nep-law New Economics Papers
on Law and Economics
Issue of 2015‒01‒03
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Determinants of In-Court Settlements Empiricial Evidence from a German Trial Court By Berlemann, Michael; Christmann, Robin
  2. Severance Pay By Boeri, Tito; Garibaldi, Pietro; Moen, Espen R
  3. The Role of Anti-Corruption Agencies in the Investigation and Prosecution of Procurement Related Corruption Cases By Engelbert, Annika
  4. How Democracy could foster Economic Growth: The Last 200 Years By Carol S. Leonard; Daniel Shestakov; Konstantin Yanovskiy
  5. Asymmetric Information and Opportunistic Behaviour in Ex Ante Contract Negotiations: Precontractual Liability Regime By Angelo Castaldo; Elisabetta Conte; Gianluigi Galeotti
  6. Storable Votes and Judicial Nominations in the U.S. Senate By Casella, Alessandra; Turban, Sébastien; Wawro, Gregory
  7. Arbitration and Renegotiation in Trade Agreements By Mostafa Beshkar
  8. Free to Leave? A Welfare Analysis of Divorce Regimes By Fernández, Raquel; Wong, Joyce Cheng
  9. Judicial Error and Cooperation By Thomas Markussen; Louis Putterman; Jean-Robert Tyran
  10. Global Strategy: The World is your Oyster (if you can shuck it!) By Reus, T.H.

  1. By: Berlemann, Michael (Helmut Schmidt University, Hamburg); Christmann, Robin (Helmut Schmidt University, Hamburg)
    Abstract: Because verdicts are typically the more costly resolution of legal disputes, most governments are interested in high settlement rates. In this paper, we use a unique dataset of 860 case records from a German trial court to explore which factors have a significant impact on the decision to settle in civil law litigation. We find that case-specific factors, procedural aspects and individual characteristics of the involved judge have a significant impact on settlement probability. Interestingly, we find supporting evidence for the hypothesis that the gender of the involved judge has an impact on settlement probabilities in certain subfields of law. Based on our empirical results, we derive some conclusions for legal policies that aim at increasing settlement rates.
    Keywords: settlement rate; judge; mediation; bargaining; procedural rules; gender effects
    JEL: C78 J16 K10 K41
    Date: 2014–12–15
  2. By: Boeri, Tito; Garibaldi, Pietro; Moen, Espen R
    Abstract: All OECD countries have either legally mandated severance pay or compensations imposed by industry-level bargaining in case of employer initiated job separations. According to the extensive literature on Employment Protection Legislation (EPL), such transfers are either ineffective or less efficient than unemployment benefits in providing insurance against labor market risk. In this paper we show that mandatory severance is optimal in presence of wage deferrals motivated by deterrence of opportunistic behavior of workers. Our results hold under risk neutrality and in general equilibrium. We also establish a link between optimal severance and efficiency of the legal system and we characterize the effects of shifting the burden of proof from the employer to the worker. Our model accounts for two neglected features of EPL. The first is the discretion of judges in interpreting the law, which relates not only to the decision as to whether the dismissal is deemed fair or unfair, but also to the nature, economic vs. disciplinary, of the layoff. The second feature is that compensation for dismissal is generally increasing with tenure. The model also rationalizes why severance is generally higher in countries with less efficient judicial systems and why small firms are typically exempted from the strictest EPL provisions.
    Keywords: graded security; legal systems; severance; unfair dismissal
    JEL: J33 J63 J65
    Date: 2014–10
  3. By: Engelbert, Annika
    Abstract: In most developing countries, anti-corruption agencies were established in compliance with international treaties to prevent and combat corruption through law enforcement. Yet conviction rates in corruption have remained very low, undermining the deterrent effect arising from a high risk of detection. Whereas previous research has focused on identifying external success factors for anti-corruption agencies, this paper argues that effective collaboration mechanisms between these agencies, monitoring bodies in corruption-prone sectors such as public procurement, and public prosecution are crucial for curbing corruption. By means of a comparative case study of Tanzania and Uganda, it shall be explored whether a more streamlined or dispersed collaboration approach is more promising in a highly corrupt setting. Besides national laws, the analysis is based on findings from expert interviews and on reports by procurement authorities and the media.
    Keywords: Corruption; Anti-corruption agencies; Tanzania; Uganda
    Date: 2014
  4. By: Carol S. Leonard; Daniel Shestakov (RANEPA); Konstantin Yanovskiy (Gaidar Institute for Economic Policy)
    Abstract: In this paper we explore current understandings of the influence of political rights, among historical legacies, on economic development. We construct variables for selected political regimes for 1811-2010. We find significant association between individual rights and economic growth. We argue that current understanding of political regimes supportive of growth (Acemoglu, etc), should parse the concept of property rights to include the protection of the individual in their focus on private property rights protection, alone, respected in various forms of government, are insufficient; what matters is the security of individuals from arbitrary arrest, regardless of “type of regime”. Discretionary rights of rulers or democratic governments to arrest citizens undermines the protection of private property rights and other attributes classically given to democratic foundations of economic growth, for example, free press, freedom of the exercise of religious belief. We suggest, as a research agenda, that the power of the politically competitive system therefore comes from weakening discretionary authority over law enforcement
    Keywords: Rule of Law, Rule of Force, Personal Rights, Private Property Protection, Economic Growth
    JEL: P16 P50 N40 O40
    Date: 2014
  5. By: Angelo Castaldo (Sapienza Università di Roma); Elisabetta Conte (Ministero dell’Economia e delle Finanze); Gianluigi Galeotti (Sapienza Università di Roma)
    Abstract: During negotiations, parties plan an exchange that will occur in the future and that implies a high level of uncertainty, regarding both contract conditions and final outcome. In this phase, parties are requested, according to country-specific legal framework, to act in good faith. As a matter of fact, the definition of the boundaries of the good faith principle could be used as a strategic variable to understand when a form of pre-contractual liability is both necessary and efficient. Once we have analyzed the different models of pre-contractual liability, given the impact on agents’ behavior and on the level of efficiency of the negotiations. We will focus mainly on two issues. First, the failure to disclose information as a breach of the duty to act in good faith and the cases in which the introduction of a duty to disclose is efficient; secondly, the hold-up problem as a violation of the good faith principle and as opportunistic behavior related to the level of reliance adopted by the party who hasn’t made specific investment. Out aim is to identify and to explain the reasons of the efficiency enhancement given by the introduction of a pre-contractual liability regime.
    Keywords: Pre-contractual liability, Negotiations, Contract, Good faith, Duty to disclose, Reliance, Hold-up
    JEL: K12 K42 D82 D86
    Date: 2014–12
  6. By: Casella, Alessandra; Turban, Sébastien; Wawro, Gregory
    Abstract: We model a procedural reform aimed at restoring a proper role for the minority in the confirmation process of judicial nominations in the U.S. Senate. We propose that nominations to the same level court be collected in periodic lists and voted upon individually with Storable Votes, allowing each senator to allocate freely a fixed number of total votes. Although each nomination is decided by simple majority, storable votes make it possible for the minority to win occasionally, but only when the relative importance its members assign to a nomination is higher than the relative importance assigned by the majority. Numerical simulations, motivated by a game theoretic model, show that under plausible assumptions a minority of 45 senators would be able to block between 20 and 35 percent of nominees. For most parameter values, the possibility of minority victories increases aggregate welfare.
    Keywords: filibuster; judiciary; senate; storable votes; voting
    JEL: D72 H11 K4
    Date: 2014–09
  7. By: Mostafa Beshkar (Indiana University)
    Keywords: Arbitration, Liability Rule, Property Rule, Safeguards, WTO
    JEL: F13 K33
    Date: 2014–11
  8. By: Fernández, Raquel; Wong, Joyce Cheng
    Abstract: During the 1970s the US underwent an important change in its divorce laws, switching from mutual consent to a unilateral divorce regime. Who benefited and who lost from this change? To answer this question we develop a dynamic life-cycle model in which agents make consumption, saving, labor force participation (LFP), and marriage and divorce decisions subject to several shocks and given a particular divorce regime. We calibrate the model using statistics relevant to the life-cycle of the 1940 cohort. Conditioning solely on gender, our ex ante welfare analysis finds that women would fare better under mutual consent whereas men would prefer a unilateral system. Once we condition not only on gender but also on initial productivity, we find that men in the top three quintiles of the initial productivity distribution are made better off by a unilateral system as are the top two quintiles of women; the rest prefer mutual consent. We also find that although the change in divorce regime had only a small effect on the LFP of married women in the 1940 cohort, these effects would be considerably larger for a cohort who lived its entire life under a unilateral divorce system.
    Keywords: divorce; gender inequality; household bargaining; life-cycle behavior
    JEL: D13 J12 J16 K36
    Date: 2014–06
  9. By: Thomas Markussen (Department of Economics, Copenhagen University); Louis Putterman (Department of Economics, Brown University, Providence, USA); Jean-Robert Tyran (Department of Economics, Copenhagen University)
    Abstract: Cooperation can be induced by an authority with the power to mete out sanctions for free riders, but law enforcement is prone to error. This paper experimentally analyzes preferences for and consequences of errors in formal sanctions against free riders in a public goods game. With type I errors, even full contributors to the public good may be punished. With type II errors, free riders may go unpunished. We find that judicial error undermines cooperation and that the effects of type I and II errors are symmetric. To investigate their relative (dis-)like for error, we let subjects choose what type of error to prevent. By use of an incentive-compatible mechanism, we find that subjects prefer type II over type I errors. We find that the strength of this preference is fully in line with a motive to maximize income and does not indicate any additional psychological or fairness bias against type I errors.
    Keywords: Public goods, sanctions, type I errors, type II errors, willingness to pay
    JEL: H41 K4 C92
    Date: 2014–11–24
  10. By: Reus, T.H.
    Abstract: In this inaugural lecture, Taco briefly describes the disciplinary background, central research questions, and themes of Global Strategy, and he presents what may be the dominant framework of understanding how global strategy works and what determines its success. In a nutshell, the formation and implementation of global strategies involves intricate connections between – and savvy decision-making about – resources, relations and rules; i.e., the R3 of Global Strategy. What comes into play particularly in the international context is the role of rules. One of his aims in this address is therefore to broaden the interest in the roles of rules. To illustrate this, the talk discusses aspects of the international acquisition process to suggest that success in Global Strategy relies for an important part on a curiosity about how rules – both our own and others, both local and foreign – influence who we and others are as individuals and as organizations.
    Keywords: Global Strategy, Strategic Management, International Business, International Acquisitions, Mergers & Acquisitions, Rules, Institutions
    JEL: G34 D21 F42 K2 K3 K4 L51
    Date: 2014–12–05

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