nep-law New Economics Papers
on Law and Economics
Issue of 2015‒03‒05
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Litigation in Spain 2001-2010: Exploring the market for legar services By Juan S. Mora-Sanguinetti; Nuno Garoupa
  2. Competitors In Merger Control: Shall They Be Merely Heard Or Also Listened To? By Thomas Giebe; Miyu Lee; ;
  3. Fighting Corruption in Education: What Works and Who Benefits? By orcan, Oana B; Lindahl, Mikael; Mitrut, Andreea
  4. The Cost of Antitrust Law to Malaysia’s Financial Services Sector By Michael, Bryane; Williams, Mark; Munisamy, Susila
  5. An Empirical Analysis of Primary and Secondary Pharmaceutical Patents in Chile By María José Abud Sittler; Bronwyn Hall; Christian Helmers
  6. How should governments promote distributive justice?: A framework for analyzing the optimal choice of tax instruments By David Gamage
  7. Binge Drinking, Antisocial and Unlawful Behaviours, and Beverage Types By Ou Yang; Xueyan Zhao; Preety Srivastava
  8. Heterogeneous Responses to Effective Tax Enforcement: Evidence from Spanish Firms By Miguel Almunia; David Lopez-Rodriguez
  9. Measuring conflicts of interest: a revolving door indicator By Elise S. BREZIS; Joël CARIOLLE

  1. By: Juan S. Mora-Sanguinetti (Banco de España); Nuno Garoupa (University of Illinois)
    Abstract: There is empirical evidence of a cross-country positive association between the number of lawyers per capita and the extent of litigation. For instance, Spain has more litigation and more lawyers per capita than most OECD countries. How should this association be interpreted? In this paper we analyse the variation in both variables across Spanish provinces during the period 2001-2010, by means of an instrumental variable approach, to shed some light on the sources of the statistical association between them. Finally, implications of the results are discussed.
    Keywords: lawyers, litigation, civil courts, instrumental variables
    JEL: K41 K42 J44 L84
    Date: 2015–02
  2. By: Thomas Giebe; Miyu Lee; ;
    Abstract: There are legal grounds to hear competitors in merger control proceedings, and competitor involvement has gained significance. To what extent this is economically sensible is our question. The competition authority applies some welfare standard while the competitor cares about its own profit. In general, but not always, this implies a conflict of interest. We formally model this setting with cheap talk signaling games, where hearing the competitor might convey valuable information to the authority, but also serve the competitor’s own interests. We find that the authority will mostly have to ignore the competitor but, depending on the authority’s own prior information, strictly following the competitor’s selfish recommendation will improve the authority’s decision. Complementary to our analysis, we provide empirical data of competitor involvement in EU merger cases and give an overview of the legal discussion in the EU and US.
    Keywords: merger control, antitrust, European Commission, signaling, efficiency, competitors, rivals
    JEL: G34 K21 L4 C73 L2
    Date: 2015–02
  3. By: orcan, Oana B (University of Gothenburg); Lindahl, Mikael (Uppsala Center for Labor Studies); Mitrut, Andreea (Uppsala Center for Labor Studies)
    Abstract: We investigate the efficiency and distributional consequences of a corruptionfighting initiative in Romania targeting the endemic fraud in a high-stakes high school exit exam, which introduced CCTV monitoring of the exam and credible punishment threats. We find that punishment coupled with monitoring was effective in reducing corruption. Estimating the heterogeneous impact for students of different ability, poverty status, and gender, we show that fighting corruption led to efficiency gains (ability predicts exam outcomes better) but also to a worrisome score gap increase between poor and non-poor students. Consequently, the poor students have reduced chances to enter an elite university.
    Keywords: corruption; high-stakes exam; bribes; monitoring and punishment;
    JEL: I21 I24 K42
    Date: 2015–02–13
  4. By: Michael, Bryane; Williams, Mark; Munisamy, Susila
    Abstract: Judging by only economic incentives, Malaysian financial institutions (particularly banks) should completely ignore the Competition Act. The data show that Malaysian banks probably benefit from anticompetitive behaviour. Political and family connections likely facilitate such behaviour. Given that the Malaysian Competition Commission will likely lack the resources to investigate and sanction anti-competitive behaviour in Malaysia’s banking industry – the banks’ best response to the Act probably consists of ignoring it. Maximum fines of 10 million ringgit and revenue-tied penalties of only 10% of worldwide revenue mean that banks still have strong incentives to engage in anticompetitive behaviour and to pay any low fine that might be levied. The best compliance programme for banks in Malaysia likely consists of actions that avoid detection rather than detecting and preventing anticompetitive behaviour. Private rights of action are unlikely to provide any stronger economic incentives for Malaysian banks to adopt strong antitrust compliance programmes and internal audit programmes. By staying the course, Malaysian banks can continue to earn about 15 billion ringgits (approximately US$4.6 billion in anticompetitive rents).
    Keywords: antitrust,Malaysia,internal audit,compliance
    JEL: D41 L44
    Date: 2015
  5. By: María José Abud Sittler; Bronwyn Hall; Christian Helmers
    Abstract: We analyze the patent filing strategies of foreign pharmaceutical companies in Chile distinguishing between “primary” (active ingredient) and “secondary” patents (patents on modified compounds, formulations, dosages, particular medical uses etc.). There is prior evidence that secondary patents are used by pharmaceutical originator companies in the U.S. and Europe to extend patent protection on drugs in length and breadth. Using a novel dataset that comprises all drugs registered in Chile between 1991 and 2010 as well as the corresponding patents and trademarks, we find evidence that foreign originator companies pursue similar strategies in Chile. We find a primary to secondary patents ratio of 1:4 at the drug-level which is comparable to the available evidence for Europe; most secondary patents are filed over several years following the original primary patent and after the protected active ingredient has obtained market approval in Chile. This points toward effective patent term extensions through secondary patents. Secondary patents dominate “older” therapeutic classes like anti-ulcer and anti-depressants. In contrast, newer areas like anti-virals and anti-neoplastics (anti-cancer) have a much larger share of primary patents.
    JEL: K12 L5 L65 O34
    Date: 2015–02
  6. By: David Gamage (University of California, Berkley)
    Abstract: What mix of policy instruments should governments employ to raise revenues or to promote distributional equity? The dominant answer to this question in the tax theory and public finance literatures is that (with limited exceptions) governments should rely exclusively on a progressive consumption tax. Thus, among other implications, the dominant view is that governments should not tax capital income or wealth, and that legal rules should not be designed to promote distributive justice. In contrast, this Article argues that governments should potentially make use of a number of tax and non-tax policy instruments to raise revenues and to promote distributional equity. Furthermore, this Article argues that governments may have much greater capacity to raise revenues and to promote distributional equity at lower efficiency costs than is generally recognized. Whereas the existing theoretical literature focuses on a small number of distortionary costs that result from taxation (in particular, on labor-toleisure and saving-to-spending distortions), this Article analyzes the implications of taxpayers engaging in a diverse variety of tax-gaming responses. To the extent that taxpayers respond to different tax instruments through different forms of tax gaming, this Article demonstrates that governments may be able to raise revenues and promote distributional equity more efficiently by employing a number of different policy instruments. Based on these insights, this Article develops a sufficient-statistics framework for analyzing optimal-choice-of-tax-instruments questions. Then, applying that framework, this Article argues that at least some legal rules should be designed to promote distributional equity. This Article further shows how to roughly calculate the optimal extent to which each such legal rule should be calibrated to promote distributional equity.
    Date: 2014
  7. By: Ou Yang (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Xueyan Zhao (Department of Econometrics and Business Statistics, Monash University); Preety Srivastava (School of Economics, Finance and Marketing, RMIT University)
    Abstract: This paper examines evidence from Australia on the factors associated with binge drinking and several alcohol-related antisocial and unlawful behaviours. In particular, to quantify the negative externalities of excessive alcohol consumption by product type, our primary focus is the link with eleven types of alcoholic beverages. We also examine the role of binge drinking in increasing the likelihood for engaging in these antisocial and unlawful behaviours. We use individual-level data from a national representative survey and a multivariate probit model that allows unobservable factors for all negative behaviours to be correlated. Potential misclassification in the self-reported consumption data is accounted for. Results provide valuable evidence for more effective alcohol taxation as a tool for correcting differentiated negative externalities by beverage type.
    Keywords: Binge drinking, negative externalities, alcohol taxation, multivariate probit, misclassification
    JEL: C3 I1 K3
    Date: 2015–01
  8. By: Miguel Almunia (University of Warwick); David Lopez-Rodriguez (Banco de España)
    Abstract: We investigate whether monitoring the information trails generated by firms’ activities improves tax compliance. We exploit quasi-experimental variation generated by a Large Taxpayers’ Unit (LTU) in Spain, which devotes additional resources to verifying the transactions reported by firms with more than €6 million in reported revenue. Firms bunch below this threshold in order to avoid stricter tax enforcement, and this reaction is stronger in sectors where paper trail is easier to monitor. These results suggest that monitoring efforts by the tax authority and the traceability of information reported by firms are complements, and both are necessary for effective tax enforcement.
    Keywords: tax enforcement, firms, bunching, Spain, Large Taxpayers Unit (LTU).
    JEL: H26 H32
    Date: 2014
  9. By: Elise S. BREZIS (FERDI); Joël CARIOLLE (Ferdi)
    Abstract: The “revolving door” has been pinpointed as being one major cause of the 2008 financial crisis. This phenomenon, common in most industrialized countries, leads to conflicts of interest that may seriously harm economies. The purpose of this paper is to present an indicator of the distortionary effects of the revolving door – The Revolving Door Indicator (RDI). The RDI intends to proxy the economic distortions induced by influential firms engaged in the revolving door, by measuring the concentration of revolving door movements among private firms at the sector level. We document revolving door movements among Goldman Sachs, Citigroup and Fannie Mae. Although our sample is confined to three major US financial firms significantly engaged in the revolving door process, the RDI shows a high concentration of private-to-public sector revolving door movements, from which Goldman Sachs appears as the prime beneficiary.
    JEL: D7 K2 K4 L1 L2 L5
    Date: 2015–03

This nep-law issue is ©2015 by Eve-Angeline Lambert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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