nep-law New Economics Papers
on Law and Economics
Issue of 2015‒09‒18
fourteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Law and Economics and Tort Litigation Institutions: Theory and Experiments By Landeo, Claudia
  2. Temporal displacement of environmental crime. Evidence from marine oil pollution By Vollaard, Ben
  3. The Economic Costs of Court Decisions Concerning Dismissals in Japan: Identification by Judge Transfers By Hiroko Okudaira
  4. Creditor protection, judicial enforcement and credit access By Ferrando, Annalisa; Maresch, Daniela; Moro, Andrea
  5. Learning-by-doing in torts: Liability and information about accident technology By Baumann, Florian; Friehe, Tim
  6. Crime and the transition to teenage parenthood By Carine Øien-Ødegaard; Torbjørn Skardhamar
  7. Effective Labor Relations Laws and Social Welfare By Landeo, Claudia; Nikitin, Maxim
  8. Financially-Constrained Lawyers By Landeo, Claudia; Nikitin, Maxim
  9. Competition, product safety, and product liability By Chen, Yongmin; Hua, Xinyu
  10. On the Effect of State fragility on Corruption By Asongu, Simplice
  11. Investor Protection, Corporate Governance and Firm Performance: Evidence from Asian Real Estate Investment Trusts By A.Dian Prima; S. Stevenson
  12. Balancing competition and cooperation: Evidence from transatlantic airline markets By Bilotkach, Volodymyr; Hüschelrath, Kai
  13. Procedural Environmental Rights and Environmental Justice: Assessing the Impact of Environmental Constitutionalism By Joshua C. Gellers; Christopher Jeffords
  14. Can Land Use Regulations and Taxes Help Mitigate Vehicular CO2 emissions?: An Empirical Study of Japanese Cities By Iwata, Kazuyuki; Managi, Shunsuke

  1. By: Landeo, Claudia (University of Alberta, Department of Economics)
    Abstract: In tort litigation, delayed settlement or impasse imposes high costs on the parties and society. Litigation institutions might influence social welfare by affecting the likelihood of out-of-court settlement and the potential injurers’ investment in product safety. An appropriate design of litigation institutions and tort reform requires good knowledge of the factors that affect litigants’ behavior. The combination of theoretical and experimental law and economics, which represents the cornerstone of the application of the scientific method, might enhance our understanding of the effects of litigation institutions and tort reform on settlement and deterrence. We evaluate the interaction between theoretical and experimental law and economics in the study of tort litigation institutions. Special attention is devoted to liability, litigation and tort reform institutions, and behavioral factors that might affect impasse. Our analysis suggests a productive interaction between theoretical and experimental law and economics. In particular, findings from experimental economics work on litigation institutions indicate the presence and robustness of cognitive biases, and provide evidence of the effects of litigants’ biased beliefs on the likelihood of impasse. These findings have motivated the construction of new economic models of litigation involving more empirically-relevant assumptions about litigants’ beliefs. As a result of the application of the scientific method, the contributions of law and economics to the design of legal institutions might be strengthened.
    Keywords: Law and Economics; Experimental Law and Economics; Scientific Method; Civil Litigation; Institutional Design; Settlement; Litigation; Asymmetric Information; Self-Serving Bias; Pretrial Bargaining; Incentives for Care; Experiments; Caps on Non-Economic Damages; Motivated Reasoning; Divergent Beliefs; Motivated Anchoring; Non-Cooperative Games; Disputes
    JEL: C72 C90 C91 D62 D82 D86 J52 J58 K12 K21 K41 L12 L40 L42
    Date: 2015–01–01
  2. By: Vollaard, Ben (Tilburg University, TILEC)
    Abstract: The probability of conviction commonly varies across different circumstances due to imperfect monitoring. Evidence of whether and how offenders exploit gaps in monitoring provides insight into the process by which deterrence is produced. We present an empirical test of temporal displacement of illegal discharges of oil from shipping, a major source of ocean pollution, in response to a monitoring technology that features variation in the probability of conviction by time of day. After sunset and before sunrise, evidence collected using airborne radar day-round becomes contestable in court because the nature of an identified spot cannot be verified visually. Using data from surveillance flights<br/>above the Dutch part of the North Sea during 1992-2011, we only find evidence for temporal displacement after 1999, with further tightening of the regulations. By that time, the overall level of discharges had been reduced considerably, making the observed temporal displacement relatively small in absolute levels.
    Keywords: deterrence; pollution; environmentel crime
    JEL: K32 K42
    Date: 2015
  3. By: Hiroko Okudaira
    Abstract: Despite its significant influence on the actual enforcement of the law, the economic cost of court discretion has been ignored in the literature on employment protection. This paper exploits a distinctive feature of the Japanese judicial system, periodic judge transfers, to identify court discretion. Because judges move across local labor markets while a single national court system ensures that there are no legal boundaries between regions, it is possible to shut down any confounding relationships between current litigation outcomes and local labor market. A key finding is that an increase in the worker victory ratio in adjustment dismissal litigations in the last 10 years reduces rates of both job creation and destruction. Ignoring the uncertainty inherent in court decisions would lead to misspecification of the actual cost of employment protection, especially in countries with high judicial activism.
    Date: 2009–03
  4. By: Ferrando, Annalisa; Maresch, Daniela; Moro, Andrea
    Abstract: We investigate the role of the judicial system on whether or not the firms obtain the credit they applied for, by looking at the strength of the creditor protection, the strength of property rights, the time for resolving a dispute, its costs and the number of procedures the plaintiff faces. We use data about 48,590 firms from eleven countries collected via the Survey on the Access to Finance of Enterprises (European Central Bank) and data from the World Bank, the Heritage Foundation and Eurostat. The results suggest that the better the judicial enforcement system is (reduced costs, reduced time, and limited number of procedures) and the higher the creditor protection is (high overall strength of the legal system, high property rights protection), the lower the probability that the firms are credit constrained. Our results are robust to selection bias (Heckman selection) as well as different controls and different estimation techniques. More importantly, we find that these variables have considerable economic impact: the probability to obtain credit is up to 40% higher in countries with a better legal system. JEL Classification: G21, G28, K41
    Keywords: Credit Access, Creditor Protection, Judicial System, Property Rights
    Date: 2015–07
  5. By: Baumann, Florian; Friehe, Tim
    Abstract: In the economic analysis of liability law, information about accident risk and how it can be influenced by precautions is commonly taken for granted. However, a profound understanding of the relationship between care and accident risk often requires learning-by-doing. In a two-period model, we examine the implications for the optimal level of care and behavior under strict liability and negligence, showing that liability law may not induce efficient incentives.
    Keywords: liability rules,care incentives,accident technology
    JEL: K13 D62 D83
    Date: 2015
  6. By: Carine Øien-Ødegaard; Torbjørn Skardhamar (Statistics Norway)
    Abstract: Age-graded social control theory suggests that parenthood can have a preventive effect on crime among adults, but it is unclear whether and how this applies to teenagers, as teenage parenthood and affiliation with crime can have mutual confounding causes. Using individual-level Norwegian administrative register data on the total population of fifteen to nineteen year olds, we assess the relationship between teenage parenthood and criminal activity. We find that teenage parents have an elevated risk of offending compared to non-parents, but that the transition to parenthood is nevertheless related to a within-individual decline in offending. This decline does not seem to be of permanent nature for girls, but for the boys it appears to stabilize on a lower level than before the transition to teenage fatherhood.
    Keywords: teenage parenthood; crime; life course; desistance
    JEL: D19 K49
    Date: 2015–06
  7. By: Landeo, Claudia (University of Alberta, Department of Economics); Nikitin, Maxim (National Research University Higher School of Economics)
    Abstract: Effective labor relations laws determine the allocation of bargaining power between the parties involved in labor disputes, and hence, influence social welfare. The right to strike, the types of legal strikes, and the right to hire replacement workers are fundamental components of labor relations laws in the public sector. Strikes by public school teachers, which are common in real-world settings, involve particularly high social costs. We theoretically study the social welfare effects of labor relations laws that permit the effective use of replacement teachers in case of strikes. These laws refer to the explicit right to hire replacement teachers and to the prohibition of intermittent strikes. We present a sequential bargaining game of incomplete information. Our model explicitly includes a law component, which captures the impact of effective labor relations laws. We conduct social welfare analysis and demonstrate that these laws reduce bargaining impasse and increase social welfare.
    Keywords: Labor Relations Laws; Social Welfare; Bargaining Impasse; Replacement Teachers Laws; Intermittent Strikes Laws; Non-Cooperative Games; Asymmetric Information; Perfect Bayesian Equilibrium
    JEL: C72 D82 J52 J58
    Date: 2015–09–01
  8. By: Landeo, Claudia (University of Alberta, Department of Economics); Nikitin, Maxim (National Research University Higher School of Economics)
    Abstract: Financial constraints reduce the lawyers’ ability to file lawsuits and bring cases to trial. As a result, access to justice for true victims, bargaining impasse, and care taking incentives for potential injurers might be affected. We present the first cradle-to-grave model of legal disputes involving financially-constrained lawyers, third-party lawyer lending, and asymmetric information. In equilibrium, access to justice is denied to some true victims and bargaining impasse occurs. We demonstrate that policies that relax lawyers’ financial constraints might be welfare reducing if the positive impact on access to justice is weak and the potential injurers are overdeterred.
    Keywords: Access to Justice; Social Welfare; Lawsuits; Litigation; Deterrence; Third-Party Litigation Funding; Third-Party Lawyer Lending Industry; Bargaining; Asymmetric Information
    JEL: C70 D82 K41
    Date: 2015–08–03
  9. By: Chen, Yongmin; Hua, Xinyu
    Abstract: A firm's incentive to invest in product safety is affected by both the market environment and the liability when its product causes consumer harm. A long-standing question in law and economics is whether competition can (partially) substitute for product liability in motivating firms to improve product safety. We investigate this issue in a spatial model of oligopoly with product differentiation, where reputation provides a market incentive for product safety and higher product liability may distort consumers' incentive for proper product care. We find that partial liability, together with reputation concerns, can motivate firms to make socially desirable safety investment. Increased competition due to less product differentiation lowers equilibrium market price, which diminishes a firm's gain from maintaining reputation and raises the socially desirable product liability. On the other hand, an increase in the number of competitors reduces both the benefit from maintaining reputation and the potential cost savings from cutting back safety investment; consequently, the optimal liability may vary non-monotonically with the number of competitors in the market. In general, therefore, the relationship between competition and product liability is subtle, depending on how competition is measured.
    Keywords: product safety, product liabilty, competition
    JEL: K13 L13 L15
    Date: 2015–09–04
  10. By: Asongu, Simplice
    Abstract: The Kodila-Tedika & Bolito-Losembe (2014, ADR) finding on no evidence of causality flowing from State fragility to classical corruption or extreme corruption could have an important influence on academic and policy debates. Using updated data (1996-2010) from 53 African countries, we provide evidence of a positive (negative) nexus between political stability/no violence and corruption-control (corruption). As a policy implication, the finding of the underlying paper maybe more expositional than factual and should be treated with caution.
    Keywords: Fragility; Corruption; Conflicts; Africa
    JEL: F52 K42 O17 O55 P16
    Date: 2014–05
  11. By: A.Dian Prima; S. Stevenson
    Abstract: This study aims to investigate the impact of investor protection on Asian REITs valuation and performance. The relationship between investor protection and corporate governance mechanisms, namely board independence, concentrated ownership by outside blockholders and sponsors are also examined in this study. The sample consists of 317 firm year observations from 57 REITs across Japan, Singapore, Hong Kong and Malaysia with 10 years period between 2002 and 2012. The findings show that REIT with stronger investor protection is associated with higher firm valuation. Investor protection, however, is found to have only a weak positive effect on REIT performance. The results further reveal that investor protection can be a substitute to a weak level of board independence, but not vice versa. The results also suggest that investor protection serves as a complement to the monitoring of outside blockholder. More importantly, there is no evidence that REIT sponsors expropriate unitholders' wealth when there is a weak investor protection in place. Overall, the findings show that Asian REIT unitholders are generally protected, with an average score of 14 out of 18. However, there is still room for improvement to foster an investor confidence to facilitate the development of the Asian REIT market in the future.
    Keywords: Asian Markets; Corporate Governance; REITs
    JEL: R3
    Date: 2015–07–01
  12. By: Bilotkach, Volodymyr; Hüschelrath, Kai
    Abstract: In the last two decades, airline alliances were not only successful in extending the size of their networks, but also received approvals by public authorities to intensify their cooperation through to merger-like revenue-sharing joint ventures (JVs). We empirically investigate the impact of the implementation of such joint ventures on both the respective airlines' competitive strategies as well as productive efficiency. Using U.S. DOT T100 International Segment data and applying airline-market fixed effects models, we find that joint ventures - compared to services with a lower degree of cooperation - lead to a 3-5 percent increase in capacity between the respective partner airlines' hub airports; however, this is done at the expense of services elsewhere in the network. Productive efficiency, as measured by load factors, is found to be 0.5-5 percent lower for joint venture routes compared to routes operated under antitrust immunity only. We use our empirical results to discuss implications for the balancing of competition and cooperation in transatlantic airline markets.
    Keywords: air transportation,alliances,antitrust immunity,efficiencies,GMM estimator
    JEL: L41 L93 K21
    Date: 2015
  13. By: Joshua C. Gellers (University of North Florida); Christopher Jeffords (Indiana University of Pennsylvania)
    Abstract: The global trend toward the adoption of environmental rights within national constitutions has been largely regarded as a positive development for both human rights and the natural environment. The impact of constitutional environmental rights, however, has yet to be systematically assessed using empirical data. In particular, the expansion of procedural environmental rights—legal provisions relating to access to information, participation, and justice in environmental matters—provides fertile ground for analyzing how environmental rights directly interface with conditions necessary for a functioning democracy. In order to understand the extent to which these provisions deliver on their lofty aspirations, the authors conduct a quantitative analysis designed to evaluate the relationship between procedural environmental rights and environmental justice. The results demonstrate that states with procedural environmental rights are more likely than non-adopting states to facilitate the attainment of environmental justice, especially as it relates to access to information.
    Keywords: environmental rights, constitutionalism, environmental justice, human rights, democracy, sustainable development
    Date: 2015–08
  14. By: Iwata, Kazuyuki; Managi, Shunsuke
    Abstract: This study advocates a multi-dimensional urban planning strategy to help combat climate change under local—and not national—policies. However, the literature does not provide adequate guidance to local governments seeking to enhance urbanization and in turn reduce vehicular carbon dioxide (CO2) emissions. Therefore, this study sheds light on the effects of the following four urban planning instruments on vehicular CO2 emissions: urbanization promoting areas, urbanization control areas, urban planning taxes and property taxes. Using Japanese city-level data from 1990 to 2010, we find that the two urbanization area planning instruments and the urban planning taxes help lower emissions by increasing population density in low-density cities and that property taxes help reduce emissions in high-density cities. However, the increased population density associated with these instruments can lead to other negative outcomes, including increased traffic accidents, increased crime and a decrease in the facility condition index. City governments should consider complementary policies to mitigate such negative outcomes when employing planning instruments aiming to increase population density.
    Keywords: urbanization, population density, land use taxes, land use regulations, carbon dioxide emissions, multiple outcome
    JEL: Q58 R52 R58
    Date: 2015–08

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