nep-law New Economics Papers
on Law and Economics
Issue of 2015‒11‒15
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Corruption in PPPs, Incentives and Contract Incompleteness By Iossa, Elisabetta; Martimort, David
  2. Patents and the market for technology in the early 19th century France By Gabriel Galvez-Behar
  3. Advocatus, et non latro?: testing the excess of litigation in the Italian courts of justice By Paolo Buonanno; Matteo M. Galizzi
  4. Russian Constitutional Development: Formal and Informal Practices By Andrei N. Medushevskiy
  5. The Tradeoff Between Ex Ante and Ex Post Transaction Costs: Evidence From Legal Opinions By Benito Arruñada; Carlos A. Manzanares
  6. Enforcement of Merger Control : Theoretical insights for its Procedural Design By Andreea Cosnita-Langlais
  7. A Common-Space Scaling of the American Judiciary and Legal Profession By Adam Bonica; Maya Sen
  8. The Impact of Contract Enforcement Costs on Outsourcing and Aggregate Productivity By Johannes Boehm
  9. Jobs, News and Re-offending after Incarceration By Roberto Galbiati; Aurélie Ouss; Arnaud Philippe
  10. Distributional Effects of Social Security Reforms: the Case of France By Raquel Fonseca Benito; Thepthida Sopraseuth

  1. By: Iossa, Elisabetta; Martimort, David
    Abstract: We analyze risk allocation and contractual choices when public procurement is plagued with moral hazard, private information on exogenous shocks, and threat of corruption. Complete contracts entail state-contingent clauses that compensate the contractor for shocks unrelated to his own effort. By improving insurance, those contracts reduce the agency cost of moral hazard. When the contractor has private information on revenues shocks, verifying messages on shocks realizations is costly. Incomplete contracts do not specify state-contingent clauses, thereby saving on verifiability costs. This makes incomplete contracts attractive even though they entail greater agency costs. Because of private information on contracting costs, a public official may have discretion to choose whether to procure under a complete or an incomplete contract. When the public official is corrupt, such delegation results in incomplete contracts being chosen too often. Empirical predictions on the use of incomplete contracts and policy implications on the benefits of standardized contracts are discussed.
    Keywords: corruption; incomplete contracts; moral hazard; principal-agent-supervisor model; public-private partnerships; risk allocation
    JEL: D23 D82 K42 L33
    Date: 2015–11
  2. By: Gabriel Galvez-Behar (IRHiS - Institut de Recherches Historiques du Septentrion - Université Charles-de-Gaulle Lille 3 - Sciences humaines et sociales - CNRS)
    Abstract: Since the Ancien Régime, the privileges for inventions could be sold in order to improve the connection between inventors and capitalists. The 1791 French patent laws recognized the inventor's rights as a property and allowed the patent holders to assign their rights. However, to be valid, such an assignment had to be made before a notary and be registred in the prefecture. From 1824 these records were published in the Bulletin des lois. This provision was extended by the 1844 patent law and was always implemented. Thanks to this legal requirement, we have the opportunity to analyze an uninterrupted source about all these transactions during the whole 19th century. Our paper focuses on the period 1824-1844. First, we review the legal framework of French patent system, particularly regarding assignments of patents. We. Secondly, we analyze the sales, which occurred during this period and we compare them with the data available about all patents issued during the early 19th century. Finally, we consider the notion of market for technology by considering complementary sources.
    Keywords: economic history,history of technology,patents,market for technology,histoire économique,histoire des techniques,brevets d'invention,marché des techniques,France
    Date: 2015–08–03
  3. By: Paolo Buonanno; Matteo M. Galizzi
    Abstract: We explore the causality relationship between litigation rates and the number of lawyers, drawing on an original panel dataset for the 169 Italian first-instance courts of justice between 2000 and 2007. In this time period, both the number of lawyers and the civil litigation rate sharply increased, and a mandatory minimum fee was in place for lawyers’ services. We first document that the number of lawyers is positively correlated with different measures of the litigation rate. Then, using an instrumental variables strategy, we find that a 10% increase in lawyers over population is associated with an increase between 1.6 and 6% in civil litigation rates. Our empirical analysis supports the supplier-induced demand (SID) hypothesis for Italian lawyers: following a sharp increase in the number of lawyers, and in the impossibility of competing on price because of the minimum fee regulation, some lawyers may have opportunistically used their informational advantage to induce their clients to bring lawsuits into court more often than would have been optimal if they were acting in the exclusive interest of their clients.
    Keywords: lawyers; litigation rates; credence goods
    JEL: H41 J44 K41
    Date: 2014–11–06
  4. By: Andrei N. Medushevskiy (National Research University Higher School of Economics)
    Abstract: Transitional constitutionalism remains the subject of intensive political controversies. On the ground of the Project realized by the Institute of Law and Public Policy (Moscow) this article presents the analysis of the basic constitutional principles (pluralism, separation of powers, federalism, independence of justice, the guarantees of political rights and freedoms) describing the changing character of their implementation in different areas of constitutional practices – legislation, constitutional justice, administrative activity and informal practices and the comparative level of constitutional deviations in each of them. The important new acquirement of this research is the concept and methodology of the constitutional monitoring and recommendations for the full-scale reforms in key areas of Russian constitutional and political settlement. The author shows that the true choice of modern society is not the dilemma - constitutionalism versus its negation but the choice between real and sham constitutionalism with a big variety of intermediate options between them. It is precisely the area, which the author defines as a transitional type of constitutionalism, the field of collision of different political stakeholders. This is an area of unstable equilibrium where the implementation of different legal strategies and technologies may produce a definitive effect.
    Keywords: The Russian Constitution, constitutional principles, legislation, justice, administration, formal and informal practices, constitutional reforms.
    JEL: Z
    Date: 2015
  5. By: Benito Arruñada; Carlos A. Manzanares
    Abstract: Business firms’ formalization has been seen primarily as an entry barrier, which has often led to policies focused on simplifying formalities and creating minimalist company registries. This approach has been criticized on theoretical grounds for ignoring the tradeoff between ex ante registration and ex post transaction costs. This paper tests for the presence of this tradeoff in the context of company registries. In particular, using purpose-built indexes, we test for whether stronger registration requirements decrease the length of lawyer comments on model transactional legal opinions included in an authoritative report on legal opinions created by the International Bar Association. These lawyer comments proxy for due-diligence costs associated with executing large, cross-country company transactions. We confirm the presence of the tradeoff by finding that in countries with less stringent registration requirements, legal opinion comments are longer, even after controlling for the legal origin, European Union affiliation, and the log of per capita GDP.
    Keywords: business registries, company law, business formalization, impersonal transactions, information asymmetry, transaction costs, doing business
    JEL: O17 K22 K23 L59
    Date: 2015–11
  6. By: Andreea Cosnita-Langlais
    Abstract: This paper reviews the theoretical underpinnings of the main procedural choices for merger control enforcement. At each relevant stage we highlight the economic trade-offs behind the corresponding procedural choices: mandatory vs voluntary pre-merger notification, ex ante vs ex post merger review, and the type of decision eventually made, binary or not. The paper also identifies the missing debates that still need formal treatment. Our study provides insight for the optimal procedural design of merger control, and as such may be useful to understand the different choices made by the various jurisdictions for merger policy enforcement.
    Keywords: merger control, enforcement, procedural design.
    JEL: K21 L41 D82
    Date: 2015
  7. By: Adam Bonica; Maya Sen
    Abstract: We extend the scaling methodology previously used in Bonica (2014) to jointly scale the American judiciary and legal profession in a common-space with other political actors. The end result is the first consistently measured ideological scores across state and federal judiciaries and the legal profession, including 11,115 state and federal judges, 377,427 attorneys in private practice, 3,966 law professors, and 2,726 government attorneys. After discussing the technical details behind these data, we present three examples of their potential use.
    Date: 2015–10
  8. By: Johannes Boehm (Département d'économie)
    Abstract: Legal institutions affect economic outcomes, but how much? This paper documents how costly supplier contract enforcement shapes form boundaries, and quantifies the impact of this transaction cost on aggregate productivity and welfare. I embed a contracting game between a buyer and a supplier in a general-equilibrium closed-economy Eaton-Kortum-type model. Contract enforcement costs lead suppliers to underproduce. Thus, firms will perform more of the production process in-house instead of outsourcing it. On a macroeconomic scale, in countries with slow and costly courts, firms should buy relatively less inputs from sectors whose products are more specific to the buyer-seller relationship. I first present reduced-form evidence for this hypothesis using cross-country regressions. I use microdata on case law from the United States to construct a new measure of relationship-specificity by sector-pairs. This allows me to control for productivity differences across countries and sectors and to identify the effect of contracting frictions on industry structure. I then proceed to structurally estimate the key parameters of my macro-model. Using a set of counterfactual experiments, I investigate the role of contracting frictions in shaping productivity and income per capita across countries. Setting enforcement costs to US levels would increase real income by an average of 7.5 percent across all countries, and by an average of 15.3 percent across low-income countries. Hence, transaction costs and the determinants of firm boundaries are important for countries' aggregate level of development.
    Keywords: Contract enforcement costs; Contracting frictions; Transaction costs; Outsourcing; Aggregate productivity
    JEL: D23 F11 O43 L22
    Date: 2015–10
  9. By: Roberto Galbiati (Département d'économie); Aurélie Ouss; Arnaud Philippe
    Abstract: While theoretically important, the relationship between crime and employment is difficult to measure empirically. This paper addresses major identification challenges by exploiting high frequency data of daily online postings on job openings and closings at the county level, merged with individual-level administrative data about all inmates released from French prisons. We find that people who are released when jobs are being created are less likely to recidivate; conversely, people who are released when jobs are being cut are more likely to recidivate. We further show that news on job creation matters, over and beyond actual employment opportunities, suggesting implications for crime-control policies. From a methodological standpoint, this paper demonstrates how using media and online information on jobs can generate higher-frequency variation than administrative employment data, and help to overcome identification challenges to capture effects of variations in job market opportunities, especially when combined with other administrative sources.
    Keywords: Labor market conditions; Opportunity; Crime; Recidivism
    Date: 2015–11
  10. By: Raquel Fonseca Benito; Thepthida Sopraseuth
    Abstract: This paper uses a calibrated dynamic life-cycle model to quantify the long-run distributional impact of two opposite Social Security reforms: modifying the parameters of a defined benefit (DB) plan (such as in France with Ayrault’s reform) or switching to a notional defined contribution (NDC) plan (such as in Italy). Both reforms yield an inequal distribution of welfare losses. Low-skilled workers are the main losers of the reforms. This is so for different reasons in each reform. In the case of Ayrault’s reform, low-skilled individuals delay retirement by 2 years, up to age 62. In switching to a NDC scheme, low-skilled workers’ pensions fall substantially. In NDC schemes, inequalities along the working-life are directly translated into inequalities in pension levels. The switch from a DB plan to the Italian reform yields substantial welfare losses, pensions drastically fall, and individuals save more. Since low-skilled workers do not save as much as middle or high-skilled workers, the switch to NDC schemes leads to a more unequal society in terms of asset distribution. Cet article utilise un modèle de cycle de vie dynamique calibré pour quantifier l’impact distributif à long terme de deux réformes du système de retraite : la première modifie les paramètres d’un système à prestations déterminées (PD) (comme la réforme Ayrault en France). La seconde est fondée que le passage à un système de comptes notionnels à contribution définie (NDC) (comme en Italie). Les deux réformes donnent lieu à une répartition inégale des pertes en bien-être. Les travailleurs peu qualifiés sont les principaux perdants des réforme. Il en est ainsi pour des raisons différentes. Dans le cas de la réforme Ayrault, les individus peu qualifiés retardent la retraite de 2 ans, jusqu’à 62 ans. Dans un système de retraite NDC, les pensions des travailleurs peu qualifiés sont sensiblement réduites. Les inégalités au long de la vie active sont directement traduites en inégalités dans le niveau des pensions. Le passage au régime NDC génère d’importantes pertes de bien-être. Les pensions sont réduites, les individus épargnent davantage. Puisque les travailleurs peu qualifiés n’épargent pas autant que les autres travailleurs, le passage au régime NDC conduit à une société plus inégalitaire en termes de répartition du patrimoine financier.
    Keywords: Pension reforms, life-cycle heterogeneous-agent model, distributional effects,
    JEL: D8 K4 Z13
    Date: 2015–11–04

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.