nep-law New Economics Papers
on Law and Economics
Issue of 2015‒06‒27
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. When the Mafia Comes to Town By Annalisa Scognamiglio
  2. A Bayesian Model of the Litigation Game By Enrique Guerra-Pujol
  3. The Changing Returns to Crime: Do Criminals Respond to Prices? By Draca, Mirko; Koutmeridis, Theodore; Machin, Stephen
  4. Estimating the impact of Mexican drug cartels on crime By Roxana Gutierrez-Romero; Alessandra Conte
  5. White or Black Hat? An Economic Analysis of Computer Hacking By Caitlin Brown
  6. Harmonisation du Hayek et Posner: Posner, Hayek et l'analyse économique du droit By Ojo, Marianne
  7. Transatlantic Investment Treaty Protection By Poulsen, Lauge; Bonnitcha, Jonathan; Yackee, Jason
  8. Cartel enforcement in the EU: Leniency programmes and the appeals process By Hüschelrath, Kai
  9. The good, the bad and the ugly: The socio-economic impact of drug cartels and their violence in Mexico By Roxana Gutierrez-Romero; Monica Oviedo Leon
  10. Economic and Social Impacts of the Media By Della Vigna, Stefano; La Ferrara, Eliana
  11. Digital VAT Carousel Fraud: A New Boundary for Criminality By Fabrizio Borselli; Silvia Fedeli; Luisa Giuriato
  12. The Impact of Sentencing on Offenders' Future Labour Market Outcomes and Re-offending- Community Work Versus Fines By Michele Morris; Charles Sullivan

  1. By: Annalisa Scognamiglio (CSEF, University of Naples)
    Abstract: This paper investigates the effect of diffusion of organized crime on local economies by examining a legal institution that operated in Italy between 1956 and 1988. The law allowed Public Authorities to force mafiosos to resettle to another town. Using variation in the number of resettled mafia members across destination provinces in a differences-in-differences setting, I find no conclusive evidence on the effect of the policy on crime or homicides, while there is a very robust positive impact on employment in the construction sector. Results are consistent with mafia exploiting these new locations mainly for money laundering. JEL Classification: K42, O17.
    Keywords: Organized crime, law making, shadow economy.
    Date: 2015–05–30
  2. By: Enrique Guerra-Pujol
    Abstract: Over a century ago, Oliver Wendell Holmes invited scholars to look at the law through the lens of probability theory: "The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law." Yet few legal scholars have taken up this intriguing invitation. As such, in place of previous approaches to the study of law, this paper presents a non-normative, mathematical approach to law and the legal process. Specifically, we present a formal Bayesian model of civil and criminal litigation, or what we refer to as the litigation game; that is, instead of focusing on the rules of civil or criminal procedure or substantive legal doctrine, we ask and attempt to answer a mathematical question: what is the posterior probability that a defendant in a civil or criminal trial will be found liable, given that the defendant has, in fact, committed a wrongful act?
    Date: 2015–06
  3. By: Draca, Mirko (London School of Economics); Koutmeridis, Theodore (University of Glasgow); Machin, Stephen (University College London)
    Abstract: In economic models of crime individuals respond to changes in the potential value of criminal opportunities. We analyse this issue by estimating crime-price elasticities from detailed data on criminal incidents in London between 2002 and 2012. The unique data feature we exploit is a detailed classification of what goods were stolen in reported theft, robbery and burglary incidents. We first consider a panel of consumer goods covering the majority of market goods stolen in the crime incidents and find evidence of significant positive price elasticities. We then study a particular group of crimes that have risen sharply recently as world prices for them have risen, namely commodity related goods (jewellery, fuel and metal crimes), finding sizable elasticities when we instrument local UK prices by exogenous shifts in global commodity prices. Finally, we show that changes in the prices of loot from crime have played a role in explaining recent crime trends.
    Keywords: crime, goods prices, metal crime, commodity prices
    JEL: K42
    Date: 2015–06
  4. By: Roxana Gutierrez-Romero (Departament d’Economia Aplicada, Universitat Autonama de Barcelona); Alessandra Conte (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: We estimate the impact of drug cartels and drug-related homicides on crime and security perceptions in Mexico. For this purpose, we combine surveys on crime victimization with indicators of where drug cartels operate with and without drug-related homicides. Using the difference-in-difference estimator, we find that people living in areas that experienced drug-related homicides are more likely to take extra precautions to guard their security, yet these areas also more likely to experience some crimes, particularly thefts and extortions. In contrast, these crimes and perceptions of unsafety do not change in areas where cartels operate without leading to drug-related homicides.
    Keywords: Crime, difference-in-difference, instrumental variables, Mexico
    JEL: K49 O17 R59 C26
    Date: 2014–09
  5. By: Caitlin Brown (Department of Economics, Georgetown University)
    Abstract: Cyber attacks have increased sharply in recent years. This paper investigates the decision a profit-motivated hacker makes between working as a malicious hacker, called a black hat, and in cybersecurity as a white hat hacker. A key component of the model is the contest between white and black hats for some part of firm output that is vulnerable to attack. White and black hat earnings are increasing, nonlinear functions of the proportion of black hats. Multiple equilibria exist. Increasing the role of law enforcement in both apprehending black hats and the provision of computer security are shown to decrease the proportion of black hats in equilibrium.
    Keywords: Computer hacking, cybercrime, information security, crime, multiple equilibria
    JEL: K42 L86 O33
    Date: 2015–06–11
  6. 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 decentralization of information within the judicial process, this paper aims to address why decentralization 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. Ce document vise à mettre en évidence le consensus Posner et Hayek sur l'importance de la décentralisation, ainsi que l'importance de l'intégration des acteurs non juridiques comme des outils pour faciliter l'allocation efficace des ressources dans le droit commun. En plus de souligner le consensus sur les points de vue des Posner et Hayek, en ce qui concerne de centralisation de l'information dans le processus judiciaire, ce document vise à expliquer pourquoi de la centralisation sert comme un outil essentiel dans la facilitation de l'objectif du droit commun comme une répartition de l'efficacité mécanisme. Alors il est soutenu que juges des tribunaux inférieurs peuvent pas et ne doivent pas être administrés tels flexibilité pour faire et défaire la loi, les principes et les décisions des lords juristes agissant en qualité de législateur, ont également illustré conduisant dans plusieurs cas que la flexibilité voulue par Le Parlement peut être mal interprété et mal appliqué dans les cas futurs. Cela a également entraîné dans la critique des aides extrinsèques à l'interprétation des lois. Ce document analyse et élargit ces observations.
    Keywords: attentes légitime; de précédents judiciaires; interprétation de la loi; l'efficacité d'allocation; Pepper v Hart; Daubert; Le Domaine d'Edgar A. Berg v Commissaire; le droit commun
    JEL: D8 G3 G38 K2 M4
    Date: 2015–06–22
  7. By: Poulsen, Lauge; Bonnitcha, Jonathan; Yackee, Jason
    Abstract: This paper presents an informal cost-benefit analysis of the inclusion of investment protection provisions, including investor-state arbitration, in an investment chapter in TTIP. The analysis is conducted from the perspective of the EU and its member states. It argues that there is little evidence to suggest that investor-state arbitration will provide the EU with meaningful benefits, such as increased foreign investment from the US. In contrast, investor-state arbitration may impose non-trivial costs, in the form of litigation expenses and reduced policy space. This is due to the huge volume of US investment that would be covered by the investment chapter, as well as the fact that an investment chapter would almost certainly give foreign investors greater rights than they currently enjoy under EU and member state law. We conclude that, from the perspective of the EU, the case for including investor-state arbitration in TTIP is weak. Although we do not conduct a cost-benefit analysis from the perspective of the US, such an analysis would likely raise similar issues.
    Date: 2015–03
  8. By: Hüschelrath, Kai
    Abstract: Fighting cartels is a major priority of EU competition policy. Acting in concert with national competition authorities in the EU, the European Commission (EC) has made considerable efforts to promote competitiveness by detecting and punishing cartels. These efforts are visible not only in the increasing number of cartel cases, but also in the substantial rise in the average fines imposed per cartel member. While the successes of past years in fighting cartels clearly hinge to some extent on various policy reforms, many commentators argue that the introduction of the EC leniency programme (LP) in 1996 is likely a key enabler. Generally, LPs offer violators a fine reduction or even full amnesty from fines if they disclose an infringement to the responsible authority and cooperate during the subsequent investigation. Below, the key results of an empirical ZEW study on the determinants of self-reporting under the European LP are presented. Given the substantial increase in both the number of detected cartels and the average fine per cartel member, it comes as no surprise that an increasing number of convicted firms have considered filing an appeal against EC decisions. Below, the characteristics of firms filing an appeal and the factors that determine their success in terms of fine reduction are discussed.
    Abstract: Die Bekämpfung von Kartellen hat einen außerordentlich hohen Stellenwert im Rahmen der EU-Wettbewerbspolitik. In Zusammenarbeit mit den nationalen Wettbewerbsbehörden der EU-Mitgliedstaaten hat die Europäische Kommission (EC) durch die Aufdeckung und Verfolgung von Kartellen erhebliche Anstrengungen zur Stärkung der Wettbewerbsfähigkeit unternommen. Zahlreiche Beobachter argumentieren, dass die von der Kommission 1996 eingeführte Kronzeugenregelung ("Leniency Programme", LP) in diesem Zusammenhang ein Schlüsselelement darstelle. Angesichts der steigenden Anzahl aufgedeckter Kartelle und der erhöhten durchschnittlichen Bußgeldstrafen pro Kartellmitglied ist es nicht überraschend, dass verurteilte Unternehmen immer häufiger erwägen, gegen die Entscheidungen der Kommission in Berufung zu gehen. Das vorliegende Paper präsentiert die zentralen Ergebnisse einer empirischen ZEW-Studie zu den Voraussetzungen einer Selbstanzeige im Rahmen des europäischen LP. Es diskutiert zudem die Merkmale der Unternehmen, die Berufung einlegen, sowie die Erfolgsfaktoren, die zu einer Bußgeldverminderung führen.
    Date: 2015
  9. By: Roxana Gutierrez-Romero (Departament d’Economia Aplicada, Universitat Autonama de Barcelona); Monica Oviedo Leon (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: This paper assesses the impact that drug cartels and their associated violence have had on development in Mexico. For this purpose, we monitor official and media reports to identify where cartels have operated with and without drug related homicides. Using the difference-in-difference kernel matching method, we find that on the one hand, inequality declined to a large extent in areas where cartels were active without incidents of drug related homicides. On the other, poverty increased in areas that had both the lowest and the highest rates of drug related homicides. Two reasons could explain this increase in poverty. In the most violent areas the number of employers and remunerations declined in key industries, such as manufacturing. In the least violent areas poverty increased possibly due to people migrating from the more violent places.
    Keywords: Drug Cartels; Violence; Poverty; Inequality; Education; Migration; Kernel matching
    JEL: K49 O16 O17 R59 C26
    Date: 2014–10
  10. By: Della Vigna, Stefano; La Ferrara, Eliana
    Abstract: We review the literature on the impact of exposure to the media. We cast a wide net and cover media impacts on education, family choices, labor and migration decisions, environmental choices, health, crime, public economics, attitudes, consumption and savings, and development economics. We stress five themes. First, the demand for entertainment plays a key role, with the economic impacts emerging largely as by-products. Second, to understand the media effects one cannot just focus on the direct effect of exposure but one needs to take into account the crowding-out of alternative activities (substitution effect). Third, the sources of identification play a critical role in determining what is known: credible estimates of short- and long run effects are available for some topics and some media but not for others. Fourth, most of the evidence on social and economic impacts is for exposure to the entertainment media such as television, as opposed to the printed press. Fifth, for the policy impacts both the substitution effect of media exposure and the demand for entertainment play an important role.
    Keywords: edutainment; imitation; internet; media economics; persuasion; radio; television
    JEL: A13 D01 H4 I10 I20 J00 K42 L82 L96 O10
    Date: 2015–06
  11. By: Fabrizio Borselli; Silvia Fedeli; Luisa Giuriato
    Abstract: The paper analyses the first Value Added Tax (VAT) fraud on Voice over Internet Protocol, the Phuncards-Broker operation, which took place in Italy in 2005-2007. The scheme consists of a chain of frauds on e-services that represents an important evolution of the "classic" models of carousel fraud, showing the increasing vulnerabilities of the VAT systems. The authors explore the policy implications for tax authorities, looking at how changes in their strategies may tackle the incentives to participate in the fraud. We argue that, in the short term, information technology (IT) solutions might offer some of the best answers when effectively combined with reverse-charge, while, in the longer-term, an extension of the One-Stop-Shop system may represent a new hypothesis of VAT reform in an anti-fraud perspective.
    Keywords: EU Value added tax, VAT fraud, reverse-charge, One-Stop-Shop system
    JEL: H20 H21 H22 H26 K34 K42
  12. By: Michele Morris; Charles Sullivan (The Treasury)
    Abstract: This study provides evidence to help inform sentencing policy by assessing the differential impact of two types of sentences (community work and fines) on adult offenders subsequent employment, benefit receipt and re-offending. This is the first study in New Zealand to examine post-sentencing employment outcomes and benefit receipt of such offenders. We focus on offences where we observe variation in sentencing after controlling for observable differences and examine outcomes for up to three years following conviction. This analysis uses recently-linked anonymised administrative data from the tax, benefit and justice systems within Statistics New Zealand’s Integrated Data Infrastructure, which provides detailed information on all convicted offenders and their offending. Impacts are estimated by comparing the changes in post-conviction outcomes of offenders who received a fine with changes in outcomes for matched comparison groups of offenders who received a community work sentence. Matching is done using the method of propensity score matching. Impacts are estimated separately for four types of offences and for a general model that pools several types of offences together. People sentenced to community work are more likely to re-offend within two years of conviction compared to fined offenders. There is no difference in impact on employment during the follow-up period for the two types of sentences (except in one case where there is a short-term differential impact in the year following conviction). We find that people sentenced to community work are more likely to be on benefit following conviction compared to people who are fined. We regard our estimates as an upper bound of the true differential impact of community work compared to fines on offenders’ subsequent outcomes. While our method controls for observed offender characteristics, it is still possible that there are significant uncontrolled differences between the offenders who were sentenced to community work and those who were fined (eg, the differences in being on benefit could be due to differences in the level of financial support from a partner).
    JEL: K14 D04
    Date: 2015–06

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