New Economics Papers
on Law and Economics
Issue of 2014‒08‒16
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Punishment and Deterrence: Evidence from Drunk Driving By Benjamin Hansen
  2. Norm Enforcement in Social Dilemmas: An Experiment with Police Commissioners By Dickinson, David; Masclet, David; Villeval, Marie Claire
  3. The Prison Boom and the Lack of Black Progress after Smith and Welch By Derek Neal; Armin Rick
  4. Mortgage Foreclosures and the Shifting Context of Crime in Micro-Neighborhoods By Johanna Lacoe; Ingrid Gould Ellen
  5. When Economics Met Antitrust: The Second Chicago School and the Economization of Antitrust Law By Patrice Bougette; Marc Deschamps; Frédéric Marty
  6. Lead Exposure and Behavior: Effects on Antisocial and Risky Behavior among Children and Adolescents By Jessica Wolpaw Reyes
  7. A justification for the role of audits?: adoption of International Financial Reporting Standards (IFRS) and jurisdictional analyses (Brazil, China,Japan and South Africa) By Ojo, Marianne
  8. International Traffic Termination By OECD
  9. Preferentialism in Trade Relations : Challenges for the World Trade Organization By Patrick Low
  10. Net Neutrality and the Incentives (Not) to Exclude Competitors By Dewenter, Ralf; Rösch, Jürgen

  1. By: Benjamin Hansen
    Abstract: Traditional economic models of criminal behavior have straightforward predictions: raising the expected cost of crime via apprehension probabilities or punishments decreases crime. I test the effect of harsher punishments on deterring driving under the influence (DUI). In this setting, punishments are determined by strict rules on Blood Alcohol Content (BAC) and previous offenses. Regression discontinuity derived estimates suggest that having a BAC above the DUI threshold reduces recidivism by up to 2 percentage points (17 percent). Likewise having a BAC over the aggravated DUI threshold reduces recidivism by an additional percentage point (9 percent). The results suggest that recent recommendations to lower the BAC limit to .05 would save relatively few lives, while increasing marginal punishments and sanctions monotonically along the BAC distribution would more effectively deter the drunk drivers most likely to be involved in fatal crashes.
    JEL: I18 I28 K14 K42
    Date: 2014–06
  2. By: Dickinson, David (Appalachian State University); Masclet, David (University of Rennes); Villeval, Marie Claire (CNRS, GATE)
    Abstract: Do individuals trained in law enforcement punish or reward differently from typical student subjects? We analyze norm enforcement behavior of newly appointed police commissioners in both a Voluntary Contribution Mechanism game and a Common Pool Resource game. Our experimental design includes treatments where a reward or sanction institution is exogenously imposed, as well as treatments with endogenous selection of the norm enforcement institution. Compared to a standard student-subject pool, police commissioners cooperate significantly more in both games. With exogenous institutions, police commissioners bear a higher burden of punishment costs than non-police subjects. When the norm enforcement institution is endogenous, all subjects vote more in favor of rewards over sanctions, but police subjects with some work experience are more likely to vote for sanctions. Police subjects also reward and sanction more than the others when the institution results from a majority vote.
    Keywords: norm enforcement, common pool resources, voluntary contribution mechanism, police officers, experiment
    JEL: C92 H41 D63
    Date: 2014–05
  3. By: Derek Neal; Armin Rick
    Abstract: More than two decades ago, Smith and Welch (1989) used the 1940 through 1980 census files to document important relative black progress. However, recent data indicate that this progress did not continue, at least among men. The growth of incarceration rates among black men in recent decades combined with the sharp drop in black employment rates during the Great Recession have left most black men in a position relative to white men that is really no better than the position they occupied only a few years after the Civil Rights Act of 1965. A move toward more punitive treatment of arrested offenders drove prison growth in recent decades, and this trend is evident among arrested offenders in every major crime category. Changes in the severity of corrections policies have had a much larger impact on black communities than white communities because arrest rates have historically been much greater for blacks than whites.
    JEL: J01 J31 K14
    Date: 2014–07
  4. By: Johanna Lacoe; Ingrid Gould Ellen
    Abstract: In the wake of the housing crisis there is growing concern that increased mortgage foreclosures may lead to physical deterioration of buildings and increased vacancy rates in neighborhoods, undermining neighborhood social controls, and causing increases in local crime. While some recent research suggests that increased mortgage foreclosures in micro-neighborhoods cause modest increases in crime (Ellen, Lacoe, and Sharygin, 2013; Cui, 2010), this paper considers whether foreclosures lead to increased crime on a block, as well as the mechanisms through which foreclosures affect neighborhood crime. To shed light on mechanisms, we investigate whether and how foreclosures shift the location and type of criminal activity by changing the relative attractiveness to potential offenders of one location versus another. For instance, the presence of a vacant, foreclosed building may make it more likely that a drug dealer will sell drugs in a building rather than on the street. As a result, crime occurring inside residences (and in vacant buildings in particular) and on the street may increase by different magnitudes. In addition, we consider whether foreclosures affect resident reports of disorder. Using richly detailed foreclosure, 311, and crime data geo-coded to the blockface (a street segment in-between the two closest cross-streets), we estimate the impact of foreclosures on the location of crime within blockfaces.This research focuses on Chicago, Illinois. Like many areas of the country, housing prices in Chicago reached a peak in 2006, and declined through 2011. In September 2011, 8.7 percent of the mortgages in the Chicago metropolitan area were in foreclosure, giving Chicago the 11th highest foreclosure rate among the 100 largest metropolitan areas in the country. Recent media reports claim that foreclosed and abandoned buildings in Chicago attract criminal activity including gang activity, drug use, and burglaries, in addition to graffiti, and theft of copper pipes and radiators (Knight and O’Shea, 2011). This study takes an empirical look at how foreclosures have changed patterns of crime in Chicago.
    Keywords: foreclosures, crime
    Date: 2014
  5. By: Patrice Bougette (University of Nice Sophia Antipolis, France; GREDEG CNRS); Marc Deschamps (University of Nice Sophia Antipolis, France; GREDEG CNRS; BETA CNRS); Frédéric Marty (GREDEG CNRS; University of Nice Sophia Antipolis; OFCE - Sciences Po. Paris)
    Abstract: In this article, we use a history of economic thought perspective to analyze the process by which the Chicago School of Antitrust emerged in the 1950s and became dominant in the US. We show the extent to which economic objectives and theoretical views shaped antitrust laws in their inception. After establishing the minor influence of economics in the promulgation of U.S. competition laws, we then highlight U.S. economists' very cautious views about antitrust until the Second New Deal. We analyze the process by which the Chicago School developed a general and coherent framework for competition policy. We rely mainly on the seminal and programmatic work of Director and Levi (1956) and trace how this theoretical paradigm was made collective, i.e. the 'economization' process took place in US antitrust. Finally, we discuss the implications, if not the possible pitfalls, of such a conversion to economics-led competition law enforcement.
    Keywords: Antitrust, Chicago School, Consumer welfare, Efficiency, Monopolization
    JEL: K21 L40
    Date: 2014–07
  6. By: Jessica Wolpaw Reyes
    Abstract: It is well known that exposure to lead has numerous adverse effects on behavior and development. Using data on two cohorts of children from the NLSY, this paper investigates the effect of early childhood lead exposure on behavior problems from childhood through early adulthood. I find large negative consequences of early childhood lead exposure, in the form of an unfolding series of adverse behavioral outcomes: behavior problems as a child, pregnancy and aggression as a teen, and criminal behavior as a young adult. At the levels of lead that were the norm in United States until the late 1980s, estimated elasticities of these behaviors with respect to lead range between 0.1 and 1.0.
    JEL: I18 J13 K49 Q53 Q58
    Date: 2014–08
  7. By: Ojo, Marianne
    Abstract: As well as consolidating on the existing literature on fair value accounting, by way of reference to jurisdictional analyses which include a focus on China, Japan, Brazil, and South Africa, this paper not only highlights why there is need for a re-think of the use of fair values as the primary basis for the implementation of IFRS, but also accentuates the links between systemic risk and information asymmetries – hence the justification for greater focus on information channels as well as disclosure and financial reporting requirements. Audits, which serve as vital signalling mechanisms in capital markets, have limited roles in many emerging economies than is the case with industrial nations. In contributing to the extant literature on the topic, this paper also aims to address the vital and crucial question relating to whether certain emerging economies are justified in their reluctance to fully embrace audits – based on cost- benefit considerations, as well as other inadequacies relating to fair value measurements. Furthermore, it will be highlighted that whilst audits may appear to have more limited roles in certain jurisdictions, there appears to be greater willingness to embrace Basel III requirements – and in particular, the Basel III leverage ratios in jurisdictions such as China. Ultimately the paper also aims to investigate whether there are any justifications or rationales for a jurisdiction's willingness and pace to adopt IFRS, Basel III requirements, in relation to the existing role assumed by audits in such jurisdictions.
    Keywords: fair value accounting; Finance Theory; information asymmetries; risk; corporate governance; ownership structures; auditor; disclosure; principal; agent; regulation; moral hazard; IFRS; China; Japan; Brazil; South Africa
    JEL: D8 E3 G3 G38 K2
    Date: 2014–08–08
  8. By: OECD
    Abstract: This report examines measures taken in countries that have restricted the ability for markets to set termination charges for incoming international telecommunication traffic by mandating rates below which no market player can diverge. The report explores empirically the effects of the introduction of such policies and finds that an increase of these termination charges reduces traffic (measured by minutes or calls) in such a way that the expected increase in revenue, given the rise of the termination charge, may be countervailed. Thus, the report concludes that these practices are not in the best interest of the countries where they have been introduced or of countries paying the higher termination rates.
    Date: 2014–06–13
  9. By: Patrick Low (Asian Development Bank Institute (ADBI))
    Abstract: This paper argues that preferential trade agreements (PTAs) and the World Trade Organization (WTO) are not substitutes, and while PTAs are without doubt here to stay, dispensing with a multilateral venue for doing business in trade matters is not a serious option. It is therefore necessary to seek out better accommodation between PTAs and the WTO than has been apparent to date. The law of the General Agreement on Tariffs and Trade (GATT)/WTO has systematically fallen short in imposing discipline on discriminatory reciprocal trade agreements, while procedural requirements, such as notifications, have been partially observed at best, and dispute settlement findings have tended to reinforce existing weaknesses in the disciplines. One approach to remedying this situation is to explore a different kind of cooperation—that of soft law. A soft law approach to improving coherence and compatibility between the WTO and PTAs may hold some promise, but the option also has its pitfalls.
    Keywords: Preferentialism in trade relations, preferential trade agreements (PTAs), WTO, soft law
    JEL: F1 F5 K3
    Date: 2014–05
  10. By: Dewenter, Ralf (Helmut Schmidt University, Hamburg); Rösch, Jürgen (Helmut Schmidt University, Hamburg)
    Abstract: This paper analyses the incentives of a vertical integrated Internet service provider (ISP) to block competitors from content markets. Using a simple model we find that the ISP does not block competing content providers as long as the contents are differentiated sufficiently. Exclusion only takes place when the competitor offers perfect homogeneous content and the ISP has a local monopoly over its Internet access customers or if network effects are strong. In this case, however, the abuse of market power can at least in Europe be prohibited by competition authorities. That is, according to our model there is no need for a regulation of net neutrality.
    Keywords: net neutrality; competition; Internet service providers
    JEL: D40 K20 L12 L82 L86
    Date: 2014–07–28

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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