nep-law New Economics Papers
on Law and Economics
Issue of 2014‒12‒08
six papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Stealing to Survive : Crime and Income Shocks in 19th Century France By Galbiati, Roberto; Caroli, Eve; Bignon, Vincent
  2. Affirmative Action and Stereotypes in Higher Education Admissions By Prasad Krishnamurthy; Aaron Edlin
  3. Balanced collective contributions, the equal allocation of non-separable costs and application to data sharing games By Sylvain Béal; Marc Deschamps; Philippe Solal
  4. On the Intended and Unintended Consequences of Enhanced Border and Interior Immigration Enforcement: Evidence from Deportees By Amuedo-Dorantes, Catalina; Pozo, Susan
  5. The appeals process: An empirical assessment By Hüschelrath, Kai; Smuda, Florian
  6. The broken buck stops here: Embracing sponsor support in money market fund reform By Fisch, Jill E.

  1. By: Galbiati, Roberto; Caroli, Eve; Bignon, Vincent
    Abstract: Using local administrative data from 1826 to 1936, we document the evolution of crime rates in 19th century France and we estimate the impact of a negative income shock on crime. Our identification strategy exploits the phylloxera crisis. Between 1863 and 1890, phylloxera destroyed about 40% of French vineyards. We use the geographical variation in the timing of this shock to identify its impact on property and violent crime rates, as well as minor offences. Our estimates suggest that the phylloxera crisis caused a substantial increase in property crime rates and a significant decrease in violent crimes.
    Keywords: Crime; income shock; phylloxera; 19th century France;
    JEL: K42 N33 R11
    Date: 2014–10
  2. By: Prasad Krishnamurthy; Aaron Edlin
    Abstract: We analyze how admission policies affect stereotypes against students from disadvantaged groups. Many critics of affirmative action argue that lower admission standards cause such stereotypes and suggest group-blind admissions as a remedy. We show that when stereotypes result from social inequality, they can persist under group-blind admissions. In such cases, eliminating stereotypes perversely requires a higher admission standard for disadvantaged students. If a school seeks both to treat students equally and limit stereotypes, the optimal admission policy would still impose a higher standard on disadvantaged students. A third goal, such as equal representation, is required to justify group-blind admissions. Even when there is such a third goal, group-blind admissions are optimal only when the conflicting goals of equal representation and limiting stereotypes exactly balance. This is an implausible justification for group-blind admission because it implies that some schools desire higher standards for disadvantaged students. Schools that do not desire such higher standards will typically find some amount of affirmative action to be optimal.
    JEL: D0 D3 D63 D82 I23 I24 K00
    Date: 2014–10
  3. By: Sylvain Béal (CRESE, Université de Franche-Comté); Marc Deschamps (Université de Lorraine, BETA (CNRS 7522) and GREDEG (CNRS UMR 7321)); Philippe Solal (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne)
    Abstract: The axiom of Balanced collective contributions is introduced as a collective variant of the axiom of Balanced contributions proposed by Myerson (1980). It requires that the identical average impact of the withdrawal of any agent from a game on the remaining population. It turns out that Balanced collective contributions and the classical axiom of Efficiency characterize the equal allocation of non-separable costs, an allocation rule which is extensively used in cost allocation problems and in accounting. For instance, the equal allocation of non-separable costs coincides with the Nucleolus on the class of data sharing games within the European REACH legislation. While our result does not hold on data sharing games, we provide comparable characterizations of the equal allocation of non-separable costs and the Shapley value.
    Keywords: Balanced collective contributions, Balanced contributions, Equal allocation of non-separable costs, Shapley value, Data games.
    JEL: C71 D71 K32 L65
    Date: 2014–08
  4. By: Amuedo-Dorantes, Catalina (San Diego State University); Pozo, Susan (Western Michigan University)
    Abstract: Over the past decade, a number of federal and state policies intended to stem the flow of illegal immigration have been implemented. In this paper, we focus on two initiatives: (a) Operation Streamline, as an example of increased border enforcement by the federal government, and (b) state-level omnibus immigration laws, as an illustration of enhanced interior enforcement by state governments. We investigate whether these policies have reduced the intentions of deported immigrants to attempt a new unauthorized crossing. While state-level omnibus immigration laws reduce the proportion of deportees intending to attempt a new crossing, increased border enforcement has proven to be far less effective. In addition, we ascertain human costs associated with these policies. Our findings are mixed in this regard. Noteworthy is how the adoption of more stringent interior enforcement seems to result in a "herding" or "ganging-up" effect whereby the incidence of verbal and physical abuse rises with the number of states enacting such measures. Additionally, our estimates suggest that deportees are more likely to respond that they have risked their lives to cross into the United States as a result of enhanced border enforcement.
    Keywords: deportation, interior enforcement, border enforcement, treatment of deportees, re-migration intentions
    JEL: F22 K42
    Date: 2014–09
  5. By: Hüschelrath, Kai; Smuda, Florian
    Abstract: The appeals process - whereby the losing party of an administrative or judicial decision can seek reconsideration of their arguments before a higher institution - is an important mechanism to correct legal errors and to improve existing laws and regulations. We use data of 467 firm groups that participated in 88 cartels convicted by the European Commission between 2000 and 2012 to study both the characteristics of firm groups filing an appeal and the factors that determine their successfulness in terms of fine reduction. Applying discrete choice models and a two-stage hurdle model, we find that while some characteristics - such as the size and financial condition of the firm group or the clarity of fine guidelines - only affect the probability to file an appeal, other factors such as the size of the fine imposed in connection to characteristics as ringleader, repeat offender or leniency applicant influence both the probability and the success of an appeal. We take our empirical results to derive conclusions for both firms and public policy makers.
    Keywords: Law and Economics,appeals,antitrust policy,cartels,European Union
    JEL: K21 K41 K42 L41
    Date: 2014
  6. By: Fisch, Jill E.
    Abstract: Since the 2008 financial crisis, in which the Reserve Primary Fund "broke the buck," money market funds (MMFs) have been the subject of ongoing policy debate. Many commentators view MMFs as a key contributor to the crisis because widespread redemption demands during the days following the Lehman bankruptcy contributed to a freeze in the credit markets. In response, MMFs were deemed a component of the nefarious shadow banking industry and targeted for regulatory reform. The Securities and Exchange Commission's (SEC) misguided 2014 reforms responded by potentially exacerbating MMF fragility while potentially crippling large segments of the MMF industry. Determining the appropriate approach to MMF reform has been difficult. Banks regulators supported requiring MMFs to trade at a floating net asset value (NAV) rather than a stable $1 share price. By definition, a floating NAV prevents MMFs from breaking the buck but is unlikely to eliminate the risk of large redemptions in a time of crisis. Other reform proposals have similar shortcomings. More fundamentally, the SEC's reforms may substantially reduce the utility of MMFs for many investors, which could, in turn, affect the availability of short term credit. The shape of MMF reform has been influenced by a turf war among regulators as the SEC has battled with bank regulators both about the need for additional reforms and about the structure and timing of those reforms. Bank regulators have been influential in shaping the terms of the debate by using banking rhetoric to frame the narrative of MMF fragility. This rhetoric masks a critical difference between banks and MMFs' asset segregation. Unlike banks, MMF sponsors have assets and operations that are separate from the assets of the MMF itself. This difference has caused the SEC to mistake sponsor support as a weakness rather than a key stability-enhancing feature. As a result, the SEC mistakenly adopted reforms that burden sponsor support instead of encouraging it. As this article explains, required sponsor support offers a novel and simple regulatory solution to MMF fragility. Accordingly this article proposes that the SEC require MMF sponsors explicitly to guarantee the $1 share price. Taking sponsor support out of the shadows embraces rather than ignores the advantage that MMFs offer over banks through asset partitioning. At the same time, sponsor support harnesses market discipline as a constraint against MMF risktaking and moral hazard.
    Keywords: regulation of financial markets,banking regulation,securities law and regulation,money market funds,mutual funds,MMFs,SEC,securities,net asset value,financial crisis,shadow banking,systemic risk,financial crisis
    JEL: G01 G23 K22
    Date: 2014

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