nep-law New Economics Papers
on Law and Economics
Issue of 2016‒07‒16
fourteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Is Amazon the next Google? By Budzinski, Oliver; Köhler, Karoline Henrike
  2. Illegal Migration and Consumption Behavior of Immigrant Households By Dustmann, Christian; Fasani, Francesco; Speciale, Biagio
  3. Tougher Than the Rest? Relationship between Unemployment and Crime in Croatia By Vedran Recher
  4. Digital Markets, Data, and Privacy: Competition Law, Consumer Law, and Data Protection By Wolfgang Kerber
  5. Learning from the Swiss corporate governance exception By Massimiliano Vatiero
  6. The transnationalisation of law: rethinking law through transnational environmental regulation By Veerle Heyvaert
  7. Tort Reform and Innovation By Galasso, Alberto; Luo, Hong
  8. Towards a Requisite Regulatory Management System: Philippines By Gilberto M. Llanto
  9. Market power and media revenue allocation in professonal sports: The case of formula one By Budzinski, Oliver; Müller-Kock, Anika
  10. Effects of the Minimum Wage on Infant Health By Wehby, George; Dave, Dhaval M.; Kaestner, Robert
  11. Hard Labour in the lab: Are monetary and non-monetary sanctions really substitutable? By Matteo Rizzolli; James Tremewan
  12. Measuring patent quality and national technological capacity in cross-country comparison By Boeing, Philipp; Mueller, Elisabeth
  13. Unprofitable horizontal mergers, external effects, and welfare By Budzinski, Oliver; Kretschmer, Jürgen-Peter
  14. Self-Regulatory Organizations Under the Shadow of Governmental Oversight: Blossom Or Perish? By Silvester Van Koten

  1. By: Budzinski, Oliver; Köhler, Karoline Henrike
    Abstract: Dominant or apparently dominant internet platform increasingly become subject to both antitrust investigations and further-reaching political calls for regulation. While Google is currently in the focus of the discussion, the next candidate is already on the horizon - the ubiquitous online trading platform Amazon. Competitors and suppliers but also famous economists like Paul Krugman unite in criticizing Amazon's market power and alleged abuse of it. In this paper, we collect the multitude of allegations against Amazon and categorize them according to types of potential anticompetitive conduct or types of market failure. We provide an economic analysis of these allegations based upon economic theory as well as publicly available information and data. As one of our main results, we find that the most severe allegations against Amazon do not hold from an economic perspective and, consequently, do not warrant regulation or other drastic interventions (like breaking the company up). However, several areas of conduct, in particular, the use of best price clauses and the (anti-) competitive interplay of Amazon and the major publishers in the e-book market require competition policy action. The standard antitrust instruments, enriched with modern economic theory, should suffice to disincentivize the identified anticompetitive conduct for now.
    Keywords: antitrust,internet,platform economics,media economics,competition policy,innovation,Amazon,Google,e-books,book industry,best-price clauses,abuse of dominance,pricing,regulation
    JEL: K21 L41 L42 L81 K23 L50 L82 L12 D40 L25 Z11 B52 L86 M21
    Date: 2015
  2. By: Dustmann, Christian (University College London); Fasani, Francesco (Queen Mary, University of London); Speciale, Biagio (Université Paris 1 Panthéon-Sorbonne)
    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, weather shocks, legal status
    JEL: F22 D12 K42
    Date: 2016–06
  3. By: Vedran Recher (The Institute of Economics, Zagreb)
    Abstract: In this paper, the relationship between unemployment and crime is analysed. A panel of 20 Croatian counties over the years 1998-2013 is used to estimate the effect of unemployment on the rates of various groups of property and violent crimes. According to the theory of economics of crime, increase in unemployment leads to higher crime rates. A fixed-effects model, including time- and county-specific effects and several covariates, is estimated. The results show there is no impact of unemployment on aggregate property crimes. For all violent crimes bar rapes, the results oppose the theory and intuition. The unexpected results are discussed in the context of the Croatian-specific macro-environment.
    Keywords: crime, unemployment, fixed-effects model, panel data
    JEL: K42 J00 J69
    Date: 2016–04
  4. By: Wolfgang Kerber (University of Marburg)
    Abstract: The digitalisation of the economy with data as the new critical resource is a technological revolution which requires an adaptation of the legal framework for markets and the economy. This paper analyzes the privacy concerns in the digital economy from an economics perspective. What can we learn from economics whether and to what extent we need legal rules helping to protect privacy? Particularly important are the complex tradeoff problems between benefits and costs of privacy and disclosure. This paper claims that it is not sufficient to look for policy solutions only in one field of the law, as, e.g. competition law or data protection law, rather an integrated approach from different regulatory perspectives is necessary. This paper focusses on competition policy, consumer policy, and data protection policy as the three main regulatory perspectives that are relevant for privacy concerns. For all three policies it is discussed from an economic perspective how these policies might help to remedy market failures in regard to privacy rights and privacy preferences of individuals, and how a more integrated regulatory approach can be developed.
    Keywords: digital economy, Big Data, privacy, data protection, competition law, consumer law
    Date: 2016
  5. By: Massimiliano Vatiero (Institute of Law (IDUSI), and Institute of Economics (IdEP), Facoltà di Economia, Università della Svizzera italiana, Svizzera)
    Abstract: The Swiss economy represents an exception to the legal origin theory (e.g., Roe (2006)). Although Switzerland is a country belonging to the civil law family, many of its public companies have diffused corporate ownership, as do those in common law countries. This paper maintains that the Swiss exception relies on the complementarity between corporate ownership and policies addressing employment protection and innovation. The Swiss case presents two lessons: first, the current corporate governance is the result of a long and composite path in which politics plays a pivotal role; second, the institutional differences and similarities across countries, which one would try to explain along with the legal origin theory, can derive diversely from additional politics-based accounts, such as those referring to policies on employment protection and innovation.
    Keywords: corporate governance and ownership, innovation, employment protection, institutional complementarity, Swiss economy
    JEL: G30 J50 P16
    Date: 2016–06
  6. By: Veerle Heyvaert
    Abstract: This working paper argues that the rise of transnational regulation has a transformative impact on law. It examines the field of transnational environmental regulation to show that its proliferation challenges the continued appropriateness of representations of law as: (i) territorial, (ii) emanating from the state, (iii) composed of a public and private sphere, (iv) constitutive and regulatory in function, and (v) cohesive and regimented. Instead, law is increasingly perceived as (i) delocalised, (ii) flowing from a plurality of sources, (iii) organisationally inchoate, (iv) reflexive and coordinating in function, and (v) polycentric. Together, these shifts in perception amount to a transformation that the paper identifies as the transnationalisation of law. The paper then explores three responses to the transnationalisation of law. It distinguishes responses motivated by a desire to reclaim the traditional conception of law from those that seek to reconstruct law at the transnational level and, thirdly, responses that advocate a context-responsive reconceptualisation of law. Each response, it will be shown, creates a different set of opportunities for and challenges to the relevance of law for transnational regulation.
    Date: 2016–06
  7. By: Galasso, Alberto; Luo, Hong
    Abstract: Current academic and policy debates focus on the impact of tort reforms on physicians' behavior and medical costs. This paper examines whether these reforms also affect incentives to develop new technologies. We find that, on average, laws that limit the liability exposure of healthcare providers are associated with a significant reduction in medical device patenting. Tort reforms have the strongest impact in medical fields in which the probability of facing a malpractice claim is the largest, and they do not seem to affect the propensity to develop technologies of the highest and lowest quality. Our results underscore the importance of considering dynamic effects in the economic analysis of tort laws.
    Date: 2016–06
  8. By: Gilberto M. Llanto (Economic Research Institute for ASEAN and East Asia (ERIA), Philippine Institute for Development Studies)
    Abstract: Part One of this paper explores the evolution of regulation in the Philippines since the post-martial rule regime. This paper tracks the macroeconomic and regulatory reforms, and the political and economic history. It explores the existence of a regulatory management system in the Philippines, identifying that the Philippines does not have a coherent regulatory management system, but does has some of the parts of such a system. Parts Two explores how some aspects of a regulatory management system were applied in the successful case study of regulatory change in the establishment of the National Competitiveness Council, a public private partnership, while Part Three looks at another successful case in the regulatory reforms of Quezon City’s Business Permit and Licensing System.
    Keywords: regulatory reform, regulatory management, RIS, regulatory impact analysis, national competitiveness council, quezon city business permit, licensing system
    JEL: K23 K20 L5 L51 L74
    Date: 2016–07
  9. By: Budzinski, Oliver; Müller-Kock, Anika
    Abstract: Recent allegations from participants of the FIA Formula One World Championship (F1) suggest that the promoter of F1 (possibly together with the sports association) violates European competition law in two ways. First, it alleged-ly abuses its market power by deducting an inappropriate high share from the rev-enues of the collective sale of media rights in order to boost the profits of its pri-vate equity parent company (vertical allocation of media revenue). Second, it alleg-edly forms a cartel with selected top teams at the detriment of smaller teams by providing both unjustified extra payments to these teams and enforcing a heavily biased horizontal allocation of media revenues, benefitting the cartel teams. Pro-fessional sports championships typically receive common revenue, for instance, from trademark rights and marketing, but often also from the sale of broadcasting and other media rights. This common revenue needs to be allocated in two ways: (i) vertical allocation between the sports authority and the participants, and (ii) hor-izontal allocation among the participants. Different professional sports champion-ships employ vastly differing schemes for both types of allocation. In this paper, we present an empirical assessment whether the current antitrust allegations against F1 may be valid. We employ concentration measures from empirical economics, like the Hirshman-Herfindahl-Index (HHI), the concentration ratio and the standard de-viation in order to assess different allocation schemes from different commercial sports. With the help of these indices we show that the allocation scheme em-ployed in F1 considerably differs from such used in other professional sports championships. We find the empirical picture to be consistent with an anticompetitive interpretation of F1 media revenue structures and policies. We conclude that there is merit in starting an in-depth antitrust investigation of Formula One motor racing, which would also represent an opportunity for the European Commission to cor-rect earlier mistakes.
    Keywords: competition,antitrust,abuse of market power,sports economics,formula one motor racing,sports business,media revenue,football
    JEL: K21 L12 L40 L83 Z20
    Date: 2016
  10. By: Wehby, George (University of Iowa, NBER); Dave, Dhaval M. (Bentley University); Kaestner, Robert (University of Illinois at Chicago)
    Abstract: The minimum wage has increased in multiple states over the past three decades. Research has focused on effects on labor supply, but very little is known about how the minimum wage affects health, including children's health. We address this knowledge gap and provide an investigation focused on examining the impact of the effective state minimum wage rate on infant health. Using data on the entire universe of births in the US over 25 years, we find that an increase in the minimum wage is associated with an increase in birth weight driven by increased gestational length and fetal growth rate. The effect size is meaningful and plausible. We also find evidence of an increase in prenatal care use and a decline in smoking during pregnancy, which are some channels through which minimum wage can affect infant health. Labor market policies that enhance wages can thus affect wellbeing in broader ways, and such health effects should enter into any cost‐benefit calculus of such policies.
    Keywords: minimum wage, health, infant, prenatal care, smoking, income, pregnant women
    JEL: I1 I3 J2 J3
    Date: 2016–07
  11. By: Matteo Rizzolli; James Tremewan
    Abstract: The theory of optimal deterrence suggests the substitution of mon- etary sanctions over non-monetary sanctions whenever this is possible because non-monetary sanctions are more socially costly. This pre- scription is based on the assumption that monetary and non-monetary sanctions are perfect substitutes: there exists a monetary equivalent of a non-monetary sanction that, if used as a ne, produces the same level of deterrence. We test this assumption with an experiment. In our stealing game potential thieves face the possibility of punishment. Our non-monetary sanction treatments mimic hard labour: we require convicted individuals to carry out a tedious real e ort task. In the monetary treatments sanctions are insteadones, which are based on individuals' willingness to pay to avoid the effort task to ensure com- parability to the non-monetary treatment. A second manipulation of our experiment concerns the balance of errors in the adjudication pro- cedure (convictions of innocents and acquittal of guilty individuals). We and that stealing is reduced most e ectively by a sanction regime that combines non-monetary sanctions with a severe procedure. Our data is consistent with the notion that both monetary punishment and pro-defendant sanction regimes are less effective in communicat- ing moral condemnation of an act.
    JEL: D01 K14 K40 K41 D42
    Date: 2016–06
  12. By: Boeing, Philipp; Mueller, Elisabeth
    Abstract: China recently surpassed the USA as the greatest global source of patent applications. However, without internationally comparable measures of patent quality it remains questionable whether China's patent expansion constitutes the rise of a new technological superpower. Our novel quality index is based on citations from international search reports and provides internationally comparable, quality-adjusted figures for applications made under the Patent Cooperation Treaty (PCT). We show that China's patent expansion has taken place to the detriment of patent quality. Weighting national PCT counts with our index reveals a widening gap between the technological capacities of China and the leading USA.
    Keywords: patent quality,national technological capacity,cross-country comparison
    JEL: O32 O34
    Date: 2016
  13. By: Budzinski, Oliver; Kretschmer, Jürgen-Peter
    Abstract: Standard analysis of mergers in oligopolies along the lines of the popular Farrell-Shapiro-Framework (FSF) relies regarding its policy conclusions sensitively on the assumption that rational agents will only propose privately profitable mergers. If this assumption held, a positive external effect of a proposed merger would represent a sufficient condition to allow the merger. However, the empirical picture on mergers and acquisitions reveals a significant share of unprofitable mergers and economic theory, moreover, demonstrates that privately unprofitable mergers can be the result of rational action. Therefore, we drop this restrictive assumption and allow for unprofitable mergers to occur. This exerts a considerable impact on merger policy conclusions: while several insights of the original analysis are corroborated (f.i. efficiency defence), a positive external effect does not represent a sufficient condition for the allowance of a merger anymore. Applying such a rule would cause a considerable amount of false decisions.
    Keywords: mergers & acquisitions,oligopoly theory,horizontal merger policy,profitability of mergers,antitrust
    JEL: L13 L41 K21 D43
    Date: 2015
  14. By: Silvester Van Koten
    Abstract: Self-Regulatory Organizations (SROs) have been argued to be afflicted with incentive-incompatibility problems and, indeed, they have a mixed record in their ability to curb market abuse. An earlier theoretical study by DeMarzo et al. (2005), however, finds that SROs, under the oversight of the government, may overcome these incentive-incompatibility problems and may deliver the same degree of oversight as the government would have delivered without the SRO, but against lower costs. I find that this result hinges on the assumption that the interaction between the SRO and the government can be characterized as a game of sequential moves with the SRO moving first and the government moving second. For institutional settings where it is more appropriate to characterize the interaction as a game of simultaneous moves, I obtain the inefficient result that oversight by the government fully crowds out oversight by the SRO. A possible remedy is suggested.
    Keywords: Self-Regulatory organizations, regulation, governmental oversight, simultaneous versus sequential games, costly state verification.
    JEL: C72 G18 G28 K20 L44
    Date: 2015–11

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