nep-law New Economics Papers
on Law and Economics
Issue of 2015‒06‒20
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Deterrence and the Optimality of Rewarding Prisoners for Good Behavior By A. Mitchell Polinsky
  2. Harmonising Hayek and Posner: revisiting Posner, Hayek & the economic analysis of Law By Ojo, Marianne
  3. Good Intentions and Unintended Evil? Clients’ Punishment in the Market for Sex Services with Voluntary and Involuntary Providers By Sonnabend, Hendrik
  4. Law enforcement and drug trafficking networks: a simple model By Raffo López Leonardo
  5. Wiretapping As a Secret Investigation Measure in Turkish Criminal Jurisdiction Law By Mehmet Onursal Cin
  7. Crime Victimization, Neighbourhood Safety and Happiness in China By Zhiming Cheng; Russell Smyth
  8. Merger remedies in oligopoly under a consumer welfare standard By Dertwinkel-Kalt, Markus; Wey, Christian
  9. Shaming Tax Delinquents: Theory and Evidence from a Field Experiment in the United States By Ricardo Perez-Truglia; Ugo Troiano
  11. Cross-Licensing and Competition By Jeon, Doh-Shin; Lefouili, Yassine
  12. Putting a Carbon Charge on Federal Coal: Legal and Economic Issues By Krupnick, Alan; Darmstadter, Joel; Richardson, Nathan; McLaughlin, Katrina

  1. By: A. Mitchell Polinsky (Stanford University)
    Abstract: In this article I examine the social desirability of rewarding prisoners for good behavior, either by reducing their sentences (granting "time off"), converting part of their sentences to a period of parole, or providing them with privileges in prison. Rewarding good behavior reduces the state’s cost of operating prisons. But rewarding good behavior also tends to lower the deterrence of crime because such rewards diminish the disutility of imprisonment. I demonstrate that, despite this countervailing consideration, it is always socially desirable to reward good behavior with either time off or parole. In essence, this is because the reward can be chosen so that it just offsets the burden borne by prisoners to meet the standard of good behavior — resulting in good behavior essentially without a reduction in deterrence. While employing privileges to reward good behavior might be preferable to no reward, the use of privileges is inferior to time off and parole.
    Keywords: imprisonment; parole; prison costs; prisoner behavior; deterrence; sanctions
    JEL: H23 K14 K42
    Date: 2015–06
  2. By: Ojo, Marianne
    Abstract: This paper is aimed at highlighting Posner and Hayek’s consensus on the importance of decentralization, as well as the significance of the incorporation of non-legal actors as tools for facilitating the efficient allocation of resources in common law. In addition to highlighting the consensus on the views of Posner and Hayek, in respect of de centralization of information within the judicial process, this paper aims to address why de centralization serves as a vital tool in facilitating the objective of common law as an efficiency allocation mechanism. Whilst it is argued that lower court judges may not and should not be given such flexibility to make and unmake the law, the principles and decisions of law lords acting in the capacity of legislature, have also illustrated in several leading cases that the flexibility intended by Parliament may be misinterpreted and wrongly applied in future cases. This has also resulted in the criticism of extrinsic aids to statutory interpretation. This paper analyses and expands on these observations.
    Keywords: legitimate expectations; certainty; flexibility; judicial precedents; statutory interpretation; allocative efficiency; Pepper v Hart; Daubert; common law; regulatory capture; regulation
    JEL: D8 E3 G3 K2 M4
    Date: 2015–06
  3. By: Sonnabend, Hendrik
    Abstract: While there is no consensus concerning the legal and moral judgment towards prostitution, there is an overwhelming agreement on the need to fight sexual slavery. The paper shows the effect of clients’ punishment in the market for commercial sex (the so called neo-abolitionism or nordic prostitution regime) as it concerns sexual slavery. As a result the theoretical analysis reveals that this effect is ambiguous and crucially depends on the size of the deterrence effect and on local properties of the market demand. Policy implications that arise are identified and discussed.
    Keywords: Prostitution,Regulation,Forced Labor,Sexual Slavery
    JEL: K42 J3 L51 I18
    Date: 2015
  4. By: Raffo López Leonardo
    Abstract: This article presents a theoretical model to explain the performance of illicit drug markets. The analytical framework is based on the oligopoly model of Poret and Téjedo (2006), but the latter is extended in a crucial respect: the influence of drug trafficking networks in the illicit drug markets is considered. The proposed model indicates that Poret and Téjedo were correct: the aggregate quantity of drugs sold is negatively affected by the intensity of the law enforcement policies applied and positively affected by the number of traffickers in the market. We also determined that the individual and aggregate sales in the market are positively affected by the network’s average density. Our model is useful for explaining the failure of the war against drugs to halt the reproduction and expansion of illegal activities at a global level during the three past decades.
    Keywords: drug trafficking, illegal markets, law enforcement, social networks, gametheory, oligopoly
    JEL: K42 D43 L13 C72 D85
    Date: 2015–05–01
  5. By: Mehmet Onursal Cin (Selcuk University, Faculty of Law)
    Abstract: Organized Crimes are increasing all over the world. Besides, communication technologies evolving rapidly. And criminal organizations benefit from this case. Local Investigation authorities who have to struggle with organized crime are also required to take advantage of this technological development. During a criminal investigation, wiretapping is a very important method of obtaining evidence. This measure is the most effective one in the other secret investigation measures and it also violates freedom of communication and private life, which are under guarantee of Turkish Constitution. Because of that the legal formulation and implementation should be performed very carefully.The aim of this article is to discuss the legal and social dimensions of wiretapping system in Turkish Criminal Procedure. Although it is similar to the German System, due to political, social and demographic conditions, some major changes have been made.According to Turkish Constitution Art.22 which entitled Freedom of communication; everyone has freedom of communication. This freedom and its confidentiality can only be limited because of national security, public order, prevention of crime, protection of the general public health and ethic rules or the protection of the rights and freedoms of others. In order to limit these freedoms, an authorized judge should make a decision that depends counted reasons by Art.22. Also The European Convention on human rights (ECHR) Art.8 regulates that all people have right to be respected their private and family life, for his home and correspondence. As a Law State no one have permit to violate the Constitution and ECHR. It is a serious crime to wiretap or to use a machine to capture the communications of others without court approval, unless one of the parties has given his prior consent. In recent years, due to the implementation of the unlawful wiretapping in Turkey, we can say that Turkish Criminal Jurisdiction System experienced many sensational cases and scandals. Many official institutions have authority to wiretap in our law system. (Police, Army, Intelligence Agency) But the real problem is illegal eavesdropping. The government must struggle to these malicious people who eavesdrop to citizens by wiretapping devices that can be easily purchased over the Internet. Because this type of listening, has been put majority of our people into “someone’s eavesdropping me" paranoia.In this context, the study aims to investigate the way of using wiretapping and its shortcomings in the process of criminal investigation of Turkish criminal system.
    Keywords: wiretapping, eavesdropping, criminal jurisdiction law
    JEL: K14
  6. By: Srdjan Djordjevic (University of Kragujevac, Faculty of Law,)
    Abstract: The economic values and categories within the constitutional preamble appear in this work as a subject of the special interest. In the contrast to the primary center of gravity of classical legal thought when it researches the constitutional preamble, the pendulum will be slightly shifted towards questionable of position and the way in which constitutional preambles regulate issues of economic values and categories. We do not regard this question less significant compared to the usual literary manners of preamble study. It is our understanding of the importance of constitutional attitudes towards to the vital issues of the state and security that started us to begin exploring of this problem, in the context of an established thematic framework of this paper. There is no doubt that legislators in the preambles treat various issues in different ways, depending on the gravity of priority. Rarely, we could find constitutions without preambles, constitutions with technical preambles and with preambles, almost entirely, faced toward the past. However, for this paper is interesting preambles which texts could be characterized as a futuristic projection and perspective, because, among them we want to find the essence of the legislators’ attitudes to economic issues.
    Keywords: preamble, constitution, law, economic value, economic justice
    JEL: K10 K30 K40
    Date: 2015–03
  7. By: Zhiming Cheng; Russell Smyth
    Abstract: We examine the relationship between happiness, crime victimization and neighbourhood safety in China. We find that being a victim of crime, and having an acquaintance who is a victim of crime, have a negative effect on happiness. The cost of compensating someone who is a victim of crime, such that they are returned to the same position as if they had not been victimized, is similar to the cost of compensating someone who has an acquaintance who is a victim of crime (around 60 per cent of annual household income). Females who are victims of crime, and victims of out-of-home theft and assault/threat, feel less victimized if they have an acquaintance who is also a victim of crime with whom to share their experience. Living in a safe neighbourhood has a positive effect on happiness. The amount needed to compensate someone for living in an unsafe, or neutral neighbourhood, as opposed to safe neighbourhood, is 1500 per cent of annual household income, which is much higher than the shadow price suggested by previous studies for the United States and United Kingdom.
    Keywords: China; Crime victimization; Neighbourhood safety; Happiness
    JEL: D60 I31 K42 O10
    Date: 2015–01
  8. By: Dertwinkel-Kalt, Markus; Wey, Christian
    Abstract: We analyze the welfare effects of structural remedies on merger activity in a Cournot oligopoly if the antitrust agency applies a consumer surplus standard. We derive conditions such that otherwise price-increasing mergers become externality-free by the use of remedial divestitures. In this case, the consumer surplus standard ensures that mergers are only implemented if they increase social welfare. If the merging parties can extract the entire surplus from the asset sale, then the socially optimal buyer will be selected under a consumer standard.
    Keywords: Remedies,Merger control,Consumer standard,Synergies
    JEL: L13 L41 K21
    Date: 2015
  9. By: Ricardo Perez-Truglia; Ugo Troiano
    Abstract: We study shaming as a policy to improve tax debt collection. First, we show that when the tax agency focuses on private welfare and revenues, the optimal policy may involve a mix of financial and shaming penalties. Second, we present evidence from a field experiment with 34,344 tax delinquents who owed half a billion dollars in three U.S. states. We find that increasing the salience of financial and shaming penalties reduces tax delinquency. We also provide suggestive evidence that the effectiveness of these penalties depends on the garnishability of the debtor's income as in the model.
    JEL: H26 H63 K42
    Date: 2015–06
  10. By: Alper Uyumaz (Selçuk University school of law); Sinan Sami Akkurt (Selçuk University school of law)
    Abstract: The liability of the carriage by air sustained in the case of the damage of any baggage ( or luggage) has already been regulated in the article 12 of Turkish Civil Aviation Code (TSHK.), the article 18 of Warsaw Convention (War.C.) and in the subsection 2, 3, 4 of the article 17 of 1999 Montreal Convention (Mon.C.). TSHK.a.121/ s.1 that regulates the liability of the carrier in the event of domestic flight is as: ‘The carrier is liable for damage sustained in case of the loss of, or of damage to checked baggage on condition that the loss or damage took place during the carriage by air.’ The liability indicated here, in Warsaw Convention a.18/s.1, is as: ‘ The carrier will be liable for the damage sustained in case of destruction, or loss of, or of damage to checked baggage; however the event causing the destruction must take place during the carriage by air’, and the liability is adjudged, in Montreal Convention a.17/s.2, is as ‘ The carrier is liable for the damage sustained in the event of destruction, or loss, or damage of the checked baggage on condition that the event which caused the destruction, loss or damage took place on board the aircraft or during the period in which the checked baggage was in the charge of the carrier.’ As understood from these regulations, the carrier is liable for the damage sustained during the period that the registered baggage is in the charge of the carrier, whether it is domestic or international flights. The conditions of the liability mentioned above will be examined in this study.
    Keywords: Legal liability of carrier; baggage carring in aviation law; Turkish Civil Aviation Code Art.12; Montreal Convention Art.17; Warsaw Convention Art. 18
    JEL: K12 K33 K30
  11. By: Jeon, Doh-Shin; Lefouili, Yassine
    Abstract: We study bilateral cross-licensing agreements among N (> 2) competing firms. We find that the fully cooperative royalty, i.e., the one that allows them to achieve the monopoly profit, can be sustained as the outcome of bilaterally efficient agreements, regardless of whether the agreements are public or private and whether firms compete in quantities or prices. We extend this monopolization result to a general class of two-stage games in which firms bilaterally agree in the first stage to make each other payments that depend on their second-stage non-cooperative actions. Policy implications regarding the antitrust treatment of cross-licensing agreements are derived.
    Keywords: Cross-Licensing, Royalties, Collusion, Antitrust and Intellectual Property.
    JEL: D43 L13 L24 L41 O34
    Date: 2015–05–19
  12. By: Krupnick, Alan (Resources for the Future); Darmstadter, Joel (Resources for the Future); Richardson, Nathan (Resources for the Future); McLaughlin, Katrina (Resources for the Future)
    Abstract: US policy to limit greenhouse gas emissions is currently driven, in part, by the US Environmental Protection Agency’s proposed Clean Power Plan, which seeks a drop in carbon dioxide (CO2) emissions from fossil-fueled power plants—a “downstream” approach to regulation. Here, we consider an alternative, or possibly complementary, regulatory perspective - What is the legal and economic feasibility of imposing an “upstream” CO2 charge on coal production at its extraction site? Specifically, our focus is on leased coal from federal lands managed by the Bureau of Land Management (BLM). Such a carbon charge is designed, in principle, to embody the cumulative “lifecycle” externalities from coal mining to combustion (or other “downstream” utilization). Our legal analysis concludes that BLM has the statutory and regulatory authority to impose such a charge and that it would be best to add it to the royalty rate. But a large fee that would dramatically reduce revenues could invite judicial concern. The economic case is weaker than the legal case because production on state, private, and tribal lands (60 percent of total production) would not be subject to the charge and so could ramp up in response to the economic disadvantage the charge would cause for coal on federal lands, among other reasons. Best would be a comprehensive set of charges on royalties for all fossil fuels, irrespective of ownership.
    Keywords: carbon taxes, coal, climate change, pollution strategies, emissions reductions
    JEL: Q30 Q52 Q54
    Date: 2015–03–30
  13. By: Ümit Süleyman ÜSTÜN (Assoc. Prof. Dr.) (Selçuk Üniversitesi); Faruk B (Selçuk Üniversitesi)
    Abstract: The legality principle of taxes is arranged in the 73rd article of Turkish Constitution: “Taxes, dues, fees and similar charges shall be enacted, amended and repealed by the law”. By this provision, it has been stressed that the basic authority on taxation appertains to national assembly. The provision granting the authority about taxation to Council of Ministers is set at the 4th (the last) paragraph article 73 of Turkish Constitution: “Council of Ministers may be empowered to make amendments within the lower and upper limits prescribed by the law on provisions of exemptions, exceptions, reductions and rates related to taxes, duties, fees and similar charges”.In this study, we try to explain the scope of the legality principle of taxes in Turkish Constitution. Also the authority about taxation given to the Cabinet is also examined in this presentation.
    Keywords: Tax, legality principle of taxes, Turkish Constitution
    JEL: K34

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