nep-law New Economics Papers
on Law and Economics
Issue of 2015‒01‒19
sixteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Financial Power of the Powerless: Socio-Economic Status and Interest Rates under Partial Rule of Law By Timur Kuran; Jared Rubin
  2. But Who Will Get Billy? The Effect of Child Custody Laws on Marriage By Elaina Rose; Ho-Po Crystal Wong
  3. Comparative Analusis Of Antitrust Policy Against Collusion In Some Transition Economies: Challenges For Effectiveness By Andrey V. Makarov
  4. Wet Laws, Drinking Establishments, and Violent Crime By Anderson, D. Mark; Crost, Benjamin; Rees, Daniel I.
  5. Why do Budgets Received by State Prosecutors Vary Across Districts in the United States? By Manu Raghav
  6. Role Of The European Court Of Justice In The Third Pillar: Does Not It Grow Too Fast? By Ivan Grigoriev
  7. Constructing the Secular: Law and Religion Jurisprudence in Europe and the United States By Zachary R. Calo
  8. Cost of crime: a systematic review By Nyantara Wickramasekera; Sandy Tubeuf; Judy Wright; Helen Elsey; Jenni Murray
  9. On the question of defining "Legal liability" By Ivanskyy Andrey Yosipovich
  10. Resisting to the Extortion Racket: an Empirical Analysis By Michele Battisti; Andrea Mario Lavezzi; Lucio Masserini; Monica Pratesi
  11. The Revolving Door Indicator: Estimating the Distortionary Power of the Revolving Door By Elise S. Brezis; Joel Cariolle
  12. Democratizing intellectual property systems : how corruption hinders equal opportunities for firms By Paunov C.
  13. Borrower Protection and the Supply of Credit: Evidence from Foreclosure Laws By Jihad Dagher; Yangfan Sun
  14. Discretion Rather than Simple Rules: the Case of Social Protection By Alvaro Forteza; Cecilia Noboa
  15. Understanding Immoral Conduct in Business Settings: A Behavioural Ethics Approach By van Dijke, M.H.
  16. Institutions and Regulations in Innovation Systems: Effects, Problems and Innovation Policy Design By Borrás , Susana; Edquist , Charles

  1. By: Timur Kuran (Duke University); Jared Rubin (Chapman University)
    Abstract: In advanced economies interest rates generally vary inversely with the borrower’s socio-economic status, because status tends to depend inversely on default risk. Both of these relationships depend critically on the impartiality of the law. Specifically, they require a lender to be able to sue a recalcitrant borrower in a sufficiently impartial court. Where the law is markedly biased in favor of elites, privileged socio-economic classes will pay a premium for capital. This is because they pose a greater risk to lenders who have limited means of punishing them. Developing the underlying theory, this paper also tests it through a data set consisting of judicial records from Ottoman Istanbul, 1602-1799. Pre-modern Istanbul offers an ideal testing ground, because rule of law existed but was highly partial. Court data show that titled elites, men, and Muslims all paid higher interest rates conditional on various loan characteristics. A general implication is that elites have much to gain from instituting impartially enforced rules in financial markets even as they strive to maintain privileges in other domains. It is no coincidence that in the Ottoman Empire the beginnings of legal modernization included the establishment of relatively impartial commercial courts.
    Keywords: Rule of law, elite, status, religion, gender, court, interest rate, credit, financial market, Ottoman Empire, Istanbul, Islam, Islamic law, sharia
    JEL: G10 K42 N2 N4 N95
    Date: 2014
  2. By: Elaina Rose (University of Washington); Ho-Po Crystal Wong (West Virginia University, College of Business and Economics)
    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: 2014–12
  3. By: Andrey V. Makarov (National Research University Higher School of Economics)
    Abstract: This article focuses on the development of antitrust policy in transition economies in the context of preventing explicit and tacit collusion. Experience of BRICS, Kazakhstan, Ukraine and CEE countries (Bulgaria, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Czech Republic, Estonia) in the creation of antitrust institutions was analyzed, including both legislation and enforcement practice. This article analyzes such enforcement problems as: classification problems (tacit vs explicit collusion, vertical vs horizontal agreements), flexibility of prohibitions (“per se” vs “rule of reason”), design of sanctions, private enforcement challenge, leniency program mechanisms, the role of antitrust authorities etc. Main challenges for policy effectiveness in this field were shown
    Keywords: collusion, antitrust policy, leniency program, transition economies, CEE, BRICS
    JEL: K21 L41 L42
    Date: 2014
  4. By: Anderson, D. Mark (Montana State University); Crost, Benjamin (University of Illinois at Urbana-Champaign); Rees, Daniel I. (University of Colorado Denver)
    Abstract: Drawing on county-level data from Kansas for the period 1977-2011, we examine whether plausibly exogenous increases in the number of establishments licensed to sell alcohol by the drink are related to violent crime. During this period, 86 out of 105 counties in Kansas voted to legalize the sale of alcohol to the general public for on-premises consumption. We provide evidence that these counties experienced substantial increases in the total number of establishments with on-premises liquor licenses (e.g., bars and restaurants). Using legalization as an instrument, we show that a 10 percent increase in drinking establishments is associated with a 4 percent increase in violent crime. Reduced-form estimates suggest that legalizing the sale of alcohol to the general public for on-premises consumption is associated with an 11 percent increase in violent crime.
    Keywords: alcohol, liquor licenses, crime
    JEL: H75 K42
    Date: 2014–12
  5. By: Manu Raghav (Department of Economics and Management, DePauw University)
    Abstract: This paper analyzes how the budget allocated to state prosecutors' offices vary across prosecutorial districts and the reasons for such variation by empirical methods, using data from Census of Prosecutors and other sources. The main results of this paper are as follows. Other factors being equal, the state prosecutor's budget increases with the crime rate in the prosecutorial district and the per-capita income of the district. State prosecutors in more politically conservative prosecutorial districts, as measured by the percentage of votes that President Bush won in 2000 presidential election, get smaller budgets and this decrease in the prosecutorial budget of a district with political conservatism is larger in more affluent and in more populous districts.
    Keywords: Prosecuting Attorneys, District Attorneys, State Courts, Crime, Prosecution, Litigation Process, Budget.
    JEL: K40 K41 K42 H72 H76
    Date: 2014–11
  6. By: Ivan Grigoriev (National Research University Higher School of Economics)
    Abstract: The article discusses the role of the European court of justice in the so called third pillar of the European Union. This role, from virtually non-existent in the early 1990s when the third pillar was introduced into the institutional structure of the European Union, grew extensively throughout the 1990-2000s and by the time the pillar structure was abandoned in the Treaty of Lisbon in 2009, the Court has already effectively escaped its limitations by its own case-law. This provides a curious example of judicialization – the process whereby legal institutions gain political power and engage into taking politically salient decisions alongside, and sometimes even instead of politicians acting within majoritarian institutions. By reviewing the ECJ case-law in the third pillar the paper attempts to establish the effect of judicialization on the EU, to evaluate it and to answer the question whether the role of the ECJ grows too fast in the third pillar.
    Keywords: Courts, jurisprudence.
    JEL: K40
    Date: 2014
  7. By: Zachary R. Calo
    Abstract: This paper compares the law and religious jurisprudence of the U.S. Supreme Court and the European Court of Human Rights across three legal areas: individual religious freedom, institutional religious freedom/freedom of the church, and religious symbols/church-state relations. Particular focus is given to the manner in which this jurisprudence reveals the underlying structure and meaning of the secular. While there remains significant jurisprudential diversity between these two courts and across these different legal areas, there is also emerging a shared accounting of religion, secularity, and moral order in the late modern the West. These legal systems will increasingly be defined by their similarities more than their differences.
    Date: 2014–09–19
  8. By: Nyantara Wickramasekera (Leeds Institute of Health Sciences, University of Leeds); Sandy Tubeuf (Leeds Institute of Health Sciences, University of Leeds); Judy Wright (Leeds Institute of Health Sciences, University of Leeds); Helen Elsey (Leeds Institute of Health Sciences, University of Leeds); Jenni Murray (Leeds Institute of Health Sciences, University of Leeds)
    Abstract: Background: Crime imposes significant costs and negative consequences to people and society globally. Understanding the cost of crime is important to conduct economic evaluations of existing crime prevention interventions and to allocate resources by prioritizing crime prevention efforts relative to the severity of the crime category. Aim: The aim of this review is to systematically search the literature to select and review all existing and relevant studies that have estimated the cost of crime. Methods: In December 2013, fifteen databases were systematically searched for published studies and grey literature. We included studies that estimated the costs of crime of adult offenders. Due to high heterogeneity, results were synthesised descriptively. Results: 21 studies met the inclusion criteria, of these 14 studies estimated the societal cost of crime, six studies focused on victim costs, and one study calculated the costs imposed by ‘career’ offenders. There was considerable variance in the estimated total costs of crime and studies from the United States consistently reported the highest total costs. Different crime categories were used to estimate the total cost of crime but all the studies consistently included robbery and burglary in the total cost estimate. Homicide was ranked as the most costly offence, followed by drug offence, fraud, sexual assault, assault, and serious traffic offence. Crime categories that involved any violence to a person were consistently associated with large intangible costs. Conclusions: This systematic review found several studies that estimated the cost of crime spread across different developed countries. However, we found large variance in the total cost estimate between studies. While it is difficult to precisely determine what caused this variance, we think that it could be due to changes in unit costs, underreporting of crime, changes in crime trends, inconsistent definitions of crime categories, and variations in the methods used to estimate costs. The findings from this systematic review highlight the need for more up-to-date studies with better reporting standards.
    Keywords: crime, cost
    JEL: H43 I38
    Date: 2014
  9. By: Ivanskyy Andrey Yosipovich (Doctor of Law, Professor, Distinguished Lawyer of Ukraine)
    Abstract: The scientific article is devoted to the multidisciplinary study of the phenomenon of legal responsibility, in legal terms, as a manifestation of social responsibility. Responsibility as a phenomenon of social life rezmatra primarily from the standpoint of hermeneutics, and then illuminates the standpoint sematièkog pojimanja and substantive content of other humanitarian sciences. The study starts from the time of ancient Rome and sheds light on the genesis of conceptions of "responsibility" to the real legal understanding of the term today. Deep understanding of the contents of one of the most important features of socio-economic life ("odgovonrost") is based on the semantic and historical, but also multicultural method, and provides a strong basis for the development of optimal models of legal regulation of social relations that underlie this understanding of the content .
    Keywords: responsibility, legal responsibility, legal category, doctrinally place, a modern interpretation, substantive meaning
    JEL: K1 K10 K19
    Date: 2014–09
  10. By: Michele Battisti (Università di Palermo); Andrea Mario Lavezzi (Università di Palermo); Lucio Masserini (Università di Pisa); Monica Pratesi (Università di Pisa)
    Abstract: In this paper we perform a statistical evaluation of whether it is worthwhile, in economic terms, to resist to extortion demands by the maa, from the point of view of rms operating in an area dominated by criminal organizations. We use a unique collected and matched database on rm characteristics on the city of Palermo, highly controlled by the maa racket. The underlined idea is that the claimed resistance has (direct and indirect) costs and benets, so that a rational rm should take this decision according its economic expectations on the future prots (in addition to potential ethic considerations). It means that the economic policy messages of this experience can be linked to make more protable the racket resistance (as a signal sent to the market). Our evidences based on multilevel discrete choice models show that this decision is strongly in uenced by socio-economic characteristics of the district, type of activity involved and other factors.
    Keywords: Organized Crime, Racketeering, Economic Growth, Discrete choice models.
    JEL: O17 K42 R11 C41
    Date: 2014
  11. By: Elise S. Brezis (Bar-Ilan University); Joel Cariolle
    Abstract: The “revolving door” phenomenon has become very common in most industrialised countries, and is leading to conflicts of interest as well as economic distortions. The purpose of this paper is to develop an indicator of the distortionary effects of the revolving door – The Revolving Door Indicator (RDI). By measuring the sectorial concentration of the revolving door, this indicator intends to proxy the distortions induced by rent-seeking firms. The RDI is a first step to size up the distortive power of the revolving door.
    Keywords: Israel; revolving door, corruption, conflict of interest, regulations, distortions
    JEL: D7 K2 K4 L1 L2 L5
    Date: 2014–12
  12. By: Paunov C. (UNU-MERIT)
    Abstract: This paper analyses how corruption affects firms ownership of intellectual property titles that relate to firms technological, organizational and further innovation efforts quality certificates and patents. Using firm-level data covering 48 developing and emerging countries, we show corruption reduced the likelihood of firms seeking quality certificates. Smaller firms were more affected by corruption and benefited less from higher levels of trust in their business environment. Corruption did not have impacts on the quality certificate ownership of exporters, foreign- and publicly-owned firms. Firms machinery investments were also negatively affected. By contrast, we do not find effects on firms ownership of patents.
    Keywords: Organizational Behavior; Transaction Costs; Property Rights; Microeconomic Analyses of Economic Development; Intellectual Property Rights;
    JEL: O34 O12 D23
    Date: 2014
  13. By: Jihad Dagher; Yangfan Sun
    Abstract: Laws governing the foreclosure process can have direct consequences on the costs of foreclosure and could therefore affect lending decisions. We exploit the heterogeneity in the judicial requirements across U.S. states to examine their impact on banks’ lending decisions in a sample of urban areas straddling state borders. A key feature of our study is the way it exploits an exogenous cutoff in loan eligibility to GSE guarantees which shift the burden of foreclosure costs onto the GSEs. We find that judicial requirements reduce the supply of credit only for jumbo loans that are ineligible for GSE guarantees. These laws do not affect, however, the relative demand of jumbo loans. Our findings, which also hold using novel nonbinary measures of judicial requirements, illustrate the consequences of foreclosure laws on the supply of mortgage credit. They also shed light on a significant indirect cross-subsidy by the GSEs to borrower-friendly states that has been overlooked thus far.
    Keywords: Mortgages;United States;Banks;Loans;Credit;Supply and demand;Econometric models;Borrower protection, foreclosure laws, credit supply, regulation, GSEs
    Date: 2014–11–26
  14. By: Alvaro Forteza (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Cecilia Noboa (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: We present a simple model of a benevolent government that provides insurance to risk averse individuals. As in macroeconomics, commitment to fully contingent rules is better than discretion, but when the government can only commit to simple rules, discretion may be the best available option. The model provides a simple albeit precise characterization of discretion and commitment to a simple rule in the context of social protection, showing when and why discretion may be better than commitment. We argue that the forces highlighted in our model can provide a rationale for several highly distortive policies often observed in the real world in weak institutional environments.
    Keywords: Discretion, Commitment, Simple Rules, Informality
    JEL: E61 H20 H30 H50 O17
    Date: 2014–08
  15. By: van Dijke, M.H.
    Abstract: __Abstract__ In the past decades, the world has observed a large variety of business scandals, such as those at ENRON, WorldCom, AHOLD, Lehman Brothers, and News of the World. These scandals caused economic damage and undermined the trust that governments, shareholders, and citizens have in the corporate and financial world. In response, the scientific study of moral and immoral conduct of organizational managers and employees - referred to as “behavioral ethics” - has rapidly grown into an accepted field of scientific enquiry. In this inaugural address, I distinguish behavioral ethics from traditional philosophical views of business ethics, and present a brief overview of the history and the current status of the field. I illustrate how progress can be made in the field of behavioral ethics using examples from my own research in the areas of organizational justice, ethical leadership, and power / hierarchy. I then present a research program that addresses some critical limitations of the field. I close by addressing how insights from behavioral ethics research can be made more practically relevant by integrating them in the curricula of business schools and by applying them to design interventions aimed at improving the moral conduct of organizational managers and employees.
    Keywords: Ethics, Morality, Integrity, Behavioral Ethics, Justice, Fairness, Power, Leadership, Prosocial Behavior
    JEL: D21 D71 K42 M14
    Date: 2014–12–19
  16. By: Borrás , Susana (Department of Business and Politics, Copenhagen Business School, Denmark and CIRCLE, Lund University, Sweden); Edquist , Charles (CIRCLE, Lund University, Sweden (Holder of the Ruben Rausing Chair in Innovation Research))
    Abstract: Institutions (including regulations) are constitutive elements of innovation systems, and therefore cornerstones of innovation policy. Focusing on (soft and hard) regulation, the paper identifies the most salient regulatory areas from the perspective of the innovation system. When asking about the effects of regulation on innovation, the paper argues that there are three key issues that need careful empirical analysis; namely, whether regulation is effective and efficient in terms of reducing uncertainty and generating incentives, whether it is able to generate ultimately wider social benefits for the innovativeness of the society at large; and the extent to which regulation is adapting to new (social, economic and technological) contexts and is socially legitimate and accepted. These are potentially the three problems that innovation policy needs to address in this area. This provides guidance for the design and re-design of innovation policy, so that policy makers may analyse empirically the social dynamics actually generated by regulation rather than simply assuming deductively their effects.
    Keywords: Innovation system; innovation policy; knowledge production; R&D; universities; innovation policy instruments; institutions; institutional change
    JEL: L38 M38 O25 O31 O32 O33
    Date: 2014–12–15

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