nep-law New Economics Papers
on Law and Economics
Issue of 2016‒10‒23
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Tort Reform and Innovation By Alberto Galasso; Hong Luo
  2. Youth Response to State Cyberbullying Laws By Kabir Dasgupta
  3. Regulation, tax and capital structure: evidence from administrative data on Italian banks By Steve Bond; Kyung Yeon Ham; Giorgia Maffini; Andrea Nobili; Giacomo Ricotti
  4. Do Doctors Prescribe Antibiotics Out of Fear of Malpractice? By Panthöfer, S.
  5. Evidence for the Effects of Mergers on Market Power and Efficiency By Bruce A. Blonigen; Justin R. Pierce
  6. A Distribution-Neutral Perspective On Tax Expenditure Limitations By Louis Kaplow
  7. Bad Credit, No Problem? Credit and Labor Market Consequences of Bad Credit Reports By Will Dobbie; Paul Goldsmith-Pinkham; Neale Mahoney; Jae Song
  8. A Comparison of Anti-Doping Measures in Sporting Contests By Qin Wu; Raph C-Bayer; Liam Lenten
  9. Expert Costs and the Role of Verifiability By Li, Jianpei; Ouyang, Yaofu
  10. Measuring the Effects of Employment Protection Policies for the Disabled: Theory and Evidence from the Americans with Disabilities Act By serena Rhee; Soojin Kim
  11. VAT Evasion in Bulgaria: A General-Equilibrium Approach By Aleksandar Vasilev
  12. Effect of State Domestic Violence Arrest Laws on Youth Mental Health and Behavioral Outcomes By Kabir Dasgupta

  1. By: Alberto Galasso; Hong Luo
    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 and that the effect is predominantly driven by innovators located in the states passing the reforms. Tort laws 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 amount of new technologies of the highest and lowest quality. Our results underscore the importance of considering dynamic effects in the economic analysis of tort laws.
    JEL: I1 K4 O3
    Date: 2016–10
  2. By: Kabir Dasgupta (New Zealand Work Research Institute, Auckland University of Technology, NZ)
    Abstract: Electronic form of harassment or cyberbullying is a large social, health, and education issue in the United States. In response to cyberbullying, most state governments have enacted electronic harassment or cyberbullying law as a part of their bullying prevention law. This is the first empirical study to examine the effects of state cyberbullying laws on youth outcomes with respect to measures of school violence, mental health, and substance use behavior. The analysis uses variation in the timing of implementation of cyberbullying laws across states as an exogenous source of variation. Using nationally representative samples of high-school teenagers from national and state Youth Risk Behavior Surveys, the study finds evidence of a positive relationship between adoption of cyberbullying laws and students’ reporting of certain experiences of school violence, mental health problems, and substance use activities. Regression analyses also study the effects of some important components of state cyberbullying laws. Finally, this study examines the sex-specific impacts of cyberbullying laws and its components on youth. The causal estimates are robust to the inclusion of multiple sensitivity checks. This study provides evidence on the efficacy of public measures designed to address cyberbullying among school-age children
    Keywords: Cyberbullying Laws; Electronic Harassment; Youth; School Violence; Mental Health; Substance use; Differences-in-differences
    JEL: I12 K36
    Date: 2016–05
  3. By: Steve Bond (University of Oxford); Kyung Yeon Ham (University of Oxford); Giorgia Maffini (University of Oxford); Andrea Nobili (Associazione Bancaria Italiana); Giacomo Ricotti (Bank of Italy)
    Abstract: This paper explores the effect of taxation on the capital structure of banks. For identification, we exploit exogenous regional variations in the rate of the Italian tax on productive activities (IRAP) using administrative, confidential data on regional banks provided by the Bank of Italy (1998-2011). We find that IRAP rate changes do not always lead to a change in banks’ leverage: banks close to the regulatory constraints do not change their leverage when tax rates change. This holds true for both tax cuts and tax hikes. Among less constrained entities, the leverage of smaller banks is more responsive to changes in tax rates than that of larger banks. Overall, the tax system has little effect on the capital structure of banks, especially for larger and possibly more systemically important institutions; regulatory constraints instead seem to be a first-order determinant. Our findings cast doubt on the role of the tax system as a cause or tool for addressing the negative externalities of excessive leverage in the banking system.
    Keywords: capital structure, debt, regulation, corporate tax, banks
    JEL: G21 G32 G38 H25 H32
    Date: 2016–10
  4. By: Panthöfer, S.
    Abstract: This paper investigates whether doctors prescribe antibiotics to protect themselves against potential malpractice claims. Using data from the National Ambulatory Medical Care Survey on more than half a million outpatient visits between 1993 and 2011, I find that doctors are 6% less likely to prescribe antibiotics after the introduction of a cap on noneconomic damages. Over 140 million discharge records from the Nationwide Inpatient Sample do not reveal a corresponding change in hospital stays for conditions that can potentially be avoided through antibiotic use in the outpatient setting. These findings, as well as a stylized model of antibiotic prescribing under the threat of malpractice, suggest that liability-reducing tort reforms can decrease the amount of antibiotics that are inappropriately prescribed for defensive reasons.
    Keywords: antibiotic misuse; antibiotic resistance; liability pressure; defensive medicine;
    JEL: I11 I18 K13
    Date: 2016–09
  5. By: Bruce A. Blonigen; Justin R. Pierce
    Abstract: Study of the impact of mergers and acquisitions (M&As) on productivity and market power has been complicated by the difficulty of separating these two effects. We use newly-developed techniques to separately estimate productivity and markups across a wide range of industries using detailed plant-level data. Employing a difference-in-differences framework, we find that M&As are associated with increases in average markups, but find little evidence for effects on plant-level productivity. We also examine whether M&As increase efficiency through reallocation of production to more efficient plants or through reductions in administrative operations, but again find little evidence for these channels, on average. The results are robust to a range of approaches to address the endogeneity of firms' merger decisions.
    Keywords: Acquisitions ; Efficiency ; Market Power ; Markups ; Mergers ; Productivity
    JEL: D24 G34 L41
    Date: 2016–10
  6. By: Louis Kaplow
    Abstract: A recent wave of literature, partly motivated by presidential campaign tax reform plans, analyzes tax expenditure limitation proposals. These reforms are often advanced not only, or even primarily, because they reduce distortions caused by favoritism for some types of expenditures over others. Largely they are urged for a number of other reasons: on distributive grounds, because the resulting broader base enables lower marginal tax rates and hence less distortion of labor effort and other margins, and to raise revenue without requiring higher marginal tax rates. It is generally recognized that the particular results on these dimensions are heavily dependent on what sorts of rate adjustments are used to return the proceeds to taxpayers. Often, revenue neutrality is assumed. This essay advances a complementary, distribution-neutral perspective on the analysis of tax expenditure limitations. Distribution-neutral implementation provides an illuminating benchmark against which to understand prior analysts’ large number of results and, more importantly, clarifies the analysis, particularly of the distribution-distortion tradeoff. The central lessons contradict the common belief that one can have less distortion of labor supply through lower marginal tax rates while also maintaining or enhancing progressivity.
    JEL: H21 H22 H23 H24 K34
    Date: 2016–10
  7. By: Will Dobbie; Paul Goldsmith-Pinkham; Neale Mahoney; Jae Song
    Abstract: Credit reports are used in nearly all consumer lending decisions and, increasingly, in hiring decisions in the labor market, but the impact of a bad credit report is largely unknown. We study the effects of credit reports on financial and labor market outcomes using a difference-in-differences research design that compares changes in outcomes over time for Chapter 13 filers, whose personal bankruptcy flags are removed from credit reports after 7 years, to changes for Chapter 7 filers, whose personal bankruptcy flags are removed from credit reports after 10 years. Using credit bureau data, we show that the removal of a Chapter 13 bankruptcy flag leads to a large increase in credit scores, and an economically significant increase in credit card balances and mortgage borrowing. We study labor market effects using administrative tax records linked to personal bankruptcy records. In sharp contrast to the credit market effects, we estimate a precise zero effect of flag removal on employment and earnings outcomes. We conclude that credit reports are important for credit market outcomes, where they are the primary source of information used to screen applicants, but are of limited consequence for labor market outcomes, where employers rely on a much broader set of screening mechanisms.
    JEL: G28 J23 J38 J71 K31 K35
    Date: 2016–10
  8. By: Qin Wu (School of Economics, University of Adelaide); Raph C-Bayer (School of Economics, University of Adelaide); Liam Lenten (La Trobe University, Australia)
    Abstract: This paper proposes a new anti-doping policy. In a conditional superannuation scheme athletes have to pay a certain fraction of their season income from sports into a superannuation fund from which they can only draw if they have never been caught doping. Theoretically, this fund has two important advantages over conventional anti-doping policies such as bans and fines. It does not lose its deterrence effect when athletes get near the end of their careers such as in the case of bans and it can deal with the widespread problem that drug cheats are often only found out much later when the detection technology has caught up with doping practices. We build a model of a dynamic sporting contest, implement it in the laboratory, and compare the performance of our policy to that of traditional policies. Our policy compares favorably with respect to doping prevention without reducing the quality of competition more than other measures do.
    Date: 2016–05
  9. By: Li, Jianpei; Ouyang, Yaofu
    Abstract: We study a credence goods market in which an expert holds private information about his treatment cost besides his superior knowledge about the nature of the consumer’s problem. Under the assumption of liability, cheating may occur through overcharging—a price for major treatment is charged while a minor treatment is provided, while under liability and verifiability, cheating can only occur through costly overtreatment of minor problems. Neither liability nor liability and verifiability achieves socially efficient outcome. Adding verifiability improves social welfare because it increases the probability that a major problem is repaired and the associated overtreatment cost is dominated by the gain from more problems being repaired.
    Keywords: Credence Goods, Expert Costs, Liability, Verifiability
    JEL: D21 D82 L23
    Date: 2016–10
  10. By: serena Rhee (Department of Economics, University of Hawaii); Soojin Kim (Purdue University)
    Abstract: We evaluate the Americans with Disabilities Act(ADA) using a directed search model in which firms post health-contingent wage contracts. We theoretically show that the ADA benefits disabled workers at the expense of non-disabled workers if firms face a high penalty for preferentially hiring non-disabled, whereas the disabled are worse off if the expected cost from terminating a disabled employee is high. Our estimation results imply that disabled job-finding and job-separation rates decreased, suggesting that for firms, the cost of hiring discrimination is lower than disabled worker termination. Overall, the ADA caused a 2:2 percentage point decline in disabled employment rates.
    Keywords: Americans with Disabilities Act, employment protection, search friction, wage posting, job-finding rate
    JEL: J78 J64 J68 K31
    Date: 2016–10
  11. By: Aleksandar Vasilev (Department of Economics, American University in Bulgaria)
    Abstract: This paper utilizes an otherwise standard micro-founded general-equilibrium setup, which is augmented with a revenue-extraction mechanism to assess the magnitude of VAT evasion. The model is calibrated to Bulgaria after the introduction of the currency board (1999-2014), as one of the very few countries in Europe with a non-di erentiated consumption tax rate, and an economy where VAT revenue makes almost half of total government tax revenue. A computational experiment performed within this setup estimates that on average, the size of evaded VAT is a bit more than one-fourth of output, an estimate which is in line with the gures provided in both Philip (2014) and the European Commission (2014). In addition, model-based simulations suggest that increases in spending on law and order could generate substantial welfare gains by decreasing VAT evasion.
    Keywords: VAT evasion, general equilibrium, Bulgaria
    JEL: D58 E26 H26 K42
    Date: 2016–10
  12. By: Kabir Dasgupta (New Zealand Work Research Institute, Auckland University of Technology, NZ)
    Abstract: Domestic violence is a large public issue in the United States. This study investigates the effectiveness of warrantless arrest laws enacted by states for domestic violence incidents on multiple youth mental and behavioral outcomes. Under these laws, police officers can arrest a suspect without a warrant even if they did not witness the crime. Although young women remain at the highest risk of victimization of domestic violence, children ages 3 to 17 years are also at elevated risk for domestic violence. Further, over 15 million children witness domestic violence in their homes every year in the U.S. Exposure to domestic violence leads to various social, emotional, behavioral, and health-related problems among the youth. In addition to measures adopted by governments at various levels to address domestic violence, all states have enacted warrantless arrest laws for domestic violence crimes. Using variation in timing of implementation of these arrest laws across states, I utilize differences-in-differences analyses in multiple, large-scale data sets of nationally representative samples of youth population to study the impact of these laws on a number of youth mental and behavioral outcomes. Results indicate the presence of heterogeneity with respect to the impact of states’ arrest laws on the outcomes studied. The study is useful for policymakers as it provides important evidence on the effectiveness of state measures designed to reduce domestic violence. The estimates obtained in the analyses are robust to multiple sensitivity checks to address key threats to identification.
    Keywords: Domestic Violence; Warrantless Arrest Laws; Youth; Mental Health; Behavioral Outcomes; Differences-in-differences
    JEL: I12 K36
    Date: 2016–07

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