nep-law New Economics Papers
on Law and Economics
Issue of 2015‒09‒05
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Does the Concern About Local Crime Affect Trust in the Police? By Joelson Oliveira Sampaio; Rodrigo De-Losso, Luciana Gross Cunha, Renan Gomes de Pieri
  2. Fighting Crime with a Little Help from my Friends: Political Alignment, Inter-Jurisdictional Cooperation and Crime in Mexico By Durante, Ruben; Gutierrez, Emilio
  3. The Politics of Selecting the Bench from the Bar: The Legal Profession and Partisan Incentives to Politicize the Judiciary By Bonica, Adam; Sen, Maya
  4. Crime scars: can recessions produce career criminals? By Brian Bell; Anna Bindler; Stephen Machin
  5. Labor Disputes and Job Flows By H. FRAISSE; F. KRAMARZ; C. PROST
  6. Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings By James Alm; Jay Shimshack
  7. Double Liability at Early American Banks By Howard Bodenhorn
  8. Credit Access after Consumer Bankruptcy Filing: New Evidence By Jagtiani, Julapa; Li, Wenli
  9. Breaking Bad: Are Meth Labs Justified in Dry Counties? By Fernandez, Jose; Gohmann, Stephan; Pinkston, Joshua
  10. Technology Entry in the Presence of Patent Thickets By Bronwyn H. Hall; Christian Helmers; Georg von Graevenitz
  11. Short-term, Long-term, and Continuing Contracts By Maija Halonen-Akatwijuka; Oliver Hart

  1. By: Joelson Oliveira Sampaio; Rodrigo De-Losso, Luciana Gross Cunha, Renan Gomes de Pieri
    Abstract: This paper investigates local crime’s concern effect on confidence in the police using Two Least Square Regressions having as instrumental variable the individual distance to police stations. We explore data from the Confidence in Justice Survey conducted for the period at 2013 to 2014 at state of Sao Paulo. We find that an increase at the total crimes registered reduces confidence on police. Such results are more effusively in some crimes like drug dealing and rape. Exploring heterogeneities in the results we find that black are more sensitive to crime rate changes even living in similar neighborhoods in what respect to security. Results also show that who has already had prior experience with the police is less sensitive independently of the quality of police job at the time.
    Keywords: Trust in the Police; Institutions; Criminality.
    JEL: G12
    Date: 2015–08–12
  2. By: Durante, Ruben; Gutierrez, Emilio
    Abstract: We investigate the relationship between inter-jurisdictional cooperation and law enforcement in Mexico. Exploiting a Regression Discontinuity Design in close municipal elections, we study how improved opportunities for cooperation in crime prevention among neighboring municipalities - proxied by the degree of political alignment between mayors - may result in lower rates of violent crime. We find that municipalities in which the party in power in the majority of neighboring jurisdictions barely won experience significantly lower homicide rates during the mayor's mandate than those in which it barely lost. This effect is sizeable and robust, is increasing in the share of neighboring municipalities governed by the same party, is independent of which party governs the neighboring municipalities, and does not appear to be driven by improved cooperation with either federal or state authorities.
    Keywords: crime; inter-jurisdictional cooperation; law enforcement; Mexico; political parties
    JEL: H11 H41 H7
    Date: 2015–08
  3. By: Bonica, Adam (Stanford University); Sen, Maya (Harvard University)
    Abstract: The American judiciary has increasingly come under attack as polarized and politicized. Using a newly collected dataset that captures the ideological positioning of nearly half a million judges and lawyers who have made campaign contributions, we present empirical evidence showing politicization through various tiers of the judicial hierarchy. We show that the higher the court, the more conservative and more polarized it becomes, in contrast with the broader population of attorneys, who tend to be liberal. These findings suggest that political actors not only appear to rely on ideology in the selection of judges, but that they strategically prioritize higher courts. To our knowledge, our study is the first to provide a direct ideological comparison across tiers of the judiciary and between judges and lawyers, and also the first to document how--and why--American courts are politicized.
    JEL: K49
    Date: 2015–01
  4. By: Brian Bell; Anna Bindler; Stephen Machin
    Abstract: Recessions typically raise youth unemployment and leave longterm labour market 'scars' on the young people concerned. Research by Brian Bell, Anna Bindler and Stephen Machin finds that they also have a disturbing and substantial impact in launching criminal careers.
    Keywords: Crime, recessions, unemployment
    JEL: J64 K42
    Date: 2015–07
  5. By: H. FRAISSE (Banque de France and IZA); F. KRAMARZ (Crest,CEPR and IZA); C. PROST (Insee)
    Abstract: This article uses variations in local conditions of the activity of the labor courts to assess the effect of dismissal costs on the labor market. Judicial activity is analyzed using a data set of individual labor disputes brought to French courts over the years 1996 to 2003. Several indicators are computed: the percentage of dismissed workers who litigate in employment tribunals, the fraction of cases leading to a conciliation between parties, to a trial, resulting in a workers victory. First, we present a simple theoretical framework helping us understand the links between litigation costs, judicial outcomes and firing costs. Court outcomes are not exogenous to market conditions but also to litigation costs: a large filing rate can come from small litigation costs for the workers, leading to large dismissal costs for the firms; it may well come from small litigation costs for the firms, the employers taking more risks when firing workers. Second, we regress job flows on indicators of judicial outcomes, using an instrument, based on local shocks in the supply of lawyers. We find that when the numbers of lawyers increase, workers litigate more often, which should increase the firing costs for the firms. This increased filing rate causes a decrease in employment fluctuations, especially for shrinking or exiting firms. The effect on employment growth is positive in the short term.
    Keywords: employment protection legislation, job flows, labor judges, unfair dismissal, France
    JEL: J32 J53 J63 K31
    Date: 2014
  6. By: James Alm (Department of Economics, Tulane University); Jay Shimshack (Frank Batten School of Leadership and Public Policy, University of Virginia)
    Abstract: Environmental monitoring and enforcement are controversial and incompletely understood. This survey reviews what we do and do not know about the overall effectiveness, as well as the cost effectiveness, of pollution monitoring and enforcement. We ask five key questions: What do environmental monitoring and enforcement actions look like in the real world? How do we assess environmental compliance and deterrence? Do environmental monitoring and enforcement actions get results? How, why, and when do inspections and sanctions achieve compliance and reduce pollution? And, what do the answers to the preceding questions tell us about designing and implementing more effective and more cost effective public policies for the environment? A key contribution is drawing lessons from diverse sources, including insights from theoretical, empirical, and experimental contributions in environmental, tax, and safety settings. We conclude that traditional environmental monitoring and enforcement actions generate important deterrence effects. However, there are limits to such deterrence, and deterrence itself cannot fully explain all patterns of environmental behavior. Encouraging compliance requires both traditional tools and additional tools.
    Keywords: environmental economics, enforcement and compliance
    JEL: Q50 Q58 K32 H26
    Date: 2014–10
  7. By: Howard Bodenhorn
    Abstract: Limited liability is a defining feature of the modern corporation, but it was not always so. In the nineteenth century, several states imposed extended liability on some firms with all the other characteristics of corporations, including perpetual life and freely tradable shares. But by 1850 about one-half of all US states imposed double liability on bank shareholders. This paper shows that double liability was associated with more concentrated bank shareholdings and that the change from single to double liability increased bank leverage ratios. In forcing bank shareholders to have more “skin in the game,” double liability changed investor and banker behaviors.
    JEL: G21 K2 N21
    Date: 2015–08
  8. By: Jagtiani, Julapa (Federal Reserve Bank of Philadelphia); Li, Wenli (Federal Reserve Bank of Philadelphia)
    Abstract: This paper uses a unique data set to shed new light on credit availability to consumer bankruptcy filers. In particular, our data allow us to distinguish between Chapter 7 and Chapter 13 bankruptcy filings, to observe changes in credit demand and credit supply explicitly, and to differentiate existing and new credit accounts. The paper has four main findings. First, despite speedy recovery in their risk scores after bankruptcy filing, most filers have much reduced access to credit in terms of credit limits, and the impact seems to be long lasting (well beyond the discharge date). Second, the reduction in credit access stems mainly from the supply side as consumer inquiries recover significantly after the filing, while credit limits remain low. Third, new lenders do not treat Chapter 13 filers more favorably than Chapter 7 filers. In fact, Chapter 13 filers are much less likely to receive new credit cards than Chapter 7 filers even after controlling for borrower characteristics and local economic environment. Finally, we find that Chapter 13 filers overall end up with a slightly larger credit limit amount than Chapter 7 filers (both after the filing and after discharge) because they are able to maintain more of their old credit from before bankruptcy filing. Our results casts doubt on the effectiveness of the current bankruptcy system in providing relief to bankruptcy filers and especially its recent push to get debtors into Chapter 13.
    JEL: G01 G02 G28 K35
    Date: 2014–08
  9. By: Fernandez, Jose; Gohmann, Stephan; Pinkston, Joshua
    Abstract: This paper examines the influence of local alcohol prohibition on the prevalence of methamphetamine labs. Using multiple sources of data for counties in Kentucky, we compare various measures of meth manufacturing in wet, moist, and dry counties. Our preferred estimates address the endogeneity of local alcohol policies by using as instrumental variables data on religious affiliations in the 1930s, when most local-option votes took place. Alcohol prohibition status is influenced by the percentage of the population that is Baptist, consistent with the “bootleggers and Baptists” model. Our results suggest that the number of meth lab seizures in Kentucky would decrease by 24.4 percent if all counties became wet.
    Keywords: Alcohol prohibition, methamphetamine production, dry counties
    JEL: I1 K42
    Date: 2015–08–25
  10. By: Bronwyn H. Hall; Christian Helmers; Georg von Graevenitz
    Abstract: We analyze the effect of patent thickets on entry into technology areas by firms in the UK. We present a model that describes incentives to enter technology areas characterized by varying technological opportunity, complexity of technology, and the potential for hold-up in patent thickets. We show empirically that our measure of patent thickets is associated with a reduction of first time patenting in a given technology area controlling for the level of technological complexity and opportunity. Technological areas characterized by more technological complexity and opportunity, in contrast, see more entry. Our evidence indicates that patent thickets raise entry costs, which leads to less entry into technologies regardless of a firm’s size.
    JEL: K11 L20 O31 O34
    Date: 2015–08
  11. By: Maija Halonen-Akatwijuka; Oliver Hart
    Abstract: Parties often regulate their relationships through ‘continuing’ contracts that are neither long-term nor short-term but usually roll over. We study the trade-off between long-term, short-term, and continuing contracts in a two period model where gains from trade exist in the first period, and may or may not exist in the second period. A long-term contract that mandates trade in both periods is disadvantageous since renegotiation is required if there are no gains from trade in the second period. A short-term contract is disadvantageous since a new contract must be negotiated if gains from trade exist in the second period. A continuing contract can be better. In a continuing contract there is no obligation to trade in the second period but if there are gains from trade the parties will bargain ‘fairly’ using the first period contract as a reference point. This can reduce the cost of negotiating the next contract. Continuing contracts are not a panacea, however, since fair bargaining may limit the use of outside options in the bargaining process and as a result parties will sometimes fail to trade when this is efficient.
    Keywords: Short-term, Long-term, Continuing Contracts, Fairness, Good Faith Bargaining.
    JEL: D23 D86 K12
    Date: 2015–08–26

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