nep-law New Economics Papers
on Law and Economics
Issue of 2015‒04‒19
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Corruption in PPPs, Incentives and Contract Incompleteness By Elisabetta Iossa; David Martimort
  2. Immigration, Regional Conditions, and Crime: Evidence from an Allocation Policy in Germany By Piopiunik, Marc; Ruhose, Jens
  3. Do pirates play fair? Ethical judgment of unauthorized sports broadcasts By Michał Krawczyk; Joanna Tyrowicz; Anna Kukla-Gryz; Wojciech Hardy
  4. Shared state taxes and tax policy of local self-governments in connection with tax morale By Agnes Sipos
  5. Is Sharia Compatible with Contemporary Russian Law? By Leonid Sykiainen
  6. Maternity and Labor Markets: Impact of Legislation in Colombia By Natalia Ramírez Bustamante; Ana Maria Tribin Uribe; Carmiña Vargas
  7. Do student loan borrowers opportunistically default? Evidence from bankruptcy reform By Darolia, Rajeev; Ritter, Dubravka
  8. A Method to Measure Standard Costs of Juvenile Justice Systems: the example of Italy By Silvio Ciappi; Elena Dalla Chiara; Federico Perali; Barbara Santagata
  9. The Impact of State Foreclosure and Bankruptcy Laws on Higher-Risk Lending: Evidence from FHA and Subprime Mortgage Originations By Qianqian Cao and Shimeng Liu
  10. U.S. Free Trade Agreements and Enforcement of Labor Law in Latin America By Sabina Dewan; Lucas Ronconi
  11. The codetermination bargains: the history of German corporate and labour law By Ewan McGaughey
  12. Exploring the Opaqueness of the Patent System - Evidence from a Natural Experiment By Harhoff, Dietmar; Stoll, Sebastian
  13. Corruption as a Self-Fulfilling Prophecy: Evidence from a Survey Experiment in Costa Rica By Daniel Gingerich; Virginia Oliveros; Ana Corbacho; Mauricio Ruiz-Vega

  1. By: Elisabetta Iossa; David Martimort
    Abstract: In a public procurement setting, we discuss the desirability of completing contracts with state-contingent clauses providing for monetary compensations to the contractor when revenue shocks occur. Realized shocks are private information of the contractor and this creates agency costs of delegated service provision. Verifying the contractor’s messages on the shocks entails contracting costs that make incomplete contracts attractive, despite their higher agency costs. A public official (supervisor) has private information on contracting costs and chooses the degree of contractual incompleteness on behalf of an upper-tier public authority. As the public official may be biased towards the contractor, delegating the contractual choice to that lower-tier may result in incomplete con-tracts being chosen too often. Empirical predictions on the use of incomplete contracts and policy implications on the benefits of standardized contract terms are discussed.
    Keywords: Corruption, Incomplete Contracts, Moral Hazard, Principal-Agent-Supervisor Model, Public-Private Partnerships, Risk Allocation
    JEL: D23 D82 K42 L33
    Date: 2014–06
  2. By: Piopiunik, Marc; Ruhose, Jens
    Abstract: After the collapse of the Soviet Union, more than 3 million people with German ancestors immigrated to Germany under a special law granting immediate citizenship. Exploiting the exogenous allocation of ethnic German immigrants by German authorities across regions upon arrival, we find that immigration significantly increases crime. The crime impact of immigration depends strongly on local labor market conditions, with strong impacts in regions with high unemployment. Similarly, we find substantially stronger effects in regions with high preexisting crime levels or large shares of foreigners.
    Keywords: Immigration; crime; allocation policy
    JEL: F22 J15 K42 R10
    Date: 2015–03–24
  3. By: Michał Krawczyk (Faculty of Economic Sciences, University of Warsaw); Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland); Anna Kukla-Gryz (Faculty of Economic Sciences, University of Warsaw); Wojciech Hardy (Faculty of Economic Sciences, University of Warsaw)
    Abstract: Ethical norms on the Internet are believed to be more permissive than in the ‘real’ world and this belief often serves as an explanation for the prevalence of the so-called digital “piracy”. In this study we provide evidence from a vignette experiment that contradicts this claim. Analyzing the case of sports broadcast, we compare explicitly the ethical judgment of legal and illegal sharing in the offline and online context. We find that the norms concerning legality, availability of alternatives and deriving material benefits from sharing content do not differ substantially between the virtual and real worlds. We also test explicitly for the role of legal awareness and find that emphasizing what is prohibited (copyright infringement) is less effective than focusing on what is permitted (fair use) in reducing the disparity between legal and ethical norms.
    Keywords: Internet piracy, file sharing, fair use, legal awareness, copynorms, vignette experiment
    JEL: K42 O34 L82
    Date: 2015
  4. By: Agnes Sipos (Budapest Business School)
    Abstract: Based on our assumption, tax morale significantly depends on a country’s legal, historical, social and cultural background and circumstances. In the first part of the paper, we discuss the legal dimension of the tax morale – including the interconnection of law, ethics and moral. Furthermore, we analyze the facts breaching tax liabilities under the scope of the criminal law and the actions violating the tax morale but not qualified as infringement of the criminal law. In the second part of the paper, we provide empirical evidences which factors (e.g. personal characteristics, commitment for paying local taxes, knowledge about the distribution of paid taxes between central and local authorities, etc.) determine significantly the individual level of tax morale. The paper discusses these complex connections either from the viewpoint of law or economics in order to find out whether it is possible to develop the tax morale of individuals, or can the legislator adequately rule the different forms of tax evasion.
    Keywords: tax morale, legal morale, tax regime, tax system
    JEL: H21 H23 H24 H26
    Date: 2015–04
  5. By: Leonid Sykiainen (National Research University Higher School of Economics)
    Abstract: The analysis of the interaction between Sharia and legislation in action along with the compatibility of Sharia with contemporary Russian law is important from both a scientific and a practical point of view. There are several reasons for the increasing interest in this issue: the renaissance of Islam, the activity of Muslim communities outside the regions where Islam has traditionally spread, the threat of Islamic extremism, and the increasing influence of Sharia upon the political and legal development of the Muslim world. Russian researchers do not have a common attitude to Sharia’s relation to Russian legislation. They put forward different arguments for and against including Sharia in the official legal system. Along with these, some Russian lawyers make attempts to find the legal possibility or even necessity of including Sharia in contemporary Russian reality, including norms, principles and institutions in the legislation. There are three modes of possible interaction between Sharia and state legislation. The first is represented by the direct inclusion of Sharia norms into the legislation. The second is legal acts which refer to historical or local traditions. The third is that Sharia provisions can be used for solving issues which are provided for by dispositive norms of state legislation
    Keywords: Sharia, legislation, Russian law, historical and local traditions, adat, polygamy, waqf, Sharia court, local government, dispositive norms.
    JEL: K10
    Date: 2015
  6. By: Natalia Ramírez Bustamante; Ana Maria Tribin Uribe; Carmiña Vargas
    Abstract: This study seeks to determine the impact on female labor outcomes of the amendment to the Colombian labor law that extended maternity leave from 12 to 14 weeks (Law 1468 of July 2011). To identify this impact, labor market outcomes of two groups of women with different fertility rates are compared. The study finds evidence that as a result of the extension of the maternity leave period, women in the high-fertility age group experience an increase in inactivity rates, informality, and self-employment. The study points to the need for a redesign of maternity protection policy that would enable the economic and social costs of bearing children to be shared by both parents and that may generate social change regarding the importance of paternal care.
    Keywords: Workforce & Employment, Labor Market Policies, Gender Equality, Labor Legislation, Women, Labor markets, Labor regulation, Maternity leave, Female labor market
    Date: 2015–03
  7. By: Darolia, Rajeev (Federal Reserve Bank of Philadelphia); Ritter, Dubravka (Federal Reserve Bank of Philadelphia)
    Abstract: Bankruptcy reform in 2005 eliminated debtors’ ability to discharge private student loan debt in bankruptcy. This law aimed to reduce costly defaults by diminishing the perceived incentive of some private student loan borrowers to declare bankruptcy even if they had sufficient income to service their debt. Using a unique, nationally representative sample of anonymized credit bureau files, we examine the bankruptcy filing and delinquency rates of private student loan borrowers in response to the 2005 bankruptcy reform. We do not find evidence that the nondischargeability provision reduced the likelihood of filing bankruptcy among private student loan borrowers as compared with other debtors whose incentives were not directly affected by the policy.
    Keywords: Bankruptcy; Bankruptcy Reform; BAPCPA; Default; Student Loans
    JEL: D14 G21 I22 K35
    Date: 2015–04–09
  8. By: Silvio Ciappi (Criminologist, Istituto Superiore Scienze Umane - Pontificia Università Salesiana, Rome); Elena Dalla Chiara (Department of Economics (University of Verona)); Federico Perali (Department of Economics (University of Verona)); Barbara Santagata (Sociologist, Istituto Don Calabria - Casa San Benedetto)
    Abstract: This study proposes a standard costs method to evaluate the total direct costs of a juvenile justice system and applies it to the Italian case.
    Keywords: Juvenile justice, standard cost, simulation
    JEL: K40 H53 H83
    Date: 2015–04
  9. By: Qianqian Cao and Shimeng Liu
    Abstract: State foreclosure and bankruptcy laws govern the rights of mortgage lenders and borrowers during foreclosure and bankruptcy proceedings and therefore impact on lenders’ exposure to credit risk. This paper seeks to understand the effects of these state laws on the type of mortgages originated. The empirical identification is based on state-level variations in foreclosure and bankruptcy provisions and a border estimation strategy. We find that higher-risk loans (FHA and subprime loans) are more likely to be originated in a state with lender-friendly foreclosure laws. Also, higher-risk loans are less likely to be originated in a state with a more generous bankruptcy homestead exemption. In addition, our results are consistent with the idea that FHA and subprime loans share a very similar clientele and are close substitutes. These results are robust without the ordering assumption among conventional prime, FHA and subprime loans.
    Keywords: State foreclosure laws, homestead exemption, mortgage originations, ordered probit
    Date: 2015
  10. By: Sabina Dewan; Lucas Ronconi
    Abstract: This paper analyzes whether Free Trade Agreements (FTAs) signed between the United States and Latin American countries during the last decade produced higher enforcement of labor regulations. The paper computes before-after estimates of the effect of FTAs on labor inspections and exploits variation across countries using non-signers as a comparison group. The empirical strategy benefits from the fact that about half of Latin American countries have signed a trade agreement with the United States. Difference-in-differences estimates suggest that signing an FTA produced a 20 percent increase in the number of labor inspectors and a 60 percent increase in the number of inspections. The North American Free Trade Agreement (NAFTA), however, does not appear to have the same positive impacts on Mexico. The paper concludes with a discussion of these results.
    Keywords: Labor Policy, Trade Agreements, Social Security, Labor regulations, Free trade agreements, Labor inspections, Labor provisions, Labor inspectors, Labor law, Enforcement, Labor, Trade, Latin America
    Date: 2014–11
  11. By: Ewan McGaughey
    Abstract: Why does codetermination exist in Germany? Law and economics theories have contended that if there were no legal compulsion, worker participation in corporate governance would be ‘virtually nonexistent’. This positive analysis, which flows from the ‘nexus of contracts’ conception of the corporation, supports a normative argument that codetermination is inefficient because it is supposed that it will seldom happen voluntarily. After discussing competing conceptions of the corporation, as a ‘thing in itself’, and as an ‘institution’, this article explores the development of German codetermination from the mid-19th century to the present. It finds the inefficiency argument sits at odds with the historical evidence. In its very inception, the right of workers to vote for a company board of directors, or in work councils with a voice in dismissals, came from collective agreements. It was not compelled by law, but was collectively bargained between business and labour representatives. These ‘codetermination bargains’ were widespread. Laws then codified these models. This was true at the foundation of the Weimar Republic from 1918 to 1922 and, after abolition in 1933, again from 1945 to 1951. The foundational codetermination bargains were made because of two ‘Goldilocks’ conditions (conditions that were ‘just right’) which were not always seen in countries like the UK or US. First, inequality of bargaining power between workers and employers was temporarily less pronounced. Second, the trade union movement became united in the objective of seeking worker voice in corporate governance. As the practice of codetermination has been embraced by a majority of EU countries, and continues to spread, it is important to have an accurate positive narrative of codetermination’s economic and political foundations.
    JEL: J50
    Date: 2015
  12. By: Harhoff, Dietmar; Stoll, Sebastian
    Abstract: One of the objectives of patent systems is to disclose information which other agents can build on in further inventions and in their decision-making. While some observers take it as given that real-world patent systems serve this objective, we argue in this article that patent systems are highly opaque and likely to be of limited value as a source of information. We use data from a natural experiment to explore this issue. Requests for accelerated examination used to be publicly observable at the European Patent Office (EPO). Starting in December 2001, the EPO started to treat these requests as confidential information. Using data on acceleration requests which were historically known only to the applicant and the EPO, and later provided to us, we test whether the change in the information regime impacted the actions of applicants and their rivals. We develop a theoretical model of acceleration requests and patent opposition to identify the extent to which the patent system is opaque. We confirm empirically that opposition and acceleration rates of high-value patents change significantly in most technological areas once acceleration requests become unobservable. We interpret these results as evidence that the system is highly opaque in many fields.
    Keywords: patent value; opaqueness; accelerated examination; patent opposition; European Patent Office (EPO)
    JEL: K40 L00
    Date: 2015–03
  13. By: Daniel Gingerich; Virginia Oliveros; Ana Corbacho; Mauricio Ruiz-Vega
    Abstract: An influential body of scholarship argues that corruption behaves as a selffulfilling prophecy. The idea of this work is that levels of corruption emerge endogenously as a result of a society-wide coordination game in which ther individual returns to corrupt behavior are a function of how disposed towards corruption the other members of society are perceived as being. An empirical implication of this logic is that if one were to exogenously perturb beliefs about societal levels of corruption upward, willingness to engage in corruption should increase as a consequence. The current paper evaluates this claim by utilizing an information experiment embedded in a large-scale household survey conducted in the Gran Área Metropolitana (GAM) of Costa Rica from October 2013 to April 2014 (n=4200). Changes in beliefs about corruption were induced via the random assignment of an informational display depicting the increasing percentage of Costa Ricans who have experienced or directly observed an act of corruption (from 2006 to 2011). The paper finds that, on average, assignment to this display (relative to the control condition) increased the probability that a respondent would be willing to pay a bribe to a police officer by approximately 0. 04 to 0. 08, thereby providing supporting evidence for the self-fulfilling prophecy hypothesis.
    Keywords: Public Administration & Policy Making, Corruption, Corruption, Spillover effects, Survey experiments, Sensitive question techniques
    Date: 2015–03

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