nep-law New Economics Papers
on Law and Economics
Issue of 2015‒05‒30
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Kingpin Approaches to Fighting Crime and Community Violence: Evidence from Mexico's Drug War By Lindo, Jason M.; Padilla-Romo, María
  2. Reducing Crime and Violence: Experimental Evidence on Adult Noncognitive Investments in Liberia By Christopher Blattman; Julian C. Jamison; Margaret Sheridan
  3. Corporation Law and the Shift toward Open Access in the Antebellum United States By Eric Hilt
  4. The republic of beliefs : a new approach to ?law and economics? By Basu,Kaushik
  5. Discretionary Authority and Prioritizing in Government Agencies By Maarten Pieter Schinkel; Lukas Toth; Jan Tuinstra
  6. Social preferences, culture and corruption By Jiang, T.
  7. Do ‘Cheeseburger Bills’ Work? Effects of Tort Reform for Fast Food By Christopher S. Carpenter; D. Sebastian Tello-Trillo
  8. Socially Optimal Service hours with Special Offers By Kazuki Onji; John P. Tang
  9. Lois et normes: les enseignements de l'économie comportementale By Claude Fluet; Roberto Galbiati
  11. Political Bonds: Political Hazards and the Choice of Municipal Financial Instruments By Abhay Aneja; Marian Moszoro; Pablo T. Spiller

  1. By: Lindo, Jason M. (Texas A&M University); Padilla-Romo, María (Texas A&M University)
    Abstract: This study considers the effects of the kingpin strategy, an approach to fighting organized crime in which law-enforcement efforts focus on capturing the leaders of the criminal organization, on community violence in the context of Mexico's drug war. Newly available historical data on drug-trafficking organizations' areas of operation at the municipality level and monthly homicide data allow us to control for a rich set of fixed effects and to leverage variation in the timing of kingpin captures to estimate their effects. This analysis indicates that kingpin captures have large and sustained effects on the homicide rate in the municipality of capture and smaller but significant effects on other municipalities where the kingpin's organization has a presence, supporting the notion that removing kingpins can have destabilizing effects throughout an organization that are accompanied by escalations in violence.
    Keywords: violence, crime, kingpin, Mexico, drugs, cartels
    JEL: I18 K42 O12
    Date: 2015–05
  2. By: Christopher Blattman; Julian C. Jamison; Margaret Sheridan
    Abstract: We show self control and self image are malleable in adults, and that investments in them reduce crime and violence. We recruited criminally-engaged Liberian men and randomized half to eight weeks of group cognitive behavioral therapy, teaching self control skills and a noncriminal self-image. We also randomized $200 grants. Cash raised incomes and reduced crime in the short-run but effects dissipated within a year. Therapy increased self control and noncriminal values, and acts of crime and violence fell 20--50%. Therapy's impacts lasted at least a year when followed by cash, likely because cash reinforced behavioral changes via prolonged practice.
    JEL: D03 J22 K42 O12
    Date: 2015–05
  3. By: Eric Hilt
    Abstract: This paper analyses the general incorporation statutes for manufacturing firms adopted by the American states up to 1860. Prior to the enactment of a general law, a business could only incorporate by obtaining a special act of their state legislature; general statutes facilitated incorporation through a routine administrative procedure. A new chronology of the adoption of these statutes reveals that several states enacted them much earlier than previous scholarship has indicated. An analysis of the contents of these laws indicates that many imposed strict regulations on the corporations they created, whereas others granted entrepreneurs near-total freedom. Many Southern states enacted particularly liberal statutes, but sometimes also prohibited nonwhites from incorporating businesses or gave a government official discretion over access to the law. Finally, an analysis of the volume of incorporation through special charters reveals that the states that failed to adopt general incorporation laws tended to offer unusually generous access to incorporation through special legislative acts. Taken together, these results imply that the adoption of a general incorporation statute did not always represent a discrete transition to open access to the corporate form. Instead, general statutes sometimes included highly restrictive provisions governing access, and some states generously accommodated demands for incorporation in the absence of a general statute.
    JEL: K2 N0 N41 N81
    Date: 2015–05
  4. By: Basu,Kaushik
    Abstract: The discipline of law and economics deals with wide-ranging topics, from competition and environmental policy to crime control, and has been instrumental in determining how an economy performs. Yet its success has fallen short of its potential. The discipline?s shortcomings are nowhere as visible as in developing economies, where a common refrain is how the law looks good on paper but does not get implemented. This paper articulates a methodological flaw that underlies much of contemporary law and economics, and argues that there is an intimate connection between human beliefs and expectations, on the one hand, and the effectiveness of the law, on the other. I propose a new approach to law and economics that is rooted in game theory and rectifies the flaw. It is argued that this approach can open up new areas of research and be marshalled to address some of the more pressing policy challenges of our time.
    Keywords: Gender and Law,Labor Policies,Public Sector Corruption&Anticorruption Measures,Parliamentary Government,Legal Products
    Date: 2015–05–07
  5. By: Maarten Pieter Schinkel (University of Amsterdam, the Netherlands); Lukas Toth (University of Amsterdam, the Netherlands); Jan Tuinstra (University of Amsterdam, the Netherlands)
    Abstract: Government agencies typically have a certain freedom to choose among different possible courses of action. This paper studies agency decision-making on priorities in a principal-agent framework with multi-tasking. The agency head (the principal) has discretion over part of the agency's budget to incentivize his staff (agents) in the pick-up of cases. The head is concerned with society's benefits from the agency's overall performance, but also with the organization's public image as formed from its case record and various non-case specific activities. Based on their talent and the contracts offered by the head, staff officials choose which type of task to pursue: complex major, yet difficult to complete cases with an uncertain outcome, or basic minor and simple cases with a much higher probability of success. The size of the agency's discretionary budget influences no t only the scale, but also the type of tasks it will engage in. Social welfare is non-monotonic and discontinuous in the agency's budget. Small changes in the budget may cause extensive restructuring from major to minor tasks, or vice versa. A budget cut can improve welfare more than extra budget would, even if resources are below the welfare-maximizing level. For lower binding budgets, the head continues to suboptimally incentivize work on complex tasks, when the agency should have shifted down to simpler tasks. Yet a reluctant head may need to be nudged with more resources to pursue productive cases. In determining the discretionary space of the agency head, government can limit the extraction of resources, but thereby also benefits less from the head's expertise. Antitrust authorities serve as one illustration of policy implications for institutional design.
    Keywords: Government agency; discretion; budget; enforcement priorities; antitrust
    JEL: D02 H11 L44 M52
    Date: 2015–05–18
  6. By: Jiang, T. (Tilburg University, School of Economics and Management)
    Abstract: Neoclassical economics more or less postulates that agents tend to maximize their own narrow self-interests and will hence break the law if the gains outweigh the costs of potential punishment. In this thesis, I argue that more understandings of corruption can be obtained incorporating insights from behavioral economics such as the postulates of social preferences. To understand why, and in what context, an individual decides to be corrupt, and in what context, it is helpful to recognize that economic agents care about not only their own narrow-interests, but also others’ payoff consequences as well as their moral image. I argue that the characteristics of other regarding preferences (synonymously as social preferences in Economics, and social value<br/>orientation in Psychology) are relevant factors of decision-making in general, and corrupt decision making is no exception. More effective policies can be designed if we gain more realistic behavioral insights.<br/>
    Date: 2015
  7. By: Christopher S. Carpenter; D. Sebastian Tello-Trillo
    Abstract: After highly publicized lawsuits against McDonald’s in 2002, 26 states adopted Commonsense Consumption Acts (CCAs) – aka ‘Cheeseburger Bills’ – that greatly limit fast food companies’ liability for weight-related harms. We provide the first evidence of the effects of CCAs using plausibly exogenous variation in the timing of CCA adoption across states. In two-way fixed effects models, we find that CCAs significantly increased stated attempts to lose weight and consumption of fruits and vegetables among heavy individuals. We also find that CCAs significantly increased employment in fast food. Finally, we find that CCAs significantly increased the number of company-owned McDonald’s restaurants and decreased the number of franchise-owned McDonald’s restaurants in a state. Overall our results provide novel evidence supporting a key prediction of tort reform – that it should induce individuals to take more care – and show that industry-specific tort reforms can have meaningful effects on market outcomes.
    JEL: I12 I18 K13
    Date: 2015–05
  8. By: Kazuki Onji (Graduate School of Economics, Osaka University); John P. Tang (Graduate School of Economics, Osaka University)
    Abstract: This study provides evidence on tax distortion to organizational choices of firm using historical data. We utilize the 1887 introduction of a personal income tax (PIT) in Japan as a quasi-experiment to examine tax-motivated incorporation. We circumvent the data limitation in the 19 th century by drawing on a firm-level dataset constructed from genealogies of Japanese corporations. The sample is 3,203 firm- year observations spanning 1880-1892. We find that the introduction of PIT affected the adoption of simpler types of corporations and increased the corporate share of establishments by about 3 percentage points. The evidence indicates the role of a corporate income tax as a backstop to maintain revenue performance of PIT.
    Keywords: Tax Avoidance, Organizational Form, Business Incorporation
    JEL: G34 H25 K34
    Date: 2015–05
  9. By: Claude Fluet; Roberto Galbiati
    Abstract: Nous discutons de quelques développements récents en économie expérimentale sur la relation entre la loi et les normes sociales dans la détermination des comportements. Dans l’approche traditionnelle de l’analyse économique du droit, l’effectivité des lois repose uniquement sur le système répressif mis en œuvre pour les faire respecter. De nombreuses expériences de laboratoires montrent cependant que les obligations légales influencent aussi les comportements par un effet sur les anticipations, ce qui permet la coordination sur de « bons équilibres » par le jeu des préférences sociales, ainsi que par un effet direct sur les préférences elles-mêmes. Ces résultats ont des conséquences importantes pour l’analyse économique des politiques légales et réglementaires.
    Keywords: Lois, obligations, normes, bien public, coopération, réciprocité, préférences sociales
    JEL: C91 C92 K41 K42 Z13
    Date: 2015
  10. By: Poonam Mukherjee; Hillol Mukherjee
    Abstract: Juvenile Delinquency-‘An Alarming Crisis’ does not have a constant or definite meaning. Some say that delinquents are those who violate the law, habitually disobedient and truant. But delinquents shouldn’t be treated as criminals but as maturing persons who need utmost guidance, love and support while they find their way towards life. They shouldn’t be treated as criminals, but being a delinquent is not an excuse to manifest distress and confusion. It is very true that two major components of delinquency is the society and the family. But since each and every one of us has, what we call “logical” mind, we get to choose what is right and what is not. Exploring new stuffs is precisely what you call ‘part of growing up’. Delinquency is when you break a certain rule or law that is accepted by the society or the environment you are into. Criminal’s behavior is influenced by various personal traits. The current research focused to investigate the relationship between personality traits of juvenile delinquency among delinquents and non-delinquent juveniles taking Tripura as a model state. This study was mainly carried out at Agartala city, Tripura and its sub-urban areas covering 10 male juvenile delinquents and 10 male non-delinquent juveniles/adolescents (matched in terms of age and gender). The sample was collected from juvenile home following purposive sampling techniques. Background information schedule and multidimensional personality inventory (MPI) were administered to them. Findings revealed that the juvenile delinquents differed with their normal counterparts in regard to all the dimensions of personality. It is observed that juvenile delinquents were more extroverts, possesses high self-concept, more dependent in nature, short tempered, have poor adjustment capacity and are less anxious than those of their normal counterparts. Key words: Juvenile Delinquency, personality disposition, extrovert, self-concept
    Date: 2014–03
  11. By: Abhay Aneja; Marian Moszoro; Pablo T. Spiller
    Abstract: We study the link between the choice of rule-based public contracts and political hazards using the municipal bond market. While general obligation bonds are serviced from all municipal revenue streams and offer elected officials financial flexibility, revenue bonds limit the discretion that political agents have in repaying debt as well as the use of revenues from the projects financed by the debt. We predict that public officials choose revenue bonds when elections are very contested to signal trustworthiness and transparency in contracting to the voter. We test this hypothesis on municipal finance data that includes 6,500 bond issuances nationwide as well as election data on over 400 cities over 20 years. We provide evidence that in politically contested cities, mayors are more likely to issue revenue bonds. The correlation is economically significant: a close victory margin of winning candidates and more partisan swings increases the probability of debt being issued as a revenue bond by 3–15% and the probability of issuing bonds through competitive bids by 7%. We test a few additional hypotheses that strengthen the argument that the choice of revenue bonds is a political risk adaptation of public agents so as to signal commitment and lower the likelihood of successful political challenges of misuse of funds.
    JEL: D23 D73 D78 H57 K23
    Date: 2015–05

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