nep-law New Economics Papers
on Law and Economics
Issue of 2015‒02‒05
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Down and Out in Italian towns: measuring the impact of economic downturns on crime By Carlo Menon; Guido de Blasio
  2. Is Legal Pot Crippling Mexican Drug Trafficking Organizations? The Effect of Medical Marijuana Laws on US Crime By Gavrilova, Evelina; Kamada, Takuma; Zoutman, Floris
  3. Trading and enforcing patent rights By Alberto Galasso; Mark Schankerman; Carlos J. Serrano
  4. Contracts and cooperation: UK Corporate Law and Corporate Governance before 1914: a Re-interpretation By James Foreman-Peck; Leslie Hannah
  5. The Harrington Paradox Squared By Coria, Jessica; Zhang, Xiao-Bing
  6. A multi-level approach to understanding the impact of cyber crime on the financial sector By Monica Lagazio; Nazneen Sherif; Mike Cushman
  7. Deconstructing data protection: the 'Added-value' of a right to data protection in the EU legal order By Orla Lynskey
  8. Crime and immigration: new evidence from England and Wales By Laura Jaitman; Stephen Machin
  9. On the Use of Price-cost Tests in Loyalty Discounts: Which Implications from Economic Theory? By Chiara Fumagalli; Massimo Motta
  10. Why do Europeans steal more than Americans? By Peter Rupert; Giulio Zanella; Marek Kapicka
  11. Does altruism justify privileges? By Enrico Colombatto; Valerio Tavormina
  12. Regulating financial market infrastructures By Guido Ferrarini; Paolo Saguato
  13. Impacts of Planning Rules, Regulations, Uncertainty and Delay on Residential Property Development By Arthur Grimes; Ian Mitchell

  1. By: Carlo Menon; Guido de Blasio
    Abstract: The paper investigates the effect of local economic conditions on crime. The study focuses on Italy’s local labor markets and analyzes the short-term response of crime to the severe slump of 2007-2009. It shows that the downturn led to a significant increase in economic-related offenses that do not require particular criminal skills or tools (namely, thefts); on the other hand, for offenses for which specific skills and criminal experience are essential (say, robberies) the impact of the crisis was negative. The results also suggest that: i) labor market institutions (i.e. wage supplementary schemes and pro-worker contractual arrangements) had a role in slowing down the effect of the economy on crime; ii) the link between the downturn and crime was weaker in areas where the presence of organized crime is relatively more intensive.
    Keywords: crime; economic crises; Italy
    JEL: E32 K14 K42
    Date: 2013–06
  2. By: Gavrilova, Evelina (Dept. of Business and Management Science, Norwegian School of Economics); Kamada, Takuma (Division of Behavioral Science, Graduate School of Arts and Letters, Tohoku University); Zoutman, Floris (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: We examine the effect of medical marijuana laws (MML) on crime treating the introduction of MML as a quasi-experiment and using three different data sources. First, using data from the Uniform Crime Reports, we find that violent crimes such as homicides and robberies decrease in states that border Mexico after MML are introduced. Second, using Supplementary Homicide Reports' data we show that for homicides the decrease is the result of a drop in drug-law and juvenile-gang related homicides. Lastly, using STRIDE data, we show that the introduction of MML in Mexican border states decreases the amount of cocaine seized, while it increases the price of cocaine. Our results are consistent with the theory that decriminalization of small-scale production and distribution of marijuana harms Mexican drug trafficking organizations, whose revenues are highly reliant on marijuana sales. The drop in drug-related crimes suggests that the introduction of MML in Mexican border states lead to a decrease in their activity in those states. Our results survive a large variety of robustness checks. Extrapolating from our results, this indicates that decriminalization of the production and distribution of drugs may lead to a drop in violence in markets where organized crime is pushed out by licit competition.
    Keywords: Cannabis Legalization; Decriminalization; Crime
    JEL: H00 K00 K42
    Date: 2015–01–19
  3. By: Alberto Galasso; Mark Schankerman; Carlos J. Serrano
    Abstract: We study how the market for innovation affects enforcement of patent rights. We show that patent transactions arising from comparative advantages in commercialization increase litigation, but trades driven by advantages in patent enforcement reduce it. Using data on trade and litigation of individually owned patents in the United States, we exploit variation in capital gains tax rates across states as an instrument to identify the causal effect of trade on litigation. We find that taxes strongly affect patent transactions, and that trade reduces litigation on average, but the impact is heterogeneous. Patents with larger potential gains from trade are more likely to change ownership, and the impact depends critically on transaction characteristics.
    JEL: L81 E6
    Date: 2013–06
  4. By: James Foreman-Peck (Cardiff University); Leslie Hannah (Cardiff University)
    Abstract: The consensus among legal and economic historians that British law provided little protection to corporate shareholders is based on formal provisions in the Companies Acts . In fact these Acts applied only to companies registered by the Board of Trade. Moreover both criminal and corporate law for statutory companies was codified in the Companies Clauses Consolidation Act of 1845. We show that, while the governance rules of private companies were largely unconstrained, for most of the Victorian period most capital in quoted companies (which were mainly statutory) scored highly on the "anti-director" rights index under mandatory rules. When registered companies came to dominate stock exchanges, nearer the end of the nineteenth century, they voluntarily adopted similar rules, which professionals serving the stock exchange and IPOs recognised had advantages for raising capital. The main exception was the omission of tiered voting rules (whose record in protecting minorities was at best debatable), in favour of one-share-one-vote. Unlike the prevailing consensus, our reinterpretation is consistent with evidence on the large size of the London Stock Exchange and extensive divorce of ownership from control in listed UK companies before 1914.
    Keywords: Corporate governance, anti-directors rights, voluntary regulation
    JEL: K22 L51
    Date: 2015–01
  5. By: Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Zhang, Xiao-Bing (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Harrington (1988) shows that state-dependent enforcement based on past compliance records provides an explanation to the seemingly contradictory observation that firms' compliance with environmental regulations is high despite the fact that inspections occur infrequently and fines are rare and small. This result has been labeled in the literature as the "Harrington paradox". In this paper we propose an improved transition structure for the audit framework where targeting is based not only on firms' past compliance record but also on adoption of environmentally superior technologies. We show that this transition structure would not only foster the adoption of new technology but also increase deterrence by changing the composition of firms in the industry toward an increased fraction of cleaner firms that pollute and violate less.<p>
    Keywords: imperfect compliance; state-dependent targeted enforcement; technology adoption; emission standards
    JEL: K31 K42 L51 Q55
    Date: 2015–01
  6. By: Monica Lagazio; Nazneen Sherif; Mike Cushman
    Abstract: This paper puts forward a multi-level model, based on system dynamics methodology, to understand the impact of cyber crime on the financial sector. Consistent with recent findings, our results show that strong dynamic relationships, amongst tangible and intangible factors, affect cyber crime cost and occur at different levels of society and value network. Specifically, shifts in financial companies’ strategic priorities, having the protection of customer trust and loyalty as a key objective, together with considerations related to market positioning vis-à-vis competitors are important factors in determining the cost of cyber crime. Most of these costs are not driven by the number of cyber crime incidents experienced by financial companies but rather by the way financial companies choose to go about in protecting their business interests and market positioning in the presence of cyber crime. Financial companies’ strategic behaviour as response to cyber crime, especially in regard to over-spending on defence measures and chronic under-reporting, has also an important consequence at overall sector and society levels, potentially driving the cost of cyber crime even further upwards. Unwanted consequences, such as weak policing, weak international frameworks for tackling cyber attacks and increases in the jurisdictional arbitrage opportunities for cyber criminals can all increase the cost of cyber crime, while inhibiting integrated and effective measures to address the problem.
    Keywords: causal loop diagram; cyber crime; economic impact; financial sector; system dynamics
    JEL: G15
    Date: 2014–09
  7. By: Orla Lynskey
    Abstract: Article 8 of the EU Charter of Fundamental Rights sets out a right to data protection which sits alongside, and in addition to, the established right to privacy in the Charter. The Charter's inclusion of an independent right to data protection differentiates it from other international human rights documents which treat data protection as a subset of the right to privacy. Its introduction and its relationship with the established right to privacy merit an explanation. This paper explores the relationship between the rights to data protection and privacy. It demonstrates that, to date, the Court of Justice of the European Union (CJEU) has consistently conflated the two rights. However, based on a comparison between the scope of the two rights as well as the protection they offer to individuals whose personal data are processed, it claims that the two rights are distinct. It argues that the right to data protection provides individuals with more rights over more types of data than the right to privacy. It suggests that the enhanced control over personal data provided by the right to data protection serves two purposes: first, it proactively promotes individual personality rights which are threatened by personal data processing and, second, it reduces the power and information asymmetries between individuals and those who process their data. For these reasons, this paper suggests that there ought to be explicit judicial recognition of the distinction between the two rights.
    Keywords: court of justice of the EU; data protection; EU charter of fundamental rights; information and power asymmetries; informational self-determination; privacy
    JEL: K23
    Date: 2014–07
  8. By: Laura Jaitman; Stephen Machin
    Abstract: We study a high profile public policy question on immigration, namely the link between crime and immigration, presenting new evidence from England and Wales in the 2000s. For studying immigration impacts, this period is of considerable interest as the composition of migration to the UK altered dramatically with the accession of Eastern European countries (the A8) to the European Union in 2004. As we show, this has important implications for ensuring a causal impact of immigration can be identified. When we are able to implement a credible research design with statistical power, we find no evidence of an average causal impact of immigration on crime, nor do we when we consider A8 and Non-A8 immigration separately. We also study London by itself as the immigration changes over time in the capital city were large. Again, we find no causal impact of immigration on crime from our spatial econometric analysis and also present evidence from unique data on arrests of natives and immigrants in London which shows no immigrant differences in the likelihood of being arrested.
    Keywords: Crime; Immigration; Enclaves; A8
    JEL: F22 K42
    Date: 2013–10
  9. By: Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Massimo Motta (ICREA-Universitat Pompeu Fabra and Barcelona Graduate School of Economics)
    Abstract: Recent cases in the US (Meritor, Eisai) and in the EU (Intel ) have revived the debate on the use of price-cost tests in loyalty discount cases. We draw on existing recent economic theories of exclusion and develop new formal material to argue that economics alone does not justify applying a price-cost test to predation but not to loyalty discounts. Still, the latter contain features (they reference rivals and allow to discriminate across buyers and/or units bought) that have a higher exclusionary potential than the former, and this may well warrant closer scrutiny and more severe treatment from antitrust agencies and courts.
    Keywords: Market-share discounts, Inefficient foreclosure, Exclusive dealing
    JEL: K21 L41
    Date: 2015–01–22
  10. By: Peter Rupert (University of California, Santa Barbara); Giulio Zanella (University of Bologna); Marek Kapicka (University of California Santa Barbara)
    Abstract: Property crime is today more widespread in Europe than in the United States, while the opposite was true during the 1970s and 1980s. In this paper we study the determinants of crime in a dynamic general equilibrium model with uninsured idiosyncratic shocks. We focus on Germany, and compute the contribution of various factors to the total change. We find that the most important factor explaining the reversal are changes in the probability of apprehension and prison duration for the United States, and demographic changes for Germany. Changes in labor tax rates and transfers are unimportant for the United States. For Germany they have non-negligible effects, but they go in opposite directions and tend to offset each other.
    Date: 2014
  11. By: Enrico Colombatto; Valerio Tavormina
    Abstract: This article discusses whether altruism justifies ad-hoc legislation with reference to three different contexts. One is defined by the libertarian notion of liberty, a second framework corresponds to the egalitarian vision, and a third one originates from social-contract theory. It is shown that current legislation is rather ambiguous and sometimes even contradictory. By and large, the common-law view tends to favour the libertarian approach, while the civil-law visions are closer to what one might expect from social-contract theory, where the letter of the law is often questioned by the academic community and by the judiciary, and decisions eventually follow the judges' discretionary power.
    Keywords: Altruism, libertarianism, egalitarianism
    JEL: D64 K19 K39
    Date: 2015–01
  12. By: Guido Ferrarini; Paolo Saguato
    Abstract: This paper focuses on the impact of financial market infrastructures (FMIs) and of their regulation on the post-crisis transformation of securities and derivatives markets. It examines, in particular, the role that trading and post-trading FMIs, and their new regulatory regime, are playing in the expansion of ‘public’ securities and derivatives markets, and the progressive shrinkage of ‘private’ markets (which broadly coincide with the ‘unregulated’ or ‘less regulated’ over-the-counter (OTC) markets). The paper provides an overview of the policy approaches underlying the international crisis-era reforms to FMIs, and focuses on the dichotomy between the ‘systemic risk’ and ‘transaction costs’ approaches to financial markets and FMIs regulation. By reviewing the current move from ‘private’ markets to ‘public’ markets internationally, and with respect to the EU and US regimes, we analyze the role of trading infrastructures as liquidity providers, both in the securities markets and in the derivatives markets. And, shifting the focus to post-trading infrastructures – central clearing houses (CCPs), central securities depositories (CSDs), and trade repositories (TRs) – we address their role in supporting financial stability and market transparency. We conclude by identifying how regulators are now more deeply involved in FMIs’ governance and operation. We argue that such policy approach resulted in regulatory initiatives which move in the direction of increasing the systemic scope of FMIs, introducing elements of publicity in private markets, and calling for higher public supervision. - This paper is a draft chapter for a forthcoming volume, "The Oxford Handbook on Financial Regulation," edited by Eilís Ferran, Niamh Moloney, and Jennifer Payne, (Oxford University Press).
    Keywords: financial markets; financial market infrastructure; exchange; clearing house; central securities depository; systemic risk; transaction cost; securities market; derivatives market; MiFID II; EMIR; MiFIR; Dodd-Frank Act
    JEL: G15 G18 G21 G23 G28 G38 K22 K23
    Date: 2014–06
  13. By: Arthur Grimes (Motu Economic and Public Policy Research); Ian Mitchell (Livingston Associates)
    Abstract: Dwelling prices are determined in the long run by the total costs of a development, where costs include regulatory costs, including costs of delay and uncertainty. We outline a conceptual framework for the development process and then develop a real options model of housing development that indicates more formally how regulatory policies and regulatory practices affect development decisions. We apply these insights to the design of a survey of property developers active in the Auckland market, with an emphasis on the ‘affordable’ part of the market. In surveying developers, we aim to elicit their views regarding the impacts that planning rules and regulations have on total development costs. We do not attempt to value the corresponding benefits of the planning rules and regulations, so this study is not a cost: benefit analysis of council planning approaches; rather it documents the costs of the rules and regulations – as perceived by developers – to provide a basis for benefits to be compared. Almost 90% of surveyed developers have been affected by delays or uncertainties related to regulation. Regulations that have had major effects on the actual building costs of apartments include: building height limits, balcony requirements, conforming to Council’s desired mix of apartment typologies and minimum floor to ceiling heights. Major cost effects on developing residential sections and standalone dwellings include: infrastructure contributions not related to the specific development, section size requirements, extended consent processes and urban design considerations stemming from Council’s urban designers. Reserve and development contributions and Watercare levies affect the costs of both types of development. Excluding the cost of Watercare and reserve and development contributions, the typical cost range of the total impact of regulations is estimated to vary between $32,500 and $60,000 per dwelling in a subdivision. In terms of affordable apartments, assuming the total internal floor area remains the same and no deck is built, the impact on total cost typically is estimated to range between $65,000 and $110,000 per apartment.
    Keywords: Residential property development; planning rules; delay; uncertainty; Auckland
    JEL: K29 R31 R38
    Date: 2015–01

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