New Economics Papers
on Law and Economics
Issue of 2014‒07‒21
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Titling Role of Possession By Benito Arruñada
  2. Decriminalizing Indoor Prostitution: Implications for Sexual Violence and Public Health By Scott Cunningham; Manisha Shah
  3. Crime Scars: Recessions and the Making of Career Criminals By Brian Bell; Anna Bindler; Stephen Machin
  4. Protecting Democracy and the Rule of Law in the European Union: The Hungarian Challenge By Bojan Bugaric
  5. Do "Reverse Payment" Settlements of Brand-Generic Patent Disputes in the Pharmaceutical Industry Constitute an Anticompetitive Pay for Delay? By Keith M. Drake; Martha A. Starr; Thomas McGuire
  6. Can the Uncertainty Caused by the Questioning of Tax Measures in Relation to Cooperatives by the ECJ Be Solved? By Sofía ARANA LANDÍN
  7. A Comparative analysis of federations: The Achaean federation and the European Union By Kyriazis, Nicholas; Economou, Emmanouel/Marios/Lazaros
  8. Property Rights and Democratic Values in pre-Classical Greece By Economou, Emmanouil Marios Lazaros; Kyriazis, Nicholas
  9. Corporate financial soundness and its impact on firm performance: Implications for corporate debt restructuring in Slovenia By Jože P. Damijan

  1. By: Benito Arruñada
    Abstract: This paper proposes two hypotheses on the publicity requirement and the limitations of possession to provide information for legal titling. It then tests these hypotheses by examining how legal systems deal with possession in movable and immovable property, and comparing actual and documentary possession. It concludes that exercise of possession is effective as a titling mechanism when it is observed by independent parties, thus providing publicity and verifiability of titling-relevant elements. However, given that possession is only effective to inform about a single in rem right, direct and automatic reliance on possession for titling requires that all other rights be diluted to in personam status or be burdened by the possessory in rem right. In any case, public knowledge of possession, either in its delivery and/or its exercise, is essential for possession to play a public titling function. Similarly, documentary possession is only effective as a public titling mechanism in the absence of multiple rights in rem.
    Keywords: property rights, enforcement, transaction costs, registries
    JEL: D23 G38 K11 K12 L85 O17 P48
    Date: 2014–06
  2. By: Scott Cunningham; Manisha Shah
    Abstract: Most governments in the world including the United States prohibit prostitution. Given these types of laws rarely change and are fairly uniform across regions, our knowledge about the impact of decriminalizing sex work is largely conjectural. We exploit the fact that a Rhode Island District Court judge unexpectedly decriminalized indoor prostitution in 2003 to provide the first causal estimates of the impact of decriminalization on the composition of the sex market, rape offenses, and sexually transmitted infection outcomes. Not surprisingly, we find that decriminalization increased the size of the indoor market. However, we also find that decriminalization caused both forcible rape offenses and gonorrhea incidence to decline for the overall population. Our synthetic control model finds 824 fewer reported rape offenses (31 percent decrease) and 1,035 fewer cases of female gonorrhea (39 percent decrease) from 2004 to 2009.
    JEL: I18 J16 K42
    Date: 2014–07
  3. By: Brian Bell; Anna Bindler; Stephen Machin
    Abstract: Recessions lead to short-term job loss, lower levels of happiness and decreasing income levels. There is growing evidence that workers who first join the labour market during economic downturns suffer from poor job matches that have a sustained detrimental effect on their wages and career progression. This paper uses a range of US and UK data to document a more disturbing long-run effect of recessions: young people who leave school in the midst of recessions are significantly more likely to lead a life of crime than those graduating into a buoyant labour market. These effects are long lasting and substantial.
    Keywords: Crime, recessions, unemployment
    JEL: J64 K42
    Date: 2014–07
  4. By: Bojan Bugaric
    Abstract: After the fall of the Berlin Wall and the collapse of communist regimes, many Central and East European countries successfully managed a ‘return to Europe’. For many observers, the ‘return to Europe’ signaled the ultimate victory of democracy and rule of law over the legacy of totalitarianism in these countries. In contrast to this optimistic view, history is not over and the rising illiberalism in Hungary as well as in some other CEE countries represents a major challenge to liberal democracy. All those who expected that a decade of ‘EU accession’ for CEE legal regimes would lead to an irreversible break with the totalitarian past were simply naive. They forgot that institutions of liberal democracy cannot be created overnight. It is not only that developing liberal democracy requires more time; it also depends on continuous support and endorsement by the people. The rise of illiberal authoritarianism in Hungary is reminiscent of the dramatic events in Europe’s most horrible century. Even if the existence of the EU makes the danger of rising illiberalism less dramatic, there are still reasons to be worried about the authoritarian illiberal attacks on liberal democracy. As the Hungarian case shows, the EU has quite limited powers to effectively prevent the slide to authoritarianism. The irony is that conditionality, so powerful before the CEE countries joined the EU, loses much of its teeth once countries become member states of the EU. Yet, the discussion of the EU instruments to contain such slides into illiberalism has also shown that they are not totally unimportant and that they can be further improved. As I tried to argue, safeguarding democracy and the rule of law in the EU requires serious improvements in the legal toolkit currently available to deal with the slide to authoritarianism in Hungary. Ultimately, EU political actors must respect the limits of the EU political constitution and not attempt to go too far in their otherwise noble aim of protecting democracy in the EU.
    Keywords: rule of law, EU, Hungary, Article 7 TEU, Victor Orban, democracy backsliding, illiberalism, Copenhagen Commission
    Date: 2014–07
  5. By: Keith M. Drake; Martha A. Starr; Thomas McGuire
    Abstract: Brand and generic drug manufacturers frequently settle patent litigation on terms that include a payment to the generic manufacturer along with a specified date at which the generic would enter the market. The Federal Trade Commission contends that these agreements extend the brand’s market exclusivity and amount to anticompetitive divisions of the market. The parties involved defend the settlements as normal business agreements that reduce business risk associated with litigation. The anticompetitive hypothesis implies brand stock prices should rise with announcement of the settlement. We classify 68 brand-generic settlements from 1993 to the present into those with and without an indication of a “reverse payment” from the brand to the generic, and conduct an event study of the announcement of the patent settlements on the stock price of the brand. For settlements with an indication of a reverse payment, brand stock prices rise on average 6% at the announcement. A “control group” of brand-generic settlements without indication of a reverse payment had no significant effect on the brands’ stock prices. Our results support the hypothesis that settlements with a reverse payment increase the expected profits of the brand manufacturer and are anticompetitive.
    JEL: I11 L41 L65
    Date: 2014–07
  6. By: Sofía ARANA LANDÍN (University of the Basque Country (UPV/EHU), Spain)
    Abstract: Different Member States provide for special tax treatment of cooperatives, which in some of them, are constitutionally protected. In some cases, a lower tax burden is granted to cooperatives due to their exceptional contribution to the community. Some of the tax measures applying to cooperatives are technical adjustments, while others are pure tax benefits, the latter seeking the promotion of the cooperative model. Ascertaining in which cases a given legal measure can be considered to be a technical adjustment and can be considered to be fair or when the given measure can be regarded as a State aid is a difficult task, as the ECJ jurisprudence has very often varied its point of view. Throughout this paper, we are going to follow the ECJ jurisprudence on State aid for cooperatives in order to check out if having an Act on Social Economy as the Spanish one may help Social Economy entities in this regard.
    Keywords: Social Economy Bill, State aids, Social Economy law, public measures, tax system.
    Date: 2014–09
  7. By: Kyriazis, Nicholas; Economou, Emmanouel/Marios/Lazaros
    Abstract: In the present paper we analyse the emergence of the first federations in history, taking as an example the Achaean one. We analyse its structure decision making, institutions and finances. Then, we compare it to the present European Union and point out similarities and differences. Lastly, we attempt a valuation of the two federations according to two criteria: democratization and community of interest. Our conclusion is that the present European Union lags far behind the Achaean federation according to both criteria and has a long way to go in order to develop into a true federation.
    Keywords: Achaean Federation, European Union, economic and political institutions
    JEL: H5 H56 H7 K1 N4 N43 Z13
    Date: 2013
  8. By: Economou, Emmanouil Marios Lazaros; Kyriazis, Nicholas
    Abstract: In the present essay we introduce the concept of macroculture as a complex of mutually supporting values, norms and beliefs in various areas of human activity, like religion, war, politics, sports etc. in a model. Then, we analyse how some macrocultures that are favorable or the “precondition” for the emergence of democracy and institutions develop, in particular property rights that foster economic development. We analyze this for an extended period that covers Later Bronze Age to Archaic Greece (approximately 1250-510 BC), as being the historical case where such a macroculture favorable to democracy and stable property rights first emerged. We argue that the nature of the Greek polytheist religion (12 gods) depicts a proto-democratic side of the ancient Greek society. We then provide a comparison of the Greek case, in relation to the other, mainly oriental societies, as far as the level of participation in decision making procedures of these societies is concerned. Our main findings indicate that during the last period of the Mycenaean world, as well as during the Geometric and Archaic age periods, the emergence of various elements of macroculture, in religion, warfare, sports and city-state environment evolved into similar proto-democratic values, leading thus to the establishment of democracy as a political phenomenon in Classical Greece, with Athens being the most well-known historical case.
    Keywords: Macroculture, Democracy, Property rights, Ancient Greece.
    JEL: K11 N44 Z12 Z13
    Date: 2014–06–06
  9. By: Jože P. Damijan (Faculty of Economics, University of Ljubljana.)
    Abstract: The paper studies the extent of corporate leverage and range of excessive debt of Slovenian firms during the recent financial crisis. Half of all firms (of those with some non-zero debt and at least one employee) are found to face an unsustainable debt-to-EBITDA leverage ratio beyond 4, accounting for almost 80 per cent of total outstanding debt. Moreover, a good quarter of all firms experience debt-to-EBITDA ratios exceeding 10 and hold almost half of total aggregate net debt. We then examine how this financial distress affects firm performance in terms of productivity, employment, exports, investment and survival. We find that, while less important during the good times (prerecession period), lack of firm financial soundness during the period of financial distress becomes a critical factor constraining firm performance. The extent of financial leverage and ability to service the outstanding debt are shown to inhibit firms’ productivity growth as well as the dynamics of exports, employment and investment. Micro and small firms are found to suffer relatively more than larger firms from high leverage in terms of export and employment performance during the recession period.
    Keywords: financial crisis, corporate debt restructuring, insolvency, bank restructuring
    JEL: G33 G34 K22 K30
    Date: 2014–05

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