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on Law and Economics |
| By: | Andrea Zorzi (Department of Economics, University Of Venice Cà Foscari) |
| Abstract: | Although now possible, no European state is competing for incorporations and this is unlikely to happen in a general fashion. In this paper I argue that, however, the possibility that one state competes for one specific segment of the market for incorporations should not be ruled out altogether. As has happened with Nevada in the U.S., a state could seek to attract companies that are looking for a very protective legal environment for their directors, officers and shareholders. Given the importance of enforcement, I argue that states could compete by capitalising on the inefficiency of their courts, rather than by changing the law on the books. The fact that no investment is necessary would change the perspective on incentives of states to compete: a very small incentive is needed, if the costs are negligible. I also take into account the possible drawbacks of such competition and the reaction other states could have. |
| Keywords: | Corporate Law, European Union, State competition, Regulatory competition, Delaware, Nevada, Harmonization, Race to the bottom |
| JEL: | G30 G32 G34 K20 K22 K41 K42 D72 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2016:12&r=law |
| By: | Dustmann, Christian; Fasani, Francesco; Speciale, Biagio |
| Abstract: | We analyze the effect of immigrants' legal status on their consumption behavior using unique survey data that samples both documented and undocumented immigrants. To address the problem of sorting into legal status, we propose two alternative identification strategies as exogenous source of variation for current legal status: First, transitory income shocks in the home country, measured as rainfall shocks at the time of emigration. Second, amnesty quotas that grant legal residence status to undocumented immigrants. Both sources of variation create a strong first stage, and - although very different in nature- lead to similar estimates of the effects of illegal status on consumption, with undocumented immigrants consuming about 40% less than documented immigrants, conditional on background characteristics. Roughly one quarter of this decrease is explained by undocumented immigrants having lower incomes than documented immigrants. Our findings imply that legalization programs may have a potentially important effect on immigrants' consumption behavior, with consequences for both the source and host countries. |
| Keywords: | consumption behavior; legal status; weather shocks |
| JEL: | D12 F22 K42 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11186&r=law |
| By: | Iwata, Hiroki |
| Abstract: | This study investigates the effect of an environmental regulation on the innovation choice of firms in an oligopoly. Most existing studies on environmental regulations and innovations examine the optimal behavior of firms when one innovation project is feasible. In our model, firms are allowed to choose from multiple types of innovation projects. Our main contributions are that we derive the conditions under which environmentally friendly and cost reducing innovations are selected in Bertrand competition and we show how environmental regulation affects innovation choice. |
| Keywords: | environmental regulation; innovation; the Porter hypothesis |
| JEL: | D21 Q55 Q58 |
| Date: | 2016–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:70280&r=law |
| By: | Jones, Lauren E. (Cornell University); Ziebarth, Nicolas R. (Cornell University) |
| Abstract: | This paper assesses the effectiveness of child safety seat laws. These laws progressively increased the mandatory age up to which children must be restrained in safety seats in cars. We use US Fatality Analysis Reporting System (FARS) data from 1978 to 2011 and rich state-time level variation in the implementation of these child safety seat laws for children of different ages. Increasing legal age thresholds is effective in increasing the actual age of child safety seat use. Across the child age distribution, restraint rates increase by about 30ppt in the long-run when the legal minimum age increases. However, we cannot reject the null hypothesis that restraining older children in safety seats does not reduce their likelihood to die in fatal accidents. We estimate that parents of 8.6M young children are "legal compliers." They compose an important target group for policymakers because these parents alter their parenting behavior when laws change. |
| Keywords: | child safety seats, age requirements, fatalities, FARS |
| JEL: | I18 K32 R41 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9900&r=law |
| By: | Tommaso Oliviero (CSEF, Università di Napoli Federico II); Annalisa Scognamiglio (CSEF, Università di Napoli) |
| Abstract: | This paper estimates the impact of property taxes on property values. The unexpected introduction of a new fiscal regime on property taxes in 2012 adopted by the Italian government in December 2011 within the austerity plan to face the sovereign debt crisis ("Manovra Salva Italia") provides an ideal empirical setting. We exploit the cross-sectional variation in the tax rates set by each Italian municipality as the intensity of the treatment. We address the endogeneity problem by instrumenting the tax rate on primary residences with the timing of the elections. As showed by Alesina and Paradisi (2014) municipalities that did not have elections in 2013 set a tax rate about 0.1 percentage points higher than the others. Our results show that in those municipalities there has been a reduction in average property values about 6% higher the others. The effect is attributable to the relative higher property tax rate and provide evidence in favor of the capitalization hypothesis on property values. |
| Keywords: | Immovable property tax, Property values. |
| JEL: | H22 H31 R21 |
| Date: | 2016–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:439&r=law |
| By: | BHARADWAJ, Prachant; LAKDAWALA, Leah K.; LI, Nicholas |
| Abstract: | While bans against child labor are a ubiquitous policy tool, there is very little empirical evidence on their effectiveness. In this paper, we examine the consequences of India's landmark legislation against child labor, the Child Labor (Prohibition and Regulation) Act of 1986. Using data from employment surveys conducted before and after the ban, and using age restrictions that determined whom the ban applied to, we show that the relative probability of child employment increases and child wages (relative to adult wages) decrease after the ban. Our main specification relies on comparing changes in work probabilities over time for children of the same age but with siblings who are rendered either eligible or ineligible for legal work when the ban is implemented. The increases in the probability of economic activity are largest for children in areas where (i) the industries targeted by the ban play a larger role in local labor markets and (ii) the probability of employer inspections are higher. These results are consistent with a theoretical model building on the seminal work of Basu and Van (1998) and Basu (2005), where families use child labor to reach subsistence constraints and where child wages decrease in response to bans, leading poor families to utilize more child labor. We also examine the effects of the ban at the household level. Using linked consumption and expenditure data, we find that along the margins of assets and share of staple goods in calorie consumption, households are worse off after the ban. |
| JEL: | I38 J22 J82 O12 |
| Date: | 2016–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-25&r=law |
| By: | Richard Bird (University of Toronto, Department of Economics); Michael Smart (University of Toronto, Department of Economics); Jorge Martinez-Vazquez |
| Abstract: | The introduction of the VAT in Canada, initially in the form of the federal GST in 1991, did not signify a major change in the tax mix even after most provincial sales taxes also became VATs. Canadians do not pay much if any more in taxes on their consumption than they did 25 years ago. Although the GST and its provincial companions are not perfect, the evidence is that they create fewer barriers to investment and growth than the taxes they replaced so that Canadians appear as a whole to be better off than they were before setting off down the road to VAT. Nonetheless, perhaps in part because the VAT in Canada unlike in other countries is generally quoted separately (like retail sales taxes in the US) and hence highly visible, it continues to be politically unpopular and considered undesirably regressive. The major contribution of this paper is to examine in some detail and with some new evidence the incidence of Canada’s sales and excise taxes, a question that has received surprisingly little analysis. Because the share of total consumption taxes coming from sales rather than excise taxes has increased, these taxes are now less regressive than they were before the move to VAT, regardless of how incidence is measured. More importantly, there are solid arguments for using consumption than income as a basis for evaluating the progressivity of consumption taxes, and on this measure the GST and its companion taxes appear to be mildly progressive. However because the remaining excises are quite regressive even on this basis, on the whole the sales and excise system remains mildly regressive. |
| Keywords: | sales tax, excise tax, value-added tax, incidence, progressivity |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1604&r=law |
| By: | Rao, R. Kavita (National Institute of Public Finance and Policy); Tandon, Suranjali (National Institute of Public Finance and Policy) |
| Abstract: | The paper presents a model for tax compliance based on prospect theory wherein an individual makes the decision whether to file, and declare a certain amount of income, or to not file based on a set of policy parameters as well as his/her preferences. The paper poses the question- at what incomes would individuals choose to file a return and answers the same using a model based on prospect theory. Further, simulations are presented to illustrate the impact of changes in tax rates, penalty and audit probability on the individual's preference to file. The results from the simulation show that for different values of policy parameters there exists crossover income at which individuals would choose to file a return. Given all else, at the exemption threshold of 0.1 million, individuals would choose to file a return at incomes greater than or equal to 0.6 million. |
| Keywords: | prospect theory ; compliance ; tax ; exemption threshold ; crossover income |
| JEL: | H26 H31 D11 K42 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:16/169&r=law |
| By: | Banerjee, Suman (University of Wyoming); Masulis, Ronald (University of New South Wales); Pal, Sarmistha (University of Surrey) |
| Abstract: | We provide novel evidence on the effectiveness of mandated changes in Russian transparency and disclosure (henceforth T&D) rules in boosting shareholder welfare. We focus on the staggered implementation of these T&D reforms initiated in 2002 and implemented during 2003-07. Using difference in difference method, we find that the reforms improved earnings quality, which on average reduced the operating performance (i.e., EBIT/Assets) of treated domestically-listed (relative to our control group of cross-listed) Russian firms, but had no significant impact on their market valuation. We argue that low tax alignment, where financial statements are not used for tax purposes, made it possible for managers of domestically-listed firms to inflate pre-reforms earnings, which became difficult post-reforms, leading to a drop in operating earnings. Yet, firm values, on average, remained unchanged because the drop in earnings was roughly offset by a decrease in the required market return due to more reliable accounting information post reform. Also, T&D reforms had negligible effects on cross-listed firms that act as our control group. Further, for domestically listed firms without a domestic controlling shareholder, post-reform reported earnings did not drop, while firm value increased significantly. For the domestically listed firms with a controlling shareholder, just the opposite occurred. Thus, a key finding of our study is that a strong governance structure is a prerequisite for significant gains in shareholder wealth following improved reliability of firm accounting information. |
| Keywords: | transparency and disclosure rules, quasi-experimental analysis, domestic vs. cross-listed firms, firm performance, Tobin's Q, EBIT-to-Asset ratio, difference-in-difference method, Russia |
| JEL: | G3 K2 P2 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9890&r=law |
| By: | Lane, Luke; Popp, Jennie; Popp, Michael; Pittman, Harrison |
| Abstract: | Section 7606 of the Farm Bill authorizes the production of industrial hemp for research and pilot program purposes. Currently 24 states have laws or statutes that have paved the way for industrial hemp production; however, only four states are in the South. Although previous research has suggested that there are 25,000 legal uses for industrial hemp, there is a lack of timely information regarding the political (social acceptability) and legal and economic feasibility of hemp production for Southern states. The purpose of this poster is to: 1) conduct an extensive literature review to summarize existing legal, political and economic considerations; and 2) identify the primary legal, political and economic challenges and opportunities for hemp production in the South. It is expected that this information will be helpful to policy makers, agricultural producers and the public by providing information about consumer acceptance, cost of production, best management practices and how the crop fits into crop rotations. As with many new industries, siting of processing locations will be a function of where the crop will be grown. Such regions are likely those where competition for land use is least. Such analyses are only possible with the types of information collected here. |
| Keywords: | industrial hemp, agricultural policy, Agricultural and Food Policy, Production Economics, Q18 D24 K39, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea16:230034&r=law |