nep-law New Economics Papers
on Law and Economics
Issue of 2014‒12‒24
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Overdeterrence of repeat offenders when penalties for first-time offenders are restricted By Muller, Daniel; Schmitz, Patrick W
  2. Economic Analysis of Theft Reporting: the Case of Mexico City By Víctor Gerardo Carreón Rodríguez; Jorge L. García-Menéndez
  3. More Schooling, Less Youth Crime? Learning from an Earthquake in Japan By Aoki, Yu
  4. But Who Will Get Billy? The Effect of Child Custody Laws on Marriage By Rose, Elaina; Wong, Crystal (Ho Po)
  5. Brazilian Anti-Corruption Legislation and its Enforcement: Potential Lessons for Institutional Design By Mariana Mota Prado; Lindsey Carson
  6. Procurement Design with Corruption By Roberto Burguet
  7. The Economics of Corruption in Sports – The Special Case of Doping By Dimant, Eugen; Deutscher, Christian
  8. Endogenous cartel formation: Experimental evidence By Fonseca, Miguel A.; Normann, Hans-Theo
  9. Do Fans Care about Compliance to Doping Regulations in Sports? The Impact of PED Suspension in Baseball By Pascal Courty; Jeffrey Cisyk
  10. Labor Market Careers before and after Incarceration By János Kollo; Bence Czafit

  1. By: Muller, Daniel; Schmitz, Patrick W
    Abstract: When penalties for first-time offenders are restricted, it is typically optimal for the lawmaker to overdeter repeat offenders. First-time offenders are then deterred not only by the (restricted) fine for a first offense, but also by the prospect of a large fine for a subsequent offense. Now suppose the restriction on penalties for first-time offenders is relaxed; i.e., larger fines for a first offense become enforceable. Should overdeterrence of repeat offenders now be reduced? We show that this is the case only if the original restriction was not very strong. Otherwise, overdeterrence of repeat offenders should actually be further amplified.
    Keywords: incentives; law enforcement; limited liability; penalties; repeat offenders
    JEL: D82 H23 K14 K42 L51
    Date: 2014–11
  2. By: Víctor Gerardo Carreón Rodríguez (Division of Economics, CIDE); Jorge L. García-Menéndez
    Abstract: Theft is the major component of crime rates in Mexico City and its reporting remains low and stable even when the budget assigned to federal public security reached an increase of 202.23% in 2006-2010. We develop a utility maximization model that attempts to explain the incentives that individuals face when theft reporting and we empirically verify it. We empirically verify a direct relationship between theft reporting and the recovered proportion of what is robbed. Also, we find an inverse relationship between theft reporting and (i) its price, and (ii) theft itself.
    Keywords: economic models of crime, theft, theft reporting
    JEL: K40 K42 K14
    Date: 2013–11
  3. By: Aoki, Yu (University of Aberdeen)
    Abstract: This paper aims to identify the causal effect of schooling on youth crime. To identify the causal effect, I use the policy interventions that occurred after the Kobe earthquake that hit Japan in 1995 as a natural experiment inducing exogenous variation in schooling. Based on a comparison of the arrest rates between municipalities exposed to similar degrees of earthquake damage but with and without the policy interventions, I find that a higher high school participation rate reduces juvenile arrest rates for violent crime but not for property crime. The estimates of social benefits show that it is less expensive to reach a target level of social benefits by improving schooling than by strengthening the police force.
    Keywords: schooling, youth crime, social externality
    JEL: H52 I28 K42
    Date: 2014–11
  4. By: Rose, Elaina (University of Washington); Wong, Crystal (Ho Po) (West Virginia University)
    Abstract: Under the tender years doctrine in effect until the 1970's, custody was virtually always awarded to the mother upon divorce. Gender-neutral custody laws introduced beginning in the 1970's provided married fathers, in principle, equal rights to custody. Subsequent marriage-neutral laws extended the rights to unmarried fathers. We develop a theoretical model of the effect of custody regime on marriage and test the model's predictions using a unique data set that merges custody law data with data from the Current Population Survey and Vital Statistics. We find that, under marriage non-neutrality, the introduction of gender-neutral laws reduced the hazard into marriage by at least 7.9 percent. There is no evidence that moving from marriage non-neutrality to marriage neutrality affected marriage under the gender-neutral custody regime.
    Keywords: marriage, custody, family law
    JEL: J1 J12 J16 J18 K36
    Date: 2014–11
  5. By: Mariana Mota Prado; Lindsey Carson
    Abstract: This paper examines the reforms and institutions that have, anecdotally and empirically, demonstrated progress in combating corruption in Brazil. Focusing specifically on the institutions charged with investigating suspected corrupt activities, we contend that institutional multiplicity – the overlap of investigative functions among various governmental entities – has strengthened outcomes by allowing institutions to collaborate, to complement one another, or to compensate for one another’s deficiencies or oversights. We further argue that our analysis of the Brazilian experience reveals the advantages in pursuing alternative institutional approaches, including institutional multiplicity combined with institutional malleability, in developing strategies to reduce corruption.
    Date: 2014
  6. By: Roberto Burguet
    Abstract: This paper investigates the design of optimal procurement mechanisms in the presence of corruption. After the sponsor and the contractor sign the contract, the latter may bribe the inspector to misrepresent quality. Thus, the mechanism affects whether bribery occurs. I show how to include bribery as an additional constraint in the optimal-control problem that the sponsor solves, and characterize the optimal contract. I discuss both the case of fixed bribes and bribes that depend on the size of the quality misrepresentation, and also uncertainty about the size of the bribe. In all cases, the optimal contract curtails quality not only for low efficiency contractors but also for the most efficient contractors. Implementation is also discussed.
    Keywords: bribery, quality, contract design
    JEL: D82 D73 H57
    Date: 2014–10
  7. By: Dimant, Eugen; Deutscher, Christian
    Abstract: Corruption in general and doping in particular are ubiquitous in both amateur and professional sports and have taken the character of a systemic threat. In creating unfair advantages, doping distorts the level playing field in sporting competition. With higher stakes involved, such distortions create negative externalities not only on the individual level (e.g. lasting health damages) but also frictions on the aggregate level (e.g. loss of media interest) and erode the principle of sports. In this paper, we provide a comprehensive literature overview of the individual drivers to dope, the concomitant detrimental effects and respective countermeasures. In explaining the athlete’s motivation to use performance enhancing drugs, we enrich the discussion by adapting insights from behavioral economics. These insights help to understand such an athlete’s decision beyond a clear-cut rationale but rather as a product of the interaction with the underlying environment. We stress that in order to ensure clean sports and fair competition, more sophisticated measurement methods have to be evolved and the respective data made publicly available in order to facilitate more extensive studies in the future. So far, the lack of data is alarming, especially in the area of elite sports where the stakes are high and doping has a substantial influence.
    Keywords: Sports, Doping, Corruption, Countermeasures, Survey
    JEL: D73 K42 L83
    Date: 2014–12
  8. By: Fonseca, Miguel A.; Normann, Hans-Theo
    Abstract: In a Bertrand-oligopoly experiment, firms choose whether or not to engage in cartel-like communication and, if so, they may get fined by a cartel authority. We find that four-firm industries form cartels more often than duopolies because they gain less from a hysteresis effect after cartel disruption.
    Keywords: cartels,collusion,communication,experiments,repeated games
    JEL: C7 C9 L41
    Date: 2014
  9. By: Pascal Courty (Department of Economics, University of Victoria); Jeffrey Cisyk
    Abstract: There is little evidence in support of the main economic rationale for regulating athletic doping: that doping reduces fan interest. The introduction of random testing for performance-enhancing drugs (PED) by Major League Baseball (MLB) offers unique data to investigate the issue. The announcement of a PED violation: (a) initially reduces home-game attendance by 8 percent, (b) has no impact on home-game attendance after 15 days, and (c) has a small negative impact on the game attendance for other MLB teams. This is the first systematic evidence that doping decreases consumer demand for sporting events.
    Keywords: Performance Enhancing Drug, Doping, Baseball, Major Baseball League, Attendance
    JEL: L83 D01
    Date: 2014–12–02
  10. By: János Kollo (Institute of Economics, Center for Economic and Regional Studies, Hungarian Academy of Sciences); Bence Czafit (Budapest Institute for Policy Analysis)
    Abstract: We study the entry to formal employment and earnings of a large sample of convicts released from Hungarian prisons in 2002-2008. We identify the effect of the prison service on post-release careers by exploiting differences in the timing of incarceration, on the one hand, and estimating fixed effects models, on the other. For convicts with a single prison spell,we find initially negative effect on employment that turns positive after about one year while the impact on wages is permanently negative. A comparison with recidivists, for whom the employment effect is negative and the wage effect is weaker, suggests that these results are driven by a drop in the reservation wages of ‘converted’ criminals rather than the lack of discrimination. This reading is supported by further data showing that the ex-inmates, on average, make increased effort to find legitimate sources of living and support to finding jobs.
    Keywords: incarceration, unemployment, wage loss, discrimination
    JEL: K42 J64 J39
    Date: 2014–11

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