merger did not affect the ownership structure (control group). We find that prices of competing firms in areas where the merger occurred (treated group) increased significantly relative to the control areas where existing firms were not affected by a merger. In fact, our findings suggest that the merger significantly raised the competitors' prices. These results are consistent with a combination of local concentration and a decrease in differentiation.
    Keywords: Ex-post merger evaluation, Retail grocery sector, Difference-in-differences, commerce de detail, prix à la consommation, marché local, enquêtealimentation, compétitivitéconsommateurfrance
    JEL: K21 L11 L66
    Date: 2013
  9. By: Salvatore Piccolo (Università Cattolica del Sacro Cuore di Milano and CSEF); Giancarlo Spagnolo (SITE Stockholm School of Economics, DEF Tor Vergata, and CEPR)
    Abstract: We propose a theory of anticompetitive effects of debt finance based on the interaction between capital structure, managerial incentives, and firms ability to sustain collusive agreements. Shareholders' commitments not to expropriate debtholders through managers with valuable reputations or common incentive schemes greatly facilitate collusive behavior in product markets. Disclosure rules aimed at improving transparency in corporate governance or network-based credit markets can confer credibility to such arrangements even in environments where firms lack commitment power, thereby inducing collusion through leverage in otherwise competitive downstream industries. Managers are happy with the arrangement since they share in the collusive rent.
    Keywords: Bankruptcy, capital structure, collusion, corporate governance, credit markets, disclosure rules, financial regulation, managerial incentives, product market competition.
    JEL: D21 G32 L13 L41
    Date: 2014–06–06
  10. By: Jurgen Brauer; Daniel Montolio; Elisa Trujillo
    Abstract: In addition to federal firearms legislation applicable to all firearms manufacturers operating in the United States, each of the 50 U.S. states has its own state, and sometimes additional municipal, firearms laws. Conceivably, the relative strictness or laxity of these laws influences location decisions by firearms manufacturers. We use diverse data sets covering the period 1986 to 2010 to exploit variations in state firearms laws to study the manufacturing location of well over 2,700 federally licensed firearms manufacturers. We find that state laws do matter for location but so do other variables. In a way, our findings are reassuring. The firearm industry is just another industry in that it responds to economic incentives and disincentives, of which relevant state laws are an example: They play but an incremental role at the decision-making margin.
    Keywords: United States, federal firearms laws, state firearms laws, firearms manufacturing, location analysis
    JEL: K23 L10 L52 L64 H73
    Date: 2014–04
  11. By: Cebula, Richard; Clark, Jeff
    Abstract: This study of the impacts of economic freedom, regulatory quality, and the relative burden of taxation on the level of per capita real income/GDP among OECD nations over the 2003-2007 period adopts a modified version of the overall economic freedom index computed by The Heritage Foundation (2013), one with the fiscal freedom and business freedom indices removed. This study then provides PLS fixed effects estimates for five linear specifications/models. Each nation during this time frame can be regarded either as a nation per se or as a de facto “economic region” within the OECD. The analysis first focuses upon all of the OECD nations and then, as a robustness test, subsequently focuses only on non-G8 OECD member nations. The estimations in this study all provide strong empirical support for the three central hypotheses proffered here, namely: (1) the higher the overall degree of economic freedom; the higher the per capita real income (GDP) level; (2) the higher the level of regulatory quality, the higher the level of per capita real income (GDP); and (3) the higher the overall tax burden, expressed as a percent of GDP, the lower the level of per capita real income (GDP).
    Keywords: real per capita GDP; economic freedom; regulatory quality; tax burden
    JEL: H24 H25 H61 K20 P12 P14
    Date: 2014–06–09

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