nep-law New Economics Papers
on Law and Economics
Issue of 2016‒10‒02
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. How Do Rights Revolutions Occur? Free Speech and the First Amendment By Chen, Daniel L.; Yeh, Susan
  2. Incentives and Ethics in the Economics of Body Parts By Nicola Lacetera
  3. Tort Law under Oligopolistic Competition By Gérard Mondello; Evens Salies
  4. The Deterrent Effect of the Death Penalty? Evidence from British Commutations During World War I By Chen, Daniel L.
  5. Recreational cannabis reduces rapes and thefts: Evidence from a quasi-experiment By D. Dragone; G. Prarolo; P. Vanin; G. Zanella
  6. This Morning's Breakfast, Last Night's Game: Detecting Extraneous Factors in Judging By Chen, Daniel L.
  7. What constitutes a compensation free regulation of foreign-owned property in international law? Some thoughts on the protection of foreign investment against expropriations, the states' right to regulate, arbitrators and TTIP By Gildeggen, Rainer; Willburger, Andreas
  8. Patent Pools in Input Markets By Reisinger, Markus; Tarantino, Emanuele
  9. How Uncertainty about Judicial Nominees Can Distort the Confirmation Process By Sen, Maya; Spaniel, William
  10. Measuring tax treaty negotiation outcomes: the Actionaid tax treaties dataset By Martin Hearson
  11. Regional Practice of Regulatory Impact Assessment By Vladimir D. Churakov
  12. The Political Ideologies of American Lawyers By Bonica, Adam; Chilton, Adam S.; Sen, Maya
  13. Taxation and Corporate Risk-Taking By Langenmayr, Dominika; Lester, Rebecca

  1. By: Chen, Daniel L.; Yeh, Susan
    Abstract: Does law shape values? We test a model of law and norms using an area of law where economic incentives are arguably not the prime drivers of social change. From 1958–2008, Democratic judges were more likely than Republicans to favor progressive free speech standards. Using the random assignment of U.S. federal court judges setting geographically-local precedent, we estimate that progressive free speech standards liberalized sexual attitudes and behaviors and increased both crime rates and the spread of sexually transmitted diseases. We then randomly allocated data entry workers to enter newsarticles of court decisions. Progressive decisions liberalized sexual attitudes and shifted norm perceptions for data entry subjects, but not self-reported behavior. These results present evidence of law’s expressive power – with fundamental implications for decision making in social and political settings and for the empirical predictions of theoretical models in these domains.
    Keywords: Law and norms, expressive law, cultural change
    JEL: J12 J16 K42 N32 N42 Z1
    Date: 2016
  2. By: Nicola Lacetera
    Abstract: Research shows that properly devised economic incentives increase the supply of blood without hampering its safety; similar effects may be expected also for other body parts such as bone marrow and organs. These positive effects alone, however, do not necessarily justify the introduction of payments for supplying body parts; these activities concern contested commodities or repugnant transactions, i.e. societies may want to prevent certain ways to regulate a transaction even if they increased supply, because of ethical concerns. When transactions concern contested commodities, therefore, societies often face trade-offs between the efficiency-enhancing effects of trades mediated by a monetary price, and the moral opposition to the provision of these payments. In this essay, I first describe and discuss the current debate on the role of moral repugnance in controversial markets, with a focus on markets for organs, tissues, blood and plasma. I then report on recent studies focused on understanding the trade-offs that individuals face when forming their opinions about how a society should organize certain transactions.
    JEL: D47 D63 D64 I11 K32 Z13
    Date: 2016–09
  3. By: Gérard Mondello (Université Côte d'Azur, France; GREDEG CNRS); Evens Salies (OFCE)
    Abstract: This article extends the unilateral accident standard model to allow for Cournot competition. Assuming risk-neutrality for the regulator and injurers, it analyzes three liability regimes: strict liability, negligence rule, and strict liability with administrative authorization or permits systems. Under competition the equivalence between negligence rule and strict liability no longer holds, and negligence insures a better level of social care. However, enforcing both a permit system and strict liability restores equivalence between liability regimes. However, whatever the current regime, competition leads to lower the global safety level of industry. Indeed, the stronger firm may benefit from safety rents, which they may use to increase production rather that maintaining a high level of safety.
    Keywords: Tort Law, Strict Liability, Negligence rule, Imperfect Competition, Oligopoly, Cournot Competition
    JEL: D43 L13 L52 K13
    Date: 2016–09
  4. By: Chen, Daniel L.
    Abstract: During World War I, the British military condemned over 3,000 soldiers to death, but only executed 12% of them; the others received commuted sentences. Many historians believe that the military command confirmed or commuted sentences for reasons unrelated to the circumstances of a particular case and that the application of the death penalty was essentially a random, “pitiless lottery.” Using a dataset on all capital cases during World War I, I statistically investigate this claim and find that the data are consistent with an essentially random process. Using this result, I exploit variation in commutations and executions within military units to identify the deterrent effect of executions, with deterrence measured by the elapsed time within a unit between the resolution of a death sentence (i.e., a commutation or execution) and subsequent absences within that unit. Absences are measured via handwritten trial records and “wanted” lists prepared by British military police units searching for deserters and preserved in war diaries and police gazettes. I find some limited evidence that executing deserters deterred absences, while executing Irish soldiers, regardless of the crime, spurred absences, particularly Irish absences. I present a model where perceived legitimacy of authority affects why people obey the law.
    Keywords: Compliance, Legitimacy, Deterrence
    JEL: K14 K42 N44 P48
    Date: 2016
  5. By: D. Dragone; G. Prarolo; P. Vanin; G. Zanella
    Abstract: An argument against the legalization of the cannabis market is that such a policy would increase crime. Exploiting the recent staggered legalization enacted by the states of Washington (end of 2012) and Oregon (end of 2014) we show, combining difference-in-differences and spatial regression discontinuity designs, that recreational cannabis caused a significant reduction of rapes and thefts on the Washington side of the border in 2013-2014 relative to the Oregon side and relative to the pre-legalization years 2010-2012.
    JEL: K23 K42
    Date: 2016–09
  6. By: Chen, Daniel L.
    Abstract: I detect intra-judge variation in judicial decisions driven by factors completely unrelated 5 to the merits of the case, or to any case characteristic for that matter. Concretely, I show that asylum 6 grant rates in U.S. immigration courts differ by the success of the court city’s NFL team on the night 7 before, and by the city’s weather on the day of, the decision. My data including half a million decisions 8 spanning two decades allows me to exclude confounding factors, such as scheduling and seasonal effects. 9 Most importantly, my design holds the identity of the judge constant. On average, U.S. immigration 10 judges grant an additional 1.5% of asylum petitions on the day after their city’s NFL team won, relative 11 to days after the team lost. Bad weather on the day of the decision has approximately the opposite effect. 12 By way of comparison, the average grant rate is 39%. In contrast, I do not find comparable effects in 13 sentencing decisions of U.S. District Courts, and speculate that this may be due to higher quality of the 14 federal judges, more time for deliberation, or the constraining effect of the federal sentencing guidelines.
    Date: 2016
  7. By: Gildeggen, Rainer; Willburger, Andreas
    Abstract: This article intends to help understand the debate about TTIP by focusing on the specific issue of how TTIP may regulate investment protection of foreign-owned property. It gives an overview of the international law of expropriations of and other interferences with foreign-owned property for public welfare objectives such as public health and safety, environmental protection, public morals, the promotion and protection of cultural diversity and human rights, and asks whether such interferences require the payment of compensation. It also describes the role arbitrators played in the development of the international law concerning the taking of foreign-owned property. With this legal background in mind it elaborates that TTIP investment protection rules and dispute settlement provisions may be an indicator on what TTIP really is: an instrument for the benefit of the citizens in Europe and the United States or a means to outplace national interests and democracy in favor of multinational enterprises. The article expresses the hope that the protection of foreign-owned property will not be regulated in the TTIP agreement and that the settlement of investment disputes between investors and states will not be put into the hands of arbitrators but of the judges of the country where the taking took place.
    Keywords: investment protection,expropriation,right to regulate,international law,arbitration,TTIP
    Date: 2016
  8. By: Reisinger, Markus; Tarantino, Emanuele
    Abstract: We show that patent pools formed by owners of perfectly complementary patents are anticompetitive if one of the licensors is integrated with a manufacturer. With vertical integration, the pool serves as coordination device, allowing patent holders to restrict supplies to the product market and share the larger profits of the affiliated manufacturer. These results are robust to entry, the contractual and competitive environments. The imposition of an unbundling and pass-through requirement makes patent pools socially desirable. We also show that this requirement is more effective than a mandated non-discriminatory policy enforcing FRAND commitments in screening anticompetitive pools.
    Keywords: Antitrust Policy; Complementary Patents; FRAND; Patent Pools and Joint Marketing Agreements; Vertical Integration and Restraints
    JEL: K11 L41 M2
    Date: 2016–09
  9. By: Sen, Maya (Harvard University); Spaniel, William (Stanford University)
    Abstract: Why are judicial nominees allowed to refuse to answer questions about important issues that could come before the courts? We address this question by examining the information environment surrounding judicial nominations. Using the Supreme Court as our example, we formulate a model that departs from the existing literature by incorporating the fact that the Senate often does not know what type of candidate the President is trying to appoint. Our model shows when the President and Senate are ideologically divergent, low information about nominees' views results in the Senate occasionally rejecting acceptable nominees. However, when the President and Senate are ideologically close, the President benefits from leaving the process opaque-that is, allowing his nominees to avoid answering tough questions. Thus, even though low information can be costly to both parties, keeping the process nontransparent shields the President from being penalized for selecting more like-minded (and possibly extreme) judges.
    JEL: K49
    Date: 2015–08
  10. By: Martin Hearson
    Abstract: This paper introduces a new dataset that codes the content of 519 tax treaties signed by low- and lower-middle-income countries in Africa and Asia. Often called Double Taxation Agreements, bilateral tax treaties divide up the right to tax cross-border economic activity between their two signatories. When one of the signatories is a developing country that is predominantly a recipient of foreign investment, the effect of the tax treaty is to impose constraints on its ability to tax inward investors, ostensibly to encourage more investment. The merits of tax treaties for developing countries have been challenged in critical legal literature for decades, and studies of whether or not they attract new investment into developing countries give contradictory and inconclusive results. These studies have rarely disaggregated the elements of tax treaties to determine which may be most pertinent to any investment-promoting effect. Meanwhile, as developing countries continue to negotiate, renegotiate, review and terminate tax treaties, comparative data on negotiating histories and outcomes is not easily obtained. The new dataset fills both these gaps. Using it, this paper demonstrates how tax treaties are changing over time. The restrictions they impose on the rate of withholding tax developing countries can levy on cross-border payments have intensified since 1970. In contrast, the permanent establishment threshold, which specifies when a foreign company’s profits become taxable in a developing country, has been falling, giving developing countries more opportunity to tax foreign investors. The picture with respect to capital gains tax and other provisions is mixed. As a group, OECD countries appear to be moving towards treaties with developing countries that impose more restrictions on the latter’s taxing rights, while non-OECD countries appear to be allowing developing countries to retain more taxing rights than in the past. These overall trends, however, mask some surprising differences between the positions of individual industrialised and emerging economies. These findings pose more questions than they answer, and it is hoped that this paper and the dataset it accompanies will stimulate new research on tax treaties.
    Keywords: capital gains tax; corporation tax; double taxation agreement; foreign direct investment; international taxation; sub-Saharan Africa; Asia; tax treaty; withholding tax
    JEL: F53 H25 K33 K34 N47 O23
    Date: 2016–02–21
  11. By: Vladimir D. Churakov (National Research University Higher School of Economics)
    Abstract: The paper is dedicated to the formal investigation of regional legislation in the sphere of the regulatory impact assessment (RIA). RIA is a crucial instrument for the evaluation of the effectiveness of law. It provides a solid basis for the objective assessment of proposed regulations in the sphere of business activity. The federal form of the Russian government requires the analysis of regional experience for the further development of RIA procedure.
    Keywords: regulatory impact assessment, law effectiveness, regional legislation.
    JEL: K00
    Date: 2016
  12. By: Bonica, Adam (Stanford University); Chilton, Adam S. (University of Chicago); Sen, Maya (Harvard University)
    Abstract: The ideology of American lawyers has been a persistent source of discussion and debate. Two obstacles, however, have prevented this topic from being systematically studied: the sheer number of attorneys in the United States and the need for a methodology that makes comparing the ideology of specific individuals possible. In this paper, we present a comprehensive mapping of lawyers' ideologies that has overcome these hurdles. We use a new dataset that links the largest database of political ideology with the largest database of lawyers' identities to complete the most extensive analysis of the political ideology of American lawyers ever conducted.
    Date: 2015–08
  13. By: Langenmayr, Dominika (Catholic University of Eichstatt-Ingolstadt and CESifo, Munich); Lester, Rebecca (Stanford University)
    Abstract: We study whether the corporate tax system provides incentives for risky firm investment. We analytically and empirically show two main findings: first, risktaking is positively related to the length of tax loss periods because the loss rules shift some risk to the government; and second, the tax rate has a positive effect on risk-taking for firms that expect to use losses, and a negative effect for those that cannot. Thus, the sign of the tax effect on risky investment hinges on firm-specific expectations of future loss recovery.
    JEL: G32 H25 H32
    Date: 2016–08

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