nep-law New Economics Papers
on Law and Economics
Issue of 2015‒10‒17
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Bargaining in the Shadow of Arbitration By Ricardo Marselli; Bryan C. McCannon; Marco Vannini
  2. Leniency, Asymmetric Punishment and Corruption. Evidence from China By Perrotta Berlin, Maria; Spagnolo, Giancarlo
  3. Actual Problems of Determination Of The Objective Limits of the Prejudgment By Sergey P. Postylyakov
  4. Litigation and the Product Rule: A Rent Seeking Approach By Jef De Mot; Thomas J. Miceli
  5. Social Closure, Surnames and Crime By P. Buonanno; P. Vanin
  6. Gender Gaps in Performance: Evidence from Young Lawyers By Azmat, Ghazala; Ferrer, Rosa
  7. The effect of cross-border group taxation on ownership chains By Rünger, Silke
  8. Under the Radar: The Effects of Monitoring Firms on Tax Compliance By Almunia, Miguel; Lopez-Rodriguez, David
  9. The ordoliberal concept of "abuse" of a dominant position and its impact on Article 102 TFEU By Behrens, Peter

  1. By: Ricardo Marselli (Parthenope University, Department of Economics); Bryan C. McCannon (West Virginia University, Department of Economics); Marco Vannini (University of Sassari)
    Abstract: Arbitration, as an alternative to litigation for contract disputes, reduces costs and time. While it has frequently been thought of as a substitute to pretrial bargaining and litigation, in fact, parties may be able to reach a settlement privately while engaged in the arbitration process. Consequently, the institutional design may influence the bargaining. We develop a theoretical model of pre-arbitration bargaining that is able to identify the impact of the institutional features on its success. A detailed data set from arbitration proceedings in Italy is analyzed. The exogenous heterogeneity in the composition of the panel of arbitrators allows us to illustrate its effect on bargaining. We show that the number of arbitrators used interacts with their experience and independence to reduce uncertainty and facilitate settlement.
    Keywords: arbitration, bargaining, contract dispute, conventional arbitration, Italy, settlement
    JEL: K41 C78
    Date: 2015–04
  2. By: Perrotta Berlin, Maria (Stockholm Institute of Transition Economics); Spagnolo, Giancarlo (Stockholm Institute of Transition Economics)
    Abstract: One-sided leniency policies and asymmetric punishment are regarded as potentially powerful anti-corruption tools, also in the light of their success in busting price-fixing cartels. It has been argued, however, that the introduction of these policies in China in 1997 has not helped fighting corruption. Following up on this view, the Central Committee of the Chinese Communist Party passed on 23 October 2014 a Decision concerning Several Major Issues in Comprehensively Advancing Governance According to Law which stressed the current government’s strong commitment to fight corruption introducing heavier penalties but also severe restrictions of leniency offered to bribe-givers. Claims on the effects of the 1997 reform are not backed by data, to our knowledge, while evaluating the effects of a policy on crimes like corruption is difficult. These crimes are typically only observed if detected and convicted by the police, and an increase in observed convictions may as well be due to an increase in the total number of crimes rather than to a positive effect of the policy. We collect data on the investigations of bribery and public official corruption, available for most Chinese provinces for the period 1986-2010, and extend to corruption a method to identify deterrence effects from changes in detected cases, originally developed for cartels. The available evidence so far points to a substantial and stable reduction in the number of major corruption cases around the 1997 reform, a result per se ambiguous but clearly consistent with a positive deterrence effect of the 1997 reform. A case study analysis is under way to corroborate and help the interpretation of these preliminary findings.
    Keywords: Corruption; Leniency; China
    JEL: K14 N45 P37
    Date: 2015–10–01
  3. By: Sergey P. Postylyakov (National Research University Higher School of Economics)
    Abstract: The article deals with relevant problems of determination of the objective limits of the prejudgment using the prejudgment of the particular types of court rulings as an example. The author concludes that the concept of «circumstances» should be defined as facts and established on their basis legal relations. The author considers that the court orders, the judgments in absentia, the judgments of dismissal due to the approval of the settlement as well as the higher court rulings that verify legality of previous judgments not verifying validity should be excluded from the objective limits of the prejudgment. The author analyzes rules of the draft of the Civil Procedure Code of the Russian Federation of 2000 and comes to the conclusion that Article 61 of the current Civil Procedure Code of the Russian Federation requires to be amended.
    Keywords: prejudgment, civil procedure, objective limits, particular types of court rulings, Russian Federation
    JEL: K41
    Date: 2015
  4. By: Jef De Mot (University of Ghent); Thomas J. Miceli (University of Connecticut)
    Abstract: This paper examines the suppression of the product rule in litigation from a rent seeking perspective. We show that there are some important arguments in favor of not applying the product rule. First, only when the product rule is suppressed is the plaintiff's equilibrium probability of winning equal to the product of the inherent quality of the several issues at stake. The probability of winning is always lower when the product rule is used, and this is especially so for relatively strong cases. Second, for many of the weakest cases, the expected value of the plaintiff is larger when the product rule is used. Third, for relatively strong cases, the litigation expenditures are typically larger when the product rule is used. This further decreases the plaintiff's expected value for strong cases.
    Keywords: product rule, litigation costs, rent seeking
    JEL: K13 K41
    Date: 2015–10
  5. By: P. Buonanno; P. Vanin
    Abstract: This paper studies the effect of social closure on crime and tax evasion rates using disaggregated data for Italian municipalities. It measures the degree of social openness of a community by the diversity of its surname distribution, which reflects the history of migration and inbreeding. It shows that, all else equal, communities with a history of social closure have lower crime rates and higher tax evasion rates than more open communities. The effect of social closure is likely to be causal, it is relevant in magnitude, statistically significant, and robust to changes in the set of included controls, in the specific measures of dependent and independent variables, in the specification of the regression equation, and in the possible sample splits. Our findings are consistent with the idea that social closure strengthens social sancions and social control, thus leading to more cooperative outcomes in local interactions, but it reduces cooperation on a larger scale.
    JEL: A14 K42 Z13
    Date: 2015–10
  6. By: Azmat, Ghazala; Ferrer, Rosa
    Abstract: This paper documents and studies the gender gap in performance among associate lawyers in the United States. Unlike other high-skilled professions, the legal profession assesses performance using transparent measures that are widely used and comparable across firms: the number of hours billed to clients and the amount of new client revenue generated. We find clear evidence of a gender gap in annual performance with respect to both measures. Male lawyers bill ten percent more hours and bring in more than twice the new client revenue than do female lawyers. We demonstrate that the differential impact across genders in the presence of young children and differences in aspirations to become a law firm partner account for a large share of the difference in performance. We also show that accounting for performance has important consequences for gender gaps in lawyers’ earnings and subsequent promotion. Whereas individual and firm characteristics explain up to 50 percent of the earnings gap, the inclusion of performance measures explains a substantial share of the remainder. Performance measures also explain a sizeable share of the gender gap in promotion.
    Keywords: gender gaps; high-skilled professionals; performance measures
    JEL: J16 J44 K40 M52
    Date: 2015–10
  7. By: Rünger, Silke
    Abstract: I examine the influence of cross-border group taxation on ownership chains for European multinational firms. I show that the tax advantages of cross-border group taxation regimes can only be exploited if a multinational firm has at least one intermediate subsidiary in the country allowing for cross-border group taxation. I use the introduction of the Austrian cross-border group taxation regime as a natural experiment to test my hypothesis. I find that the probability that a foreign parent company holds an Austrian intermediate subsidiary is significantly higher after the introduction of the group taxation regime. However, I am only able to observe this effect for parent companies already invested in Austria prior to the introduction of the cross-border group taxation regime. I am unable to provide evidence that this also holds for parent companies who are not invested in Austria prior to the introduction of the cross-border group taxation regime. My results contribute to a nascent literature that examines the influence of taxes on ownership chains, and a larger literature on (intermediate) subsidiary location decisions for multinationals. My findings provide empirical evidence that could be useful to governments in those countries attempting to reform their group taxation regimes, or who are implementing cross-border group taxation regimes for the first time.
    Keywords: group taxation,ownership chains,intermediate subsidiaries,Austria
    JEL: F23 H25 K34
    Date: 2015
  8. By: Almunia, Miguel (Department of Economics and CAGE University of Warwick); Lopez-Rodriguez, David (Banco de España)
    Abstract: This paper analyzes the effects on tax compliance of monitoring the information trails generated by firms’ activities. We exploit quasi-experimental variation generated by a Large Taxpayers Unit (LTU) in Spain, which monitors firms with more than 6 million euros in reported revenue. Firms strategically bunch below this threshold in order to avoid stricter tax enforcement. This response is stronger in sectors where transactions leave more paper trail, implying that monitoring effort and the traceability of information reported by firms are complements. We calculate that there would be substantial welfare gains from extending stricter tax monitoring to smaller businesses.
    Keywords: tax enforcement ; firms ; bunching ; Spain ; Large Taxpayers Unit (LTU)
    JEL: H26 H32
    Date: 2015
  9. By: Behrens, Peter
    Abstract: This paper explores the impact of ordoliberal thinking on the drafting of the prohibition of "abuse" of a dominant position in the market that was included in the competition rules of the Rome Treaty establishing the European Economic Community as well as on its interpretation by the Commission and the Court of Justice of the European Union (CJEU). Firstly, it is shown that the ordoliberal school must not be regarded as a set of ideas frozen in its formative period of 1933 to 1950 or 1957 when the "Freiburg School" was established but rather as an approach that has been dynamically developed and refined over the last 75 years (i.e. over four generations of ordoliberals) up to the present day by integrating important new insights without, however, giving up its core tenets and convictions. Secondly, it is shown on the basis of the preparatory work which lead in the 1950ies to the Rome Treaty that the adoption of the concept of "abuse" for the control of dominant undertakings was due to the strong influence of the German negotiating team that consisted of (in the meantime second generation) ordoliberals. Thirdly, it is explained how ordoliberal thinking about the "system of undistorted competition" and the protection of "residual competition against exclusionary practices" has influenced the application of the "abuse" concept in the jurisprudence of the Commission and the CJEU from the Continental Can case to the recent Intel case. This approach has come under attack from welfare-economic approaches which emphasize efficiency instead of competition and which have accused the ordoliberal approach of formalism, lack of sufficient economic analysis, preoccupation with fairness, protection of competitors instead of competition, obsession with interventionist regulation etc. This paper demonstrates that all of these characterizations are based on fundamental misunderstandings of what ordoliberal thinking originally meant and what it stands for today.
    Keywords: EU competition law,Rome Treaty,preparatory work,travaux préparatoires,monopoly problem,competition rules,abuse of a dominant position,ordoliberalism,Freiburg School,system of undistorted competition,protection of residual competition,exclusionary practices,predatory pricing,refusal to deal,essential facility,exploitation,efficiency,fairness,effects on competition
    Date: 2015

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