nep-law New Economics Papers
on Law and Economics
Issue of 2015‒02‒16
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Enhancing the reliability of performance measures in empirical based research: leverage ratios and theoretical based research By Ojo, Marianne
  2. De Jure Determinants of New Firm Formation: How the Pillars of Constitutions Influence Entrepreneurship By E. Carbonara; E. Santarelli
  3. The problem of causality in corporate governance research: The case of governance indexes and firm valuation By Jimmy A. Saravia; Silvia Saravia-Matus
  4. A Behavioural Approach to Health Promotion: Informing the Global NCD Agenda with Behavioural By Alemanno , Alberto
  5. Legal Uncertainty By Lang, Matthias
  6. Remedies vs. Extreme Options in Merger Control By Dertwinkel-Kalt, Markus; Wey, Christian
  7. Do Leniency Policies facilitate Collusion? Experimental Evidence By Rau, Holger; Clemens, Georg
  8. : Quantity restrictions with imperfect enforcement in an over-used commons: Permissive regulation to reduce over-use? By Jeong-Yoo Kim; Nathan Berg
  9. Police Disruption and Performance: Evidence from Recurrent Redeployments within a City By Mastrobuoni, Giovanni
  10. Criminalization of Homosexuality and Sex Ratios By Chang, Simon
  11. Arbitration and Renegotiation in Trade Agreements By Mostafa Beshkar
  12. Laws and Stigma: the Case of Prostitution By Giovanni Immordino; Francesco Flaviano Russo
  13. How Initiatives to Reduce Fraud in Federal Health Care Programs Affect the Budget By Congressional Budget Office

  1. By: Ojo, Marianne
    Abstract: As well as incorporating and exploring the role of formal analytical methods as a means of highlighting and discovering foundational and fundamental strategy issues, such as the determinants/causes of performance differences between banking institutions and other corporate structures across various jurisdictions, this paper aims to contribute to the literature on how limitations of empirical based research can be mitigated. Such causes of performance differences will incorporate a consideration of what these determinants are, how they operate, how performance should be measured, the extent to which such differences persist, the extent to which such performance measures should be relied upon. Performance measures to be incorporated in this paper will focus primarily on firm performance measures, such as leverage ratios, as well as a brief discussion of macro-economic indicators. From this perspective, the rise of macroeconomics, micro economic inefficiency debates - as well as the validity of such debates will be considered. In its aim to accentuate why many doubts have arisen as regards the reliability of the Basel III Leverage Ratio as a performance measure, and principally in respect of calibration issues, this paper will also provide an analysis of the recent updates which have taken place in respect of the Basel III Leverage Ratio and the Basel III Supplementary Leverage Ratio – both in respect of recent amendments introduced by the Basel Committee and proposals introduced in several jurisdictions such as the United Kingdom and the United States. The paper will also aim to highlight the role of enforcement and the enforceability of rules, ratios and standards, in ensuring that more comparable, consistent, objective and ultimately reliable performance measures are generated.
    Keywords: Basel III; Capital Requirements Directive IV; leverage ratios; enforcement; supervision; Binding Technical Standards; Keynesian revolution; macroeconomics; micro economic inefficiency
    JEL: D8 E3 G2 G3 G38 K2 M4
    Date: 2015–02–02
  2. By: E. Carbonara; E. Santarelli
    Abstract: This paper provides empirical evidence supporting the view that constitutions may influence the organization of economic activities. Dealing with the issue of the institutional determinants of entrepreneurship, it shows that some of the provisions contained in national constitutions are positively and significantly associated to a standard measure of entrepreneurial dynamics, namely the rate of new business density. Using a novel dataset containing the characteristics of the constitutions enacted in the world and a sample of 115 countries, the paper finds that provisions about the right to conduct/establish a business, the right to strike, consumer protection, protection of trademarks, and education promote higher rates of new firm formation.
    JEL: D72 K10 H10 L26 M13 O50 P48
    Date: 2015–02
  3. By: Jimmy A. Saravia; Silvia Saravia-Matus
    Abstract: In recent years the problem of the determination of causality has become an increasingly important question in the field of corporate governance. This paper reviews contemporary literature on the topic and finds that the current approach is to attempt to determine causality empirically and that the problem remains unresolved. After explaining the reasons why it is not possible to attempt to determine causality using real world data without falling prey to a logical fallacy, this paper discusses an approach to deal with the problem. In particular, the paper argues that the appropriate approach for the problem is to build theories, with causality featuring as a part of those theories, and then to test those theories both for logical and empirical consistency.
    Keywords: Corporate Governance; Agency Costs; Firm Valuation; Governanceindexes; Boards of Directors; Entrenchment; Shareholder Rights
    JEL: B41 G34 G38 K22
    Date: 2015–01–22
  4. By: Alemanno , Alberto
    Abstract: At a time in which behavioural science has gained increasing attention for the design of population-wide health interventions, this chapter discusses its potential contributions to the prevention and control of Non-Communicable-Diseases (NCDs). Given the largely preventable nature of NCDs, any lifestyle intervention faces the challenge to induce behavioural change. By highlighting the role of social and physical environments in shaping our behaviour, applied behavioural science provides policymakers with a new understanding of human decision-making and, as a result, may support an innovative approach to the promotion of behaviour change leading to healthier lives. <p> While only a combination of policy instruments, such as legislation, regulation, and even financial and fiscal incentives, may induce behaviour change to the scale required to reduce the burden of chronic disease at the population level, a behavioural informed approach may valuably complement the current regulatory mix. In particular, an analysis of the WHO NCD Action Plan and its accompanying strategies suggests an increased awareness of the roles played by environmental and social factors on behaviour change. Although the language employed falls short of operationalizing the major behavioural insights into the NCD agenda, it clearly highlights that their integration into the current regulatory mix appears fundamental today for the design of any lifestyle policy intervention. <p> As behavioural change is progressively becoming the focus of health promotion efforts, the lesson learned is that there is more to behaviour change than merely empowering the targeted individuals, communities and populations with the necessary information.
    Keywords: Health law; NCD; WHO; Nudge; Libertarian Paternalism; Behavioral change; Lifestyle; Regulation
    JEL: I12 I28 J18 K00 K20 K23 K32 M00
    Date: 2014–08–04
  5. By: Lang, Matthias
    Abstract: This article considers legal uncertainty in competition law. Contrary to perceived wisdom, I show that the uncertainty itself might have positive welfare effects, if it is sufficiently small. Legal uncertainty functions as a screening device provided that the threshold of legality is uncertain. Then, near the threshold, firms decision whether to pursue controversial business practices varies with their type. This allows mitigating the policy restrictions, as the competition authority cannot perfectly observe the types of the firms. Such an effect might influence the trade-off between per-se rules and rules of reason in competition law. In an extension, I discuss the effects of introducing ambiguity about the fine. I prove that this ambiguity mitigates enforcement problems if auditing costs are sufficiently high.
    JEL: K20 K42 L51
    Date: 2014
  6. By: Dertwinkel-Kalt, Markus; Wey, Christian
    Abstract: We investigate how remedies in merger control affect information acquisition by an antitrust agency. We identify conditions under which an ''extreme options'' regime which does not allow for remedies improves information acquisition by the agency which increases consumer surplus. The legislator (''principal'') and the agency share the same objective function with the only exception that the latter must bear information costs. When remedies are not feasible, then the agency's incentive to acquire information is relatively large as a false decision tends to have large adverse effects. When remedies are feasible, the intermediate option does not involve such risks, so that incentives to acquire information decreases. However, our results depend crucially on the institutional environment. In the case of an adversial system, information acquisition incentives are not per se lower if remedies are feasible.
    JEL: L13 K21 L40
    Date: 2014
  7. By: Rau, Holger; Clemens, Georg
    Abstract: This paper experimentally analyzes the cartel coordination challenge induced by the discrimination of cartel ringleaders in leniency policies. Ringleaders often take a leading role in the coordination and formation of a cartel. A leniency policy which grants amnesty to all "whistleblowers" except for ringleaders may therefore reduce the incentive to become a ringleader and may disrupt cartel formation. We analyze discriminatory and non-discriminatory leniency policies in a multi-stage cartel formation experiment where multiple ringleaders may emerge. Although theory predicts that cartels will always be reported, whistleblowing rarely occurs. Paradoxically the discriminatory leniency policy induces more firms to become ringleaders, which ultimately facilitates coordination in the cartel.
    JEL: L41 K21 C92
    Date: 2014
  8. By: Jeong-Yoo Kim (Department of Economics, Kyung Hee University, Korea); Nathan Berg (Department of Economics, University of Otago, New Zealand)
    Abstract: This paper presents a model of quantity regulation aimed at mitigating externalities from over-use of a commons: for example, restrictions on use of automobiles, fisheries, computer networks and electronic stock quotation systems with high-frequency traders. The model provides a counter-intuitive answer to the question of what happens when quantity restrictions are legislated but enforcement is imperfect. If the probability of enforcement depends on both violation rates and enforcement expenditures, then equilibrium congestion can become worse as the quantity restriction becomes more severe. Stricter regulation causes more agents to violate the regulation which consequently reduces the probability of detection. Aggregate payoffs respond nonmonotonically to stricter regulatory rules. We find an interior near-optimal solution which is neither too permissive nor too strict. We show, however, that this near-optimal quantity regulation falls short of achieving socially optimal levels of use. Moreover, socially optimal levels of use can never be achieved in the sense that there exist some agents who rationally choose to violate the regulation if the regulator sets the restricted activity level at the socially optimal level. We also discuss optimal enforcement.
    Keywords: congestion, emissions cap, regulation standard, tragedy of the commons
    JEL: K42
    Date: 2014–05
  9. By: Mastrobuoni, Giovanni (University of Essex)
    Abstract: More policing reduces crime but little is known about the mechanism. Does policing deter crime by reducing its attractiveness, or because it leads to additional arrests of recurrent criminals? This paper provides evidence of a direct link between policing and arrests. During shift changes a peculiar redeployment of police patrols belonging to separate police forces disrupts policing and lowers the likelihood of clearing robberies with an arrest by 30 percent. There is no evidence that criminals exploit these dips in police performance. A back of the envelope calculation suggests that incapacitation explains 2/3 of the elasticity between robberies and policing.
    Keywords: police, crime, incapacitation, deterrence, arrests, deployment, quasi-experiment, shift changes
    JEL: K42 H00
    Date: 2015–01
  10. By: Chang, Simon (Central University of Finance and Economics)
    Abstract: Sexual activities between consenting adults of the same sex are still criminalized in more than one third of the countries in the world despite a global wave of decriminalization in the past sixty years. This paper empirically investigates the effect of sex ratios, i.e. relative number of men to women, on the criminalization of same-sex sexual conducts. At the individual level, people in high sex ratio countries are found to be more hostile against homosexuality and the homosexuals than their counterparts in low sex ratio countries. At the country level, sex ratios have a positive effect on criminalization. In particular, the two-stage least squares estimate using temperature as instrumental variable suggests that adding another man per 100 women in a country would increase the probability of criminalization by nearly three percentage points. Moreover, the fixed-effect estimate based on a US state-level panel data show that adding another man per 100 women in a state would have lowered the probability of revoking the state sodomy law by nearly two percentage points. These findings suggest that a high sex ratio creates a homophobic social environment that facilitates (hampers) the criminalization (decriminalization) of homosexuality.
    Keywords: sex ratio, sodomy law, social norm, homosexuality
    JEL: J1 K4
    Date: 2015–01
  11. By: Mostafa Beshkar (Indiana University)
    Keywords: Arbitration, Liability Rule, Property Rule, Safeguards, WTO
    JEL: F13 K33
    Date: 2014–11
  12. By: Giovanni Immordino (Università di Napoli Federico II and CSEF); Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: We study the opinions on prostitution that emerged from the World Value Survey. We show that individuals tends to justify prostitution more in countries where it is legal or regulated and less in countries where it is prohibited, even after controlling for religious, cultural and sociological factors. To overcome the endogeneity of the policy to the opinions, we propose an instrumental variable strategy, instrumenting prostitution policy with legal origins. At least for the case of prostitution, policies seem to affect opinions.
    Keywords: Prostitution, Stigma, Law, Gender
    JEL: O17 K14 J16
    Date: 2015–02–04
  13. By: Congressional Budget Office
    Abstract: Observers often cite fraud as an important contributor to high health care spending, particularly in federal programs. This report describes how CBO estimates the budgetary effects of legislative proposals to reduce fraud in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), and how those estimates are used in the Congressional budget process. What Is Fraud? For the purposes of this report, fraud is considered to be any deliberate attempt to use deception to receive a service or payment from Medicare, Medicaid, or the Children’s Health Insurance Program when the
    JEL: H60 I13 I18 K42
    Date: 2014–10–20

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