nep-law New Economics Papers
on Law and Economics
Issue of 2015‒12‒08
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Civil Liability, Knight’s Uncertainty and Non-Dictatorial Regulator By Gérard Mondello
  2. The Tragedy of Corruption. Corruption as a social dilemma By Ye-Feng Chen; Shu-Guang Jiang; Marie Claire Villeval
  3. Exposure to media and corruption perceptions By Lucia Rizzica; Marco Tonello
  4. The China Syndrome in US: Import Competition, Crime, and Government Transfer By Che, Yi; Xu, Xun
  5. Endogenous Enforcement Institutions By Gani Aldashev; Giorgio Zanarone
  6. Development of Competition Laws in Korea By Hwang LEE
  7. Patents Rights and Innovation by Small and Large Firms By Mark Schankerman
  8. The Indian insolvency regime in practice-An Analysis of insolvency and debt recovery proceedings By Aparna Ravi
  9. The Determinants of Effective Tax Rates: Firms’ Characteristics and Corporate Governance By Ana Isabel Martins Ribeiro; António Cerqueira; Elísio Brandão
  10. «Your Money or Your Life !» The Influence of Injury and Fine Expectations on Helmet Adoption among Motorcyclists in Delhi By Carole Treibich
  11. Who is screened out of social insurance programs by entry barriers? Evidence from consumer bankruptcies By Mikhed, Vyacheslav; Scholnick, Barry

  1. By: Gérard Mondello (Université Nice Sophia Antipolis; GREDEG-CNRS)
    Abstract: This paper reviews the foundations of the unilateral standard accident model under Knightian uncertainty. It extends the Teitelbaum (2007)’s seminal article (who introduces radical uncertainty) by expanding it from producers to victims and from the probability distribution of accidents to the scale of damage. Mainly, it also considers a regulator who aggregates the agents’ preferences (Neghisi (1960) type). Under the condition that the troublemakers’ resources are sufficient to cover the damage, the article shows that uncertainty does not preclude, first, the determination of a socially optimal level of care, and second, whatever the civil liability regime (strict liability or negligence) it shows that they determine the same level of socially first-best care. The solution is inefficient only when the polluter’s wealth is insufficient to repair the victim’s losses.
    Keywords: unilateral accident, tort law, safety, large risks, ambiguity, pessimism and optimism, strict liability, negligence, ultra-hazardous activities
    JEL: D62 K13 K23 K32 Q52 Q58
    Date: 2015–12
  2. By: Ye-Feng Chen (College of Economics, Zhejiang University, China); Shu-Guang Jiang (Centre for Economic Research, Shandong University, China); Marie Claire Villeval (Université de Lyon, F-69007, France; CNRS, GATE Lyon St Etienne, 93, Chemin des Mouilles, F-69130, Ecully, France; Université Lyon 2, Lyon, F-69007, France)
    Abstract: We investigate corruption as a social dilemma by means of a bribery game in which a risk of collective failure is introduced when the number of public officials accepting a bribe from firms reaches a certain threshold. We show that, despite the social risk, the pursuit of individual interest prevails and leads to the elimination of honest officials over time. Reducing the size of the groups while increasing the probability of collective failure diminishes the public officials’ corruptibility but is not sufficient to eliminate the tragedy of corruption altogether.
    Keywords: Corruption, bribing, social dilemma, collective failure, coordination, experiment
    JEL: C92 D73 H41
    Date: 2015
  3. By: Lucia Rizzica (Bank of Italy); Marco Tonello (Bank of Italy)
    Abstract: We analyse the impact of exposure to corruption news on individuals’ perceptions about the extent of the phenomenon. To this purpose, we take information on individuals’ perceptions of the likelihood that corruption events may occur in everyday life and combine it with a dataset containing the number of news items related to corruption that appeared on the homepages of the websites of the 30 most widely read national and local newspapers on the day on which the individual was interviewed. Results show that increasing potential exposure to corruption news by one standard deviation causes an increase in corruption perception of about 3.5 per cent and a decrease in trust in justice effectiveness of about 5.2 per cent. We suggest that these effects are mainly driven by a persuasive mechanism rather than by a learning process so that individuals’ perceptions about corruption appear to be biased by media content.
    Keywords: corruption perceptions, media, newspapers
    JEL: D84 K42 K49
    Date: 2015–11
  4. By: Che, Yi; Xu, Xun
    Abstract: In this paper, we exploit the exogenous rise of Chinese imports in US to investigate the effect of import competition on crime at county level. Our results indicate that counties with high exposure to Chinese import competition are with high crime rates while the exposure effect on property crime is much larger than that for violent crime: one standard deviation increase of exposure will increase 2.1 more violent crimes in the county while such increase of exposure will cause 26.5 more property crimes. Interestingly, we find that the crime impact of exposure to Chinese import competition disappears in counties with high government transfer.
    Keywords: Chinese Import Competition; US Crime; Government
    JEL: F14 F16 K42
    Date: 2015–11
  5. By: Gani Aldashev; Giorgio Zanarone
    Abstract: Better legal institutions favor economic development, but only in States withsufficiently constrained executive power. We document this novel pattern acrossdeveloping countries, and build a simple model that illustrates how power, and theinstitutions that constrain or complement it, may affect development. We show that thereis a tradeoff between the two facets of power—enforcement and expropriation. As aruler’s power grows, his temptation not to enforce diminishes while the temptation toexpropriate grows. As a consequence, private enforcement optimally evolves into Stateenforcement, and legal institutions, which relax the ruler’s incentive constraint onenforcement, lose economic importance vis-à-vis political institutions, which limit theexecutive’s ability to expropriate. Our results are consistent with the observed crosscountrypatterns, as well as with historical evidence on the transition from the “LawMerchant” private enforcement system to the State.
    Keywords: coercive power; expropriation; enforcement; state
    JEL: H11 K42 P48
    Date: 2015–10
  6. By: Hwang LEE (Professor of Law, Korea University School of Law/ICR Law Center, Korea)
    Abstract: Economic development policies that were export-focused and biased toward unbalanced growth were initially implemented through government-led initiatives in Korea since the 1960s. These resulted in many problems as well as a big success. Korean competition policies were born and developed to take the role of correcting and complementing economic development policies. Today competition policies have become a major force in Korea’s economic policy. Many parts of industrial policies were replaced by sectoral competition policy in substance. After the 2008 global financial crisis, Korea is faced with new challenges. Recent economic difficulties seem to ask for a bigger role to protect SMEs and fairness in society to address so-called bipolarisation. The economic policy to improve productivity in the name of so-called ‘creative economy’, designed to overcome limits of existing growth strategy, requires proper regulations against abuse of IPRs to supplement strengthened protection of intellectual property rights. All in all, Korea’s antitrust policy remains generally very active in building sound market competition
    Keywords: Competition Policy, Competition Law, Korea
    JEL: K21 L40 L43
    Date: 2015–11
  7. By: Mark Schankerman
    Abstract: This paper studies the causal impact of patents on subsequent innovation by the patent holder. The analysis is based on court invalidation of patents by the U.S. Court of Appeals for the Federal Circuit, and exploits the random allocation of judges to control for the endogeneity of the judicial decision. Patent invalidation leads to a 50 percent decrease in patenting by the patent holder, on average, but the impact depends critically on characteristics of the patentee and the competitive environment. The effect is entirely driven by small innovative firms in technology fields where they face many large incumbents. Invalidation of patents held by large firms does not change the intensity of their innovation but shifts the technological direction of their subsequent patenting.
    Keywords: patents, innovation, courts
    JEL: O31 O32 O34 K41 L24
    Date: 2015–11
  8. By: Aparna Ravi (Centre for Law and Policy Research, Bangalore)
    Abstract: This paper analyses 45 cases of insolvency and bankruptcy resolution in order to measure the efficiency and problems of the present laws for firm bankruptcy in India. These cases have been selected to cover a month of judgements under the reorganisation provisions of the Sick Industrial Companies Act (SICA) 1985, the winding up provisions of Companies Act, 1956, and the debt enforcement provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002. I find that the time taken from the start of the application to the final judgement was over 10 years for more than 40 of the cases heard at the High Court. Winding up of companies or debt recovery took more than 5 years. The analysis identifies the underlying themes driving these delays as conflicts arising from having multiple laws to protect the interests of the debtor and different stakeholders, conflicts from having these different laws being implemented in the Civil Courts and Tribunals, and the pro-rehabilitation stance of the adjudicators in resolving insolvency and bankruptcy.
    Keywords: Bankruptcy law reforms, Maximise economic value, Collective default resolution, Debt enforcement, Conflicts in law, Conflicts in adjudication, Multiple adjudicating fora, Unified insolvency and bankruptcy resolution, Case law
    JEL: G33 K22
    Date: 2015–11
  9. By: Ana Isabel Martins Ribeiro (University of Porto, School of Economics and Management); António Cerqueira (University of Porto, School of Economics and Management); Elísio Brandão (University of Porto, School of Economics and Management)
    Abstract: Investors, managers and shareholders benefit from the study of what influences and determines corporate effective tax rates (ETRs) as this analysis may contribute to potential tax savings. Moreover, standard setters, regulators and policy makers have a crucial interest in identifying the main factors driving corporate taxes. Therefore, the purpose of our investigation and contribution is twofold. Firstly, we provide evidence of how ETRs are determined by firms’ financial and operational characteristics. Secondly, our objective is to show the role of Corporate Governance attributes in explaining ETRs. As the literature about this topic using non-US firms is not abundant, to address these questions we select a sample of 704 non-financial firms listed on the London Stock Exchange between 2010 and 2013. We estimate our econometric model by using GLS cross-section weights. Our results show that larger and more profitable firms have higher ETRs. On the contrary, capital intensity, leverage and R&D expenses have a negative impact on ETRs. Regarding ownership structure and board composition, our findings reveal that managerial ownership contributes to lower ETRs. On the other hand, more independent firms from controlling shareholders exhibit higher ETRs. Moreover, a larger number of board members and non-executive directors results in higher ETRs
    Keywords: Effective tax rate; Corporate Finance; Corporate Governance
    JEL: G30 H20
    Date: 2015–12
  10. By: Carole Treibich (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - AMU - Aix-Marseille Université - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM))
    Abstract: Road mortality is a growing burden in many developing countries, although many of these crashes are preventable. Behaviors adopted by road users while traveling is one key dimension on which governments usually play to reduce road accidents, either by stressing the potential injuries or by implementing fines if individuals do not adopt safe behaviors. This paper exploits original data collected among Delhi motorcyclists in 2011. I study the influence of perceived consequences of helmet non-use on the decision whether to wear or not such protective device. I also explore the role of previous experiences in the formation of these beliefs. I find that expected injuries are correlated with helmet use on long distance trips while expectations of fiinancial sanctions are linked with helmet adoption on short distance journeys. Women react more than men to a given level of expected medical expenditures. Furthermore, poorer individuals are more likely to use a helmet for given levels of health costs and traffic fines. Simulations of policies influencing individuals' subjective expectations show that an intensification of police threat and information campaigns would increase helmet adoption among motorcyclists.
    Keywords: subjective expectations,road safety,risky behaviors,India
    Date: 2015–11
  11. By: Mikhed, Vyacheslav (Federal Reserve Bank of Philadelphia); Scholnick, Barry (University of Alberta School of Business)
    Abstract: Entry barriers into social insurance programs will be effective screening devices if they cause only those individuals receiving higher benefits from a program to participate in that program. We find evidence for this by using plausibly exogenous variations in travel-related entry costs into the Canadian consumer bankruptcy system. Using detailed balance sheet and travel data, we find that higher travel-related entry costs reduce bankruptcies from individuals with lower financial benefits of bankruptcy (unsecured debt discharged, minus secured assets forgone). When compared across filers, each extra kilometer traveled to access the bankruptcy system requires approximately $11 more in financial benefits from bankruptcy. {{p}}Supersedes Working Paper 14-18
    Keywords: Social insurance; Consumer bankruptcy; Filing costs; Entry barriers
    JEL: D14 G23 G33 K35
    Date: 2015–10–22

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