nep-law New Economics Papers
on Law and Economics
Issue of 2015‒08‒13
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Do Anti-Bullying Laws Reduce Youth Violence? By Sabia, Joseph J.; Bass, Brittany
  2. The optimal scope of trade secrets law By L. A. Franzoni; A. Kumar Kaushik
  3. Dispute Settlement in the WTO (Mind over Matter) By Petros C. Mavroidis
  4. Cross-Licensing and Competition By Jeon, Doh-Shin; Lefouili, Yassine
  5. Environmental awareness of nations: the interplay with institutional transformation By Smirnova, Janna
  6. Violence and Birth Outcomes: Evidence from Homicides in Brazil By Foureaux Koppensteiner, Martin; Manacorda, Marco
  7. Antitrust, regulatory capture and economic integration By Mario Mariniello; Damien Neven; Jorge Padilla
  8. Learning by Negligence - Torts, Experimentation, and the Value of Information By Goeschl, Timo; Pfrommer, Tobias
  9. Investigating Defensive Medicine: The Role of Access By Javier Cano-Urbina; Daniel Montanera
  10. Expanding Disability Discrimination Protections to Those with Less Severe Impairments: Evidence from California's Prudence Kay Poppink Act By Patrick Button
  11. What Role Can an International Financial Centre’s Law Play in the Development of a Sunrise Industry? The Case of Hong Kong and Solar Powered Investments By Michael, Bryane; Zhao,Simon; Wojcik, Dariusz
  12. Tax Basis Determinations, Pass-Through Entities, and Taxpayer Noncompliance By James Alm; Jay A. Soled

  1. By: Sabia, Joseph J. (San Diego State University); Bass, Brittany (University of California, Irvine)
    Abstract: This study is the first to comprehensively examine the effect of state anti-bullying laws (ABLs) on youth violence. Using data from a variety of sources – including the Youth Risk Behavior Surveys, Uniform Crime Reports, and newly collected data on school shootings – we find that the enforcement of strict, comprehensive school district anti-bullying policies is associated with a 7 to 13 percent reduction in school violence and an 8 to 12 percent reduction in bullying. Our results also show that anti-bullying policy mandates are associated with a reduction in minor teen school shooting deaths and violent crime arrests. A causal interpretation of our results is supported by falsification tests on older young adults for whom ABLs do not bind.
    Keywords: bullying, youth violence, anti-bullying laws, school shootings
    JEL: I28
    Date: 2015–07
  2. By: L. A. Franzoni; A. Kumar Kaushik
    Abstract: The paper investigates the optimal scope of trade secrets law. In the model, one innovative firm invests resources first to produce knowledge, and then to protect it from unwanted disclosure. A rival firm invests to ferret out this knowledge. Trade secrets law affects this "secrecy contest" by reducing the probability of unwanted disclosure given the efforts of the parties. We show how optimal trade secrets policy depends on structural market features and cost parameters. In the final section, we consider the limit case in which the innovation lies on the face of the product, and derive the optimal scope of legal provisions preventing copycat imitation of products (unfair competition, passing off).
    JEL: K1 L1
    Date: 2015–07
  3. By: Petros C. Mavroidis
    Abstract: The WTO Dispute Settlement System aimed to curb unilateralism by establishing a multilateral process operating under the aegis of the WTO as the exclusive forum for WTO adjudication. Intuitively, one would expect that those negatively affected by the curtailing of their power to unilaterally do justice for themselves, would agree to multilateral resolution of disputes if the established regime could guarantee enforcement of obligations in comparable terms (to unilateral enforcement). In this perspective, respect and guarantee of reciprocal commitments is the key ingredient. Reciprocal commitments entered should not be unilaterally undone through the commission of illegalities. There are good reasons to doubt whether the WTO regime as it now stands guarantees reciprocity following the commitment of illegalities. It is probably more accurate to argue that the WTO regime serves ‘diffuse’ as opposed to ‘specific’ reciprocity. Still, WTO Members continue to routinely submit their disputes to the WTO adjudicating fora, lending support to the argument that the regime after all, was meant to curb punishment, and not to punish.
    Keywords: WTO,
    JEL: K40
    Date: 2015–05
  4. 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
  5. By: Smirnova, Janna
    Abstract: The paper aims to investigate the main factors responsible for the acquisition of environmental awareness by societies. We apply the institutional analysis approach that puts in evidence the factors shaping formal and informal rules and their role in the acquisition of environmental concern. The analysis demonstrates how enforcement and flexibility of formal rules and purposeful formation of informal rules may contribute to create a favourable framework for the acquisition of environmental awareness. In particular, rule of law stringency is shown to be positively related to environmental concern of the countries. We, therefore, put forward a generic scheme of the interplay between institutional change and environmental awareness, where a double causality relationship always holds. The analysis may serve as a starting point to understand the origins of the acquisition of environmental awareness over the globe and can be used for an empirical analysis based on the debate on world environmental renascence.
    Keywords: Environmental awareness; institutional enforcement; rule of law; formal rules; informal rules; cognitive development.
    JEL: O43 O44 Q56
    Date: 2015–07–30
  6. By: Foureaux Koppensteiner, Martin (University of Leicester); Manacorda, Marco (Queen Mary, University of London)
    Abstract: This paper uses microdata from Brazilian natality and mortality vital statistics between 2000 and 2010 to estimate the impact of in-utero exposure to local violence – measured by homicide rates - on birth outcomes. The estimates show that exposure to violence during the first trimester of pregnancy leads to a small but precisely estimated increase in the risk of low birthweight and prematurity. Effects are found in both rural areas, where homicides are rare, and in urban areas, where violence is endemic and are particularly pronounced among children of poorly educated mothers, implying that violence compounds the disadvantage that these children already suffer as a result of their households' lower socioeconomic status.
    Keywords: birth outcomes, birthweight, homicides, stress, Brazil
    JEL: I12 I15 I39 J13 K42
    Date: 2015–07
  7. By: Mario Mariniello; Damien Neven; Jorge Padilla
    Abstract: Highlights - There is growing worldwide concern about bias in the enforcement of competition law in favour of domestic firms. Even seemingly neutral antitrust laws can lead discrimination if they are enforced selectively. - Authors investigate the distortions that national competition authorities generate when they pursue non-competition goals in favour of domestic firms, and discuss ways to address this negative policy development in a globalised world. - The distortions identified in the paper would dissipate if governments agreed that the sole objective of competition law ought to be the protection of consumer welfare that competition-law institutions ought to be protected against capture. - A realistic and effective way to prompt international convergence towards independent enforcement of competition laws is through the inclusion of competition clauses in bilateral trade agreements and the development of dispute-resolution mechanisms.
    Date: 2015–07
  8. By: Goeschl, Timo; Pfrommer, Tobias
    Abstract: How should tort law deal with agents that employ novel and imperfectly understood technologies that later turn out to involve harm? There is no agreement among different legal systems whether strict liability or negligence rules should govern these so-called 'development risks'. The law-and- economics literature, however, has predominantly favored strict liability. The present paper shows that the choice depends on the characterization of how society learns about technology risks. When experiential public data is an irreducible input into learning, theory justifies the use of specific negligence rules in order to govern development risks. We reconcile the existence of the negligence doctrine for development risks with the theoretical literature using a simple two-period unilateral care model. There, an optimally designed negligence rule can provide a better balancing of benefits, harm to third parties, costs of care effort, and the value of information from learning than strict liability. If feasible, the optimal negligence rule partitions the population of potential users into two groups. Only the high benefit group engages in the risky activity, subject to due care levels designed to deter the low benefit group.
    Date: 2015–08–03
  9. By: Javier Cano-Urbina; Daniel Montanera
    Abstract: Defensive medicine is the treatment decisions by physicians made primarily to limit malpractice liability risk, rather than for the medical benefit of patients. Despite widespread reports of defensive medicine in surveys of physicians, empirical investigations have produced conflicting evidence. This paper develops a model of the interactions in the health care market that shows that rises in medical malpractice pressure have non-monotonic effects on health care spending. The key element in the model is the endogenous determination of access to health care, which reacts to changes in medical malpractice pressure. This implication is tested using the Vital Statistics Natality Birth Data and data on tort reforms by state-month-year, and it is found that, in general, the non-monotonic relationship predicted by the model is supported.
    Keywords: defensive medicine, obstetrics, healthcare spending
    JEL: I18 H75 K13
    Date: 2015–08
  10. By: Patrick Button (Department of Economics, Tulane University)
    Abstract: Individuals with less severe impairments are often ineligible for disability programs and are not covered under Americans with Disabilities Act, but this group still faces employment barriers through discrimination or requiring on-the-job accommodations. Effective 2001, California passed the Prudence Kay Poppink Act which broadened California's disability employment discrimination laws to cover individuals with less severe impairments. I estimate how this act affected the labor market outcomes for these newly-covered disabled workers using both difference-in-differences and difference-in-differences-in-differences regression analyses using data from the Current Population Survey's Annual Social and Economic Supplement. The results generally show a large increase in employment.
    Keywords: disability, discrimination, employment non-discrimination law, Prudence Kay Poppink Act, Americans with Disabilities Act
    JEL: J71 K31
    Date: 2015–07
  11. By: Michael, Bryane; Zhao,Simon; Wojcik, Dariusz
    Abstract: How can international financial centres like Hong Kong increase assets under management – and thus their size and ranking? Most policymakers and their advisors wrongly answer this question by focusing on financial institutions, and the law that governs them. Instead, policymakers need to start by looking at actual markets. What new tastes and technologies need funding? How can such funding fit into already existing geographies of production, distribution and finance? In this paper, we show how a focus on funding sunrise industries can help increase assets under management for the financial institutions operating in an international financial centre like Hong Kong. We show – using the specific example the photovoltaic (solar power) sector – how changes in financial law need to be contingent on market needs. We specifically show how legal changes which promote the securitisation of solar assets (and the sale of these securities) can help increase Hong Kong’s financial institutions’ assets under management. By using this specific case, we hope to provide insight into the broader question of how technological change, geography, and financial law interact.
    Keywords: solar finance,securitization
    JEL: K22 G18
    Date: 2015–07–20
  12. By: James Alm (Department of Economics, Tulane University); Jay A. Soled (Rutgers School of Business, Rutgers University)
    Abstract: In the United States, one of the most popular ways to conduct business is to use a pass- through entity such as a partnership, limited liability company, or S corporation. Investor taxpayers in such pass-through entities commonly hold their ownership interest for years or decades. Over this lengthy period of time, a taxpayer’s tax basis in the entity is subject to constant annual adjustments, which generally have no immediate tax consequences. However, when the pass-through entity investment is later sold or liquidated, tax basis determinations are of critical importance, and these determinations enable taxpayers to calculate their concomitant gains or losses. At this pivotal juncture, accurately determining taxpayers’ tax bases in these investments is highly unlikely, and the IRS’s ability to detect taxpayers’ tax basis reporting inaccuracies is virtually nonexistent. This analysis examines the phenomenon of taxpayers who do not know their tax basis in pass-through entity investments and the consequences associated with such ignorance. Also provided are projected revenue losses associated with taxpayers purposefully or inadvertently inflating the tax basis that they have in their pass-through entity investments. To curtail the projected revenue losses associated with tax basis misreporting, we propose several reform measures that Congress should adopt. Such measures include simplifying tax basis computations, enhancing information reporting, and limiting the ability of taxpayers to estimate the tax basis of their pass-through investments.
    Keywords: tax basis, pass-through entities, information reporting
    JEL: H2 H26 K34 K42
    Date: 2014–07

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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