nep-law New Economics Papers
on Law and Economics
Issue of 2015‒08‒25
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Norm Enforcement in Social Dilemmas An Experiment with Police Commissioners By David Dickinson; David Masclet; Marie Claire Villeval
  2. Crime Victimisation and Subjective Well-Being: Panel Evidence from Australia By Mahuteau, Stéphane; Zhu, Rong
  3. Profiling, screening and criminal recruitment By Cotton, Christopher; Li, Cheng
  4. The Effect of Compulsory Engagement on Youth Crime By Nikhil Jha
  5. Bad Behavior: Delinquency, Arrest and Early School Leaving By van Ours, Jan C.; Ward, Shannon; Williams, Jenny
  6. Advertising Competition in the French Free-To-Air Television Broadcasting Industry By Ivaldi, Marc; Zhang, Jiekai
  7. Cash-in-Hand, Benefit Fraud and Unemployment Insurance By Long, Iain W.; Polito, Vito
  8. How do reservation prices impact distressed debt rescheduling? By Franck Moraux; Patrick Navatte
  9. Mobile Politicians: Opportunistic Career Moves and Moral Hazard By Duha T. Altindag; Naci Mocan

  1. By: David Dickinson (Department of Economics - Appalachian State University); David Masclet (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal, CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS)
    Abstract: Do individuals trained in law enforcement punish or reward differently from typical student-subjects? We analyze norm enforcement behavior of newly appointed police commissioners in both a game with positive externalities (based on a Voluntary Contribution Mechanism) and a similar game with negative externalities. Depending on the treatment, a reward or sanction institution is either exogenously or endogenously implemented. Police commissioners cooperate significantly more in both games and bear a higher burden of the sanction costs compared to non-police subjects. When the norm enforcement institution is endogenous, subjects favor rewards over sanctions, but police subjects are more likely to vote for sanctions. Police subjects also reward and sanction more than the others when the institution results from a majority vote. Our experiment suggests that lab evidence on social dilemma games with positive or negative externalities and enforcement institutions is rather robust.
    Date: 2015–04
  2. By: Mahuteau, Stéphane (NILS, Flinders University); Zhu, Rong (NILS, Flinders University)
    Abstract: This paper estimates the effect of physical violence and property crimes on subjective well-being in Australia. Our methodology improves on previous contributions by (i) controlling for the endogeneity of victimisation and (ii) analysing the heterogeneous effect of victimisation along the whole distribution of well-being. Using fixed effects panel estimation, we find that both types of crimes reduce reported well-being to a large extent, with physical violence exerting a larger average effect than property crimes. Furthermore, using recently developed panel data quantile regression model with fixed effects, we show that the negative effects of both crimes are highly heterogeneous, with a monotonic decrease over the distribution of subjective well-being.
    Keywords: victimisation, subjective well-being, panel quantile regression
    JEL: C21 I31
    Date: 2015–08
  3. By: Cotton, Christopher; Li, Cheng
    Abstract: We model major criminal activity as a game in which a law enforcement officer chooses the rate at which to screen different population groups, and a criminal organization (e.g. drug cartel, terrorist cell) chooses the observable characteristics of its recruits. Our model best describes smuggling or terrorism activities at borders, airports and other security checkpoints. The most effective law enforcement policy imposes only moderate restrictions on the officer's ability to profile. In contrast to models of decentralized crime, requiring equal treatment never improves the effectiveness of law enforcement.
    Keywords: racial profiling, law enforcement, national security, smuggling, terrorism, crime
    JEL: D02 H56 J78 K42
    Date: 2013–10
  4. By: Nikhil Jha (Melbourne Institute of Applied Economic and Social Research, University of Melbourne)
    Abstract: This paper examines the potential incapacitation effect on various categories of crime committed by youth offenders. I exploit exogenous variation generated by the increase in school-leaving age and compulsory education or work requirement in the state of New South Wales, Australia from 15 to 17. Using incidents of crime committed by offender of different age-group incorporates incapacitation effect on crimes that do not necessarily lead to arrests. Comparative Interrupted Time-Series analysis is used to model differential trend in crime using panel data extending several pre- and post-policy periods. Results show that the policy substantially reduced incidents of crime against property, particularly by male offenders. Classification-I28, K42
    Keywords: Education, crime
    Date: 2015–06
  5. By: van Ours, Jan C.; Ward, Shannon; Williams, Jenny
    Abstract: In this paper we investigate the effects of delinquency and arrest on school leaving using information on males from the National Longitudinal Survey of Youth 1997. We use a multivariate mixed proportional hazard framework in order to account for common unobserved confounders and reverse causality. Our key finding is that delinquency as well as arrest leads to early school leaving. Further investigation reveals that the effect of delinquency is largely driven by income generating crimes, and the effect of both income generating crime and arrest are greater when onset occurs at younger ages. These findings are consistent with a criminal capital accumulation mechanism. On the basis of our sample, we show that taking into account the proportion of young men affected by delinquency and arrest, that the overall reduction in education due to delinquency is at least as large as the reduction due to arrest. This highlights the need for crime prevention efforts to extend beyond youth who come into contact with the justice system.
    Keywords: arrest; delinquency; duration models; education
    JEL: C4 D0 I2 K4
    Date: 2015–08
  6. By: Ivaldi, Marc; Zhang, Jiekai
    Abstract: This paper investigates empirically the advertising competition in the French free TV broadcasting industry in a two-sided framework. We specify a structural model of oligopoly competition of free TVs, and identify the shape and magnitude of the feedback loop between the TV viewers and the advertisers using French market data from March 2008 to December 2013. We contribute to the literature by implementing a simple procedure to test the conduct of TV channels, and identify that the nature of competition is of Cournot type on the French TV advertising market. In line with a decision of French anti-trust authority in 2010 which authorized the acquisition of two free broadcasting TV channels by a big media group under behavioral remedies, a series of competitive analysis has been conducted: We find firstly that the surpls of TV viewers keep raising after the decision of acquisition, suggesting that the implemented policy has been efficient in protecting the consumer surplus; Then, we find, by counterfactual simulation, that the merger of advertising agencies would not affect importantly the equilibrium outcomes in this industry, due to the strong network externalities between the TV viewers and the advertisers.
    Keywords: advertising; behavioral remedies; competition; market conduct; media; TV; two-sided market
    JEL: D22 D43 K21 L11 L13 L22 L41 M37
    Date: 2015–08
  7. By: Long, Iain W. (Cardiff Business School); Polito, Vito (Cardiff Business School)
    Abstract: Recent evidence questions the nature of the re-employment spike as unemployment insurance (UI) payments expire. Unemployed agents do not appear to devote more time to search and are observed leaving the UI scheme early without necessarily entering employment. We show that benefit fraud is consistent with both observations. Over time, UI recipients become increasingly willing to accept short-term cash-in-hand work. This takes them away from job search. Immediately before UI expiry, the risk of punishment for fraud exceeds the value of remaining payments. Recipients may voluntarily leave the scheme to accept cash-in-hand opportunities.
    Keywords: Cash-in-hand; Benefit fraud; Unemployment insurance; Re-employment spike
    JEL: J64 J65 K42
    Date: 2015–06
  8. By: Franck Moraux (CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1); Patrick Navatte (CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1)
    Abstract: This paper is the first to investigate rescheduling of distressed corporate debt when both the representative shareholder and the creditor face reservation prices. Parties expect from rescheduling both recovery and growth, but reservation prices are key dimensions to consider in the analysis in order to assess the opportunity and to design the new financial set-up. For reservation price, the creditor may have in mind the liquidation value of the firm he can get by a strict enforcement of his contractual rights in court. The shareholder requires fromrescheduling the recognition of her risky, specific and important (financial and intangible) involvements in the future. To shed light on rescheduling with reservation prices, we develop first a general parsimonious distribution-free structural framework. We derive sufficient conditions for rescheduling to take place and highlight situationswhere no rescheduling can occur. We characterize cases where rescheduling is for the creditor possible but sub-optimal. So the shareholder's reservation price can dramatically restrict the set of possible extensions and it does matter for the creditor. We then restrict our setting to undertake numerical analysis, our benchmark being the canonical rescheduling model of Longstaff (1990). Here, we can explore with simulations feasibility and optimality of rescheduling for different magnitudes of reservation prices and different firms' profiles.We finally investigate various concerns related to rescheduling such as agency costs, exit from no-rescheduling situations and bargaining between stakeholders.We also discuss different ways to lower the shareholder's reservation price.
    Date: 2015–04
  9. By: Duha T. Altindag; Naci Mocan
    Abstract: We exploit the randomness generated by a seat allocation mechanism utilized in Parliamentary elections that determines those politicians who get elected from a given district by a small margin, and those who lose. Using detailed information on personal attributes of more than 2,000 elected Members of the Parliament (MPs) and the votes received by each political party in every district and each of the five consecutive Parliamentary elections in Turkey between 1991 and 2011, we show that elected MPs are more likely to switch parties after an election if they faced electoral uncertainty and experienced a narrowly-won victory. The tendency to switch parties goes up as it becomes more lucrative to hold the post of MP. The impact of election uncertainty on party-switching is greater for younger MPs, and for those who are less educated. The propensity to switch due to uncertainty is higher if the MP is a member of the governing party, but only if the seat is valuable (if the majority of the party in the Parliament is slim). Politicians switch parties after an election to improve their ex-ante re-election probability in the following election. Although switching parties during a legislative session (between elections) for personal career concerns creates moral hazard, we find that party-switching MPs are more likely to get elected in the next election. These results point to forward-looking opportunistic behavior of politicians regarding their strategy to win future elections, and they indicate that politicians switch parties primarily for career concerns and for financial benefits that are associated with longer tenure in the Parliament. The results also signify that competition between political parties continues after the election, in the form of gaining seats in the Parliament post- election by transferring elected representatives of competing parties. This constitutes another dimension of the political agency problem.
    JEL: D72 K0
    Date: 2015–07

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