nep-law New Economics Papers
on Law and Economics
Issue of 2015‒01‒09
sixteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. A Simple Model of Optimal Deterrence and Incapacitation By Steven Shavell
  2. Lower Sanctions, Greater Antitrust Compliance? Cartel Conduct with Imperfect Information about Enforcement Risk By Johannes Paha
  3. Individual perceptions of local crime risk By Salm, M.; Vollaard, B.A.
  4. Legal Institutions, Credit Markets, and Economic Activity By Brown, James R.; Cookson, J Anthony; Heimer, Rawley
  5. The Economic Impact of Civil Justice Reforms By Dimitri Lorenzani; Federico Lucidi
  6. European champions and competition enforcement:Is DG COMP in ideological denial? By Damien Neven; Vilen Lipatov; Gregor Langus
  7. Using bankruptcy to reduce foreclosures: does strip-down of mortgages affect the supply of mortgage credit? By Li, Wenli; Tewari, Ishani; White, Michelle J.
  8. Should a child be allowed to give evidence? The position of child evidence under civil and Islamic laws in Malaysia By Mohd Shukri, Muhammad Hafiz; Hassan, Mohd Khairul Hisyam
  9. The Cost of Kelo: Are Property Taxes a Form of Public Use? By Thomas J. Miceli
  10. Immigration and Crime: New Empirical Evidence from European Victimization Data By Nunziata, Luca
  11. Uncertain Penalties and Compliance By Carol Luengo; Marcelo Caffera; Carlos Chávez
  12. Optimal Joint Liability Lending and with Costly Peer Monitoring By Carli, Francesco; Uras, R.B.
  13. Women and Corruption: What Positions Must They Hold to Make a Difference? By Chandan Kumar Jha; Sudipta Sarangi
  14. The influence of European regulations on the Constitution and of certain infraconstitutional regulations regarding localpublic administration٭ By Apostolache, Mihai
  15. Labor Market Careers Before and After Incarceration By Kollo, Janos; Czafit, Bence
  16. Do Payment Disclosure Laws Affect Industry-Physician Relationships? By Chen, D.L.;; Levonyan, V.;; Reinhart, S.E.;; Taksler, G.;

  1. By: Steven Shavell
    Abstract: The deterrence of crime and its reduction through incapacitation are studied in a simple multiperiod model of crime and law enforcement. Optimal imprisonment sanctions and the optimal probability of sanctions are determined. A point of emphasis is that the incapacitation of individuals is often socially desirable even when they are potentially deterrable. The reason is that successful deterrence may require a relatively high probability of sanctions and thus a relatively high enforcement expense. In contrast, incapacitation may yield benefits no matter how low the probability of sanctions is—implying that incapacitation may be superior to deterrence.
    JEL: K14 K42
    Date: 2014–12
  2. By: Johannes Paha (University of Giessen)
    Abstract: This article provides a model of two risk-neutral firms that may cooperate to achieve a goal that is potentially illegal. The model assumes enforcement risk and firms that are imperfectly informed about antitrust law enforcement. It is shown that compliance training, which educates the agents about law enforcement, may prevent hardcore cartels. Compliance training programs may also promote forms of cooperation that are beneficial for customers. The article shows that a competition authority can sometimes spur the implementation of compliance programs by imposing lower sanctions on wrongdoers.
    JEL: K21 K42 L41
    Date: 2014
  3. By: Salm, M. (Tilburg University, Center For Economic Research); Vollaard, B.A. (Tilburg University, Center For Economic Research)
    Abstract: We provide evidence that perceptions of crime risk are severely biased for many years after a move to a new neighborhood. Based on four successive waves of a large crime survey, matched with administrative records on household relocations, we find that the longer an individual lives in a neighborhood, the higher their perception of the crime rate in the neighborhood. This finding holds irrespective of whether the move is from a relatively low-crime to a relatively high-crime area or vice versa. We find that avoidance behavior adjusts in line with the observed changes in beliefs.
    Keywords: heuristic; Victimization; crime
    JEL: D81 K42
    Date: 2014
  4. By: Brown, James R. (Iowa State University); Cookson, J Anthony (Unniversity of Colorado at Boulder); Heimer, Rawley (Federal Reserve Bank of Cleveland)
    Abstract: This paper provides novel evidence on the causal connections between legal institutions, credit markets, and real economic activity. Our analysis exploits an unexplored within-country setting—Native American reservations—together with quasi-experimental variation in legal contract enforcement wherein the US Congress externally assigned state courts to adjudicate contracts on a subset of reservations. According to area-specific data on small business credit, reservations assigned to state courts, which enforce contracts more predictably than tribal courts, have stronger credit markets. Moreover, the law-driven component of credit market development is associated with significantly higher levels of per capita income, with stronger effects in sectors that depend more on external financing. By using exogenous variation in legal institutions across relatively similar sovereign entities, our study offers compelling evidence that stronger contract enforcement and better-developed credit markets lead to significant improvements in broad economic outcomes.
    Keywords: courts; law and finance; economic growth; external financing; contract enforcement.
    JEL: G21 G31 K12 N22 O43
    Date: 2014–12–08
  5. By: Dimitri Lorenzani; Federico Lucidi
    Abstract: Quality, independence and efficiency are the key components of effective justice systems, a crucial condition to ensure the proper functioning of important drivers of growth in the EU. This paper focuses on judicial efficiency and investigates the impact of certain structural reforms affecting the civil justice system on selected economic outcomes, such as business dynamics and foreign direct investments (FDI). In doing so, the role of efficiency of justice systems (measured by disposition time and the ratio of pending cases to population, both referred to litigious civil and commercial disputes) is highlighted as a transmission channel linking judicial reforms to economic variables. The work draws upon a dataset based on the reports by the Council of Europe's European Commission for the Efficiency of Justice (CEPEJ). The results support the growth potential of judicial reforms rationalising the organisation of courts, fostering investment in in-court ICT and introducing incentives to reduce excessive litigation rates (for instance by enhancing the use of alternative disputes resolution methods), which are all found to positively affect the efficiency of civil justice. By increasing the efficiency of the justice system, these reforms can enhance entrepreneurial activity (as measured by firms' entry rates) and FDI.
    JEL: K40 K41 D02 C36
    Date: 2014–09
  6. By: Damien Neven (IHEID, The Graduate Institute of International and Development Studies, Geneva); Vilen Lipatov; Gregor Langus
    Keywords: competition policy
    JEL: K21 K40 L40
    Date: 2014–11
  7. By: Li, Wenli (Federal Reserve Bank of Philadelphia); Tewari, Ishani (Yale School of Management); White, Michelle J. (University of California at San Diego, Cheung Kong Graduate School of Business, and National Bureau of Economic Research)
    Abstract: We assess the credit market impact of mortgage “strip-down” — reducing the principal of underwater residential mortgages to the current market value of the property for homeowners in Chapter 7 or Chapter 13 bankruptcy. Strip-down of mortgages in bankruptcy was proposed as a means of reducing foreclosures during the recent mortgage crisis but was blocked by lenders. Our goal is to determine whether allowing bankruptcy judges to modify mortgages would have a large adverse impact on new mortgage applicants. Our identification is provided by a series of U.S. Court of Appeals decisions during the late 1980s and early 1990s that introduced mortgage strip-down under both bankruptcy chapters in parts of the U.S., followed by two Supreme Court rulings that abolished it throughout the U.S. We find that the Supreme Court decision to abolish mortgage strip-down under Chapter 13 led to a reduction of 3% in mortgage interest rates and an increase of 1% in mortgage approval rates, while the Supreme Court decision to abolish strip-down under Chapter 7 led to a reduction of 2% in approval rates and no change in interest rates. We also find that markets react less to circuit court decisions than to Supreme Court decisions. Overall, our results suggest that lenders respond to forced renegotiation of contracts in bankruptcy, but their responses are small and not always in the predicted direction. The lack of systematic patterns evident in our results suggests that introducing mortgage strip-down under either bankruptcy chapter would not have strong adverse effects on mortgage loan terms and could be a useful new policy tool to reduce foreclosures when future housing bubbles burst.
    Keywords: Mortgage credit; Strip-down; Creditor protection; Bankruptcy
    JEL: G14 G18 K10
    Date: 2014–12–01
  8. By: Mohd Shukri, Muhammad Hafiz; Hassan, Mohd Khairul Hisyam
    Abstract: Currently, more children fall victim to crime and go to court to give evidence. The key issues include the acceptability of children as witnesses, the weight to be given to their evidence and whether or not there should be special procedures to ease the stress of giving evidence in court. The main objective of this article is to discuss the position of child evidence under civil and Islamic laws in Malaysia. This article will focus on the provisions of laws relating to evidence given by a child witness and the procedures applicable in Malaysia. This study will ascertain whether or not the current laws are adequate to protect the rights of child as witness in trial based on analysis and evaluation to every aspect which is relevant to this topic. The issue of whether or not a child should be allowed to give evidence in court will also be clarified.
    Keywords: child evidence; child witness; corroboration; unsworn evidence; Islamic laws
    JEL: K4
    Date: 2014–08–20
  9. By: Thomas J. Miceli (University of Connecticut)
    Abstract: This paper examines the economic implications of the definition of public use advanced by the Supreme Court in the case of Kelo v. New London. In its ruling, the Court asserted that the Fifth Amendment public use requirement is satisfied if the taking in question, even if for private ends, promises enhanced jobs and tax revenues for the community. The paper first reviews the law and economics of public use, and then argues that the Court’s justification creates the potential for an alliance between local governments and developers that will increase the risk of overuse of eminent domain. Underlying this risk is the unobservability of landowners’ subjective values, which requires local governments to rely on market value as the basis for property taxation.
    Keywords: Eminent domain, public use, just compensation, property taxes, subjective value
    JEL: K11 H41 H71
    Date: 2014–11
  10. By: Nunziata, Luca (University of Padova)
    Abstract: We exploit the increase in immigration flows into western European countries that took place in the 2000s to assess whether immigration affects crime victimization and the perception of criminality among European natives. Using data from the European Social Survey, the Labour Force Survey and other sources, we provide a set of fixed effects and instrumental variable estimations that deal with the endogenous sorting of immigration by region and with the sampling error in survey based measures of regional immigration shares, whose implications in terms of attenuation bias are investigated by means of Monte Carlo simulations. Our empirical findings show that an increase in immigration does not affect crime victimization, but it is associated with an increase in the fear of crime, the latter being consistently and positively correlated with the natives' unfavourable attitude toward immigrants. Our results reveal a misconception of the link between immigration and crime among European natives.
    Keywords: crime, migration, victimization, perception, fear
    JEL: J15 J61 K42 F22 R23 O15
    Date: 2014–11
  11. By: Carol Luengo; Marcelo Caffera; Carlos Chávez
    Abstract: Using a series of laboratory economic experiments, we study the effect of information regarding the amount of the fine on the individual decision to violate an emission standard. Specifically, the analysis considers variations in the information available for the regulated subjects regarding the amount of the monetary sanction, as well as variations in the stringency in the inspection effort by the regulator. Our results suggest that in the case of a regulation design that induces compliance, the presence of uncertainty regarding the amount of the fine may increase violations in certain cases. When enforcement is not sufficient to induce compliance, the uncertainty regarding the amount of the fine does not have any effect on the level of transgression. Overall, the results suggest that a cost-effective regulation design should consider including public information on the consequences of an offense.
    Keywords: s Uncertainty; Risk; Compound risk; Fine; Emission standard; Economic experiment
    JEL: C91 L51 Q58 K42
  12. By: Carli, Francesco; Uras, R.B. (Tilburg University, Center For Economic Research)
    Abstract: This paper characterizes an optimal group loan contract with costly peer monitoring. Using a fairly standard moral hazard framework, we show that the optimal group lending contract could exhibit a joint-liability scheme. However, optimality of joint-liability requires the involvement of a group leader, who heavily takes care of the partner's repayment share in bad states and gets compensated in expected terms. This key result holds even for a group of borrowers, which exhibits homogeneous characteristics in productivity, risk aversion and monitoring costs. Our work rationalizes the widely-applied group-leadership concept of microfinance programmes as an outcome of an optimal contract.
    Keywords: Micro finance; Joint-liability; Group leader.
    JEL: G21 O12 O16
    Date: 2014
  13. By: Chandan Kumar Jha; Sudipta Sarangi
    Abstract: This paper examines the precise role: whether it is the bribe-taking role, the decision-making or policy making role, in which womenâs presence can have an impact on corruption. It is the first paper in the gender and corruption literature to use an IV approach for addressing endogeneity concerns. We provide robust evidence that womenâs presence in parliament has a causal and negative impact on corruption, while other measures of female participation in economic activities are shown to have no effect. We draw inferences based on Moreiraâs (2003) conditional likelihood ratio approach. We also briefly examine the potential channels through which women as parliamentarians can affect corruption, and whether women are likely to become as corrupt as men as they gain similarity in social status.
    JEL: D73 J16 K42
    Date: 2014–11–18
  14. By: Apostolache, Mihai
    Abstract: Choosing the European path allowed Romania to modernize its legislation by adapting to the European requirements. These requirements, which take the form of standards contained in various European regulations, are the result of the experience of EU bodies or the Council of Europe, as well as other international bodies. Taking into consideration all these regulations and driven by the desire to become part of the European family as soon as possible, national policy makers have modernized the legislation,thereby bringing substantial improvements to regulations regarding local public administration. The article presents the main legal and political instruments at European and international level that have positively influenced the legislation on local public administration in Romania and the internal normative acts resulting from this influence.
    Keywords: European regulations, local public administration, norms, jurisprudence, European standards
    JEL: K0 O2 O29
    Date: 2014–12–15
  15. By: Kollo, Janos (Hungarian Academy of Sciences); Czafit, Bence (Budapest Institute)
    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
  16. By: Chen, D.L.;; Levonyan, V.;; Reinhart, S.E.;; Taksler, G.;
    Abstract: The effect of disclosure laws on what is being disclosed is typically unknown since data on disclosed activity rarely exist in the absence of disclosure laws. We exploit data from legal settlements disclosing $316 million in payments to 316,622 physicians across the U.S. from 2009-2011. Multiple regression analysis of differences-indifferences and LASSO double-selection models were used. States were classified as having strong, weak, or no disclosure based on data reported only to state authorities or being publicly available. One state, Massachusetts, began releasing payment data on the web during our sample period, allowing separate analysis of physician payments while the cost of disclosing data remained fixed for pharmaceutical companies. Strong disclosure law reduced payments among doctors accepting less than $100 and increased payments among doctors accepting greater than $100. Weak disclosure states were indistinguishable from no disclosure states. The behavioral response to mandatory disclosure is likely due to the public visibility of disclosed data.
    Keywords: physician payment; legal/regulatory issues; ethical issues;
    Date: 2014–08

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