nep-law New Economics Papers
on Law and Economics
Issue of 2016‒10‒30
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. A New (Intellectual) Property Right for Non-Personal Data? An Economic Analysis By Wolfgang Kerber
  2. Securing Property Rights By Edward L. Glaeser; Giacomo A. M. Ponzetto; Andrei Shleifer
  3. Dual Corporate Tax Evasion By Katherine Cuff; Steeve Mongrain; Joanne Roberts
  4. Grantbacks, Territorial Restraints, and the Type of Follow-On Innovation: The "But for..." Defense By Ambashi, Masahito; Régibeau, Pierre; Rockett, Katharine
  5. Public Listing, Context and CSR: The Effects of Legal Origin By Marc Goergen; Salim Chahine; Geoffrey Wood; Chris Brewster
  6. Apple’s Tax Dispute With Europe and the Need for Reform By Gary Clyde Hufbauer; Zhiyao Lu
  7. Monopoly Rights and Economic Growth: An inverted U-shaped relation By UEDA Kenichi; Stijn CLAESSENS
  8. Flexible and Secure Labour Market Transitions: Towards Institutional Capacity Building in the Digital Economy By Schmid, Günther
  9. Determinants of Property Rights Protection in Sub-Saharan Africa By Simplice Asongu; Oasis Kodila-Tedika
  10. Does increasing compulsory education decrease or displace adolescent crime? New evidence from administrative and victimization data By Brilli, Ylenia; Tonello, Marco
  11. Path Dependence and Interdependence Between Institutions and Development By David Fadiran; Mare Sarr
  12. Property Rights and Labour Supply in Ethiopia By Kenneth Houngbedji
  13. Dynamic Tax Competition, Home Bias and the Gain from Non-preferential Agreements By Kaushal Kishore

  1. By: Wolfgang Kerber (University of Marburg)
    Abstract: The discussion about appropriate legal rules for the digital economy has raised the question of the ownership of non-personal data, e.g. in the context of value networks of firms, smart manufacturing and connected cars. The article analyzes from an economic perspective whether there is a need for a new exclusive IPR on data. It is shown that there are no convincing economic arguments for the in-troduction of such a new IPR, especially due to the lack of an incentive problem for the production and analysis of data. On the contrary, a new IPR on data might lead to considerable problems and dangers for competition and innovation, especially for the digital economy, which depends on the access to a broad variety of data. Therefore problems of access to data might be a much more im-portant policy issue than exclusive property rights on data.
    Keywords: Digital economy, data ownership, intellectual property
    Date: 2016
  2. By: Edward L. Glaeser; Giacomo A. M. Ponzetto; Andrei Shleifer
    Abstract: A central challenge in securing property rights is the subversion of justice through legal skill, bribery, or physical force by the strong?the state or its powerful citizens?against the weak. We present evidence that the less educated and poorer citizens in many countries feel their property rights are least secure. We then present a model of a farmer and a mine which can pollute his farm in a jurisdiction where the mine can subvert law enforcement. We show that, in this model, injunctions or other forms of property rules work better than compensation for damage or liability rules. The equivalences of the Coase Theorem break down in realistic ways. The case for injunctions is even stronger when parties can invest in power. Our approach sheds light on several controversies in law and economics, but also applies to practical problems in developing countries, such as low demand for formality, law enforcement under uncertain property rights, and unresolved conflicts between environmental damage and development.
    Date: 2016–10
  3. By: Katherine Cuff (McMaster University); Steeve Mongrain (Simon Fraser University); Joanne Roberts (University of Calgary)
    Abstract: Firms are subject to many forms of government regulation and laws. Two major sources of these regulations are corporate tax laws and labour or employment laws. For example, labour codes stipulate that firms must ensure their workplaces meet certain safety and health standards, and pay payroll taxes to cover the provision of government provided benefits to their workers, whereas corporate tax laws require firms to collect sales taxes on goods sold and pay taxes on their income or profits. There are many ways for firms to evade these legal requirements. Much of the literature examining the evasion behaviour of firms assumes that the decision to evade one form of regulation (such as labour regulation) is perfectly linked to the decision to evade another (such as paying business corporate taxes). In this paper, we separate these two evasion decisions and allow firms to decide whether to evade labour market regulations (including the payment of payroll taxes) independently from their decisions to evade corporate taxes. We characterize the firms’ optimal entry and evasion behaviour and derive the government's optimal tax policies.
    Keywords: Informal Labour Market; Labour Regulation; Tax Evasion; Payroll taxes; Corporate Income Taxes
    JEL: H32 H26 K42
    Date: 2016–10–13
  4. By: Ambashi, Masahito; Régibeau, Pierre; Rockett, Katharine
    Abstract: We analyse the effect of grantback clauses in licensing contracts. While competition authorities fear that grantback clauses might decrease the licensee's ex post incentives to innovate, a standard defence is that grantback clauses are required for the patent-owner to agree to license its technology in the first place. We examine the validity of this "but for" defense and the equilibrium effect of grantback clauses on the innovation incentives of the licensee for both non-severable and severable innovations. Under the 2004 EU Technology Transfer Guidelines, and the guidelines for some other jurisdictions, grantback clauses that apply to "non-severable" (read "infringing") innovations are considered to be less controversial than clauses that apply to "severable" innovations.. We show, to the contrary, that grantback clauses do not increase the patent-holder's incentives to license when non-severable innovations are at stake but they do when severable innovations are concerned - suggesting that the "but fo" defense might be valid for severable innovations but not for non-severable ones. Moreover we show that, for severable innovations, grantback clauses can increase the range of parameters for which follow-on innovation by the licensee occurs.
    Keywords: grantbacks; innovation; licensing
    JEL: K21 L24 O31
    Date: 2016–10
  5. By: Marc Goergen (Cardiff Business School, Cardiff University); Salim Chahine (Olayan School of Business, American University of Beirut); Geoffrey Wood (Essex Business School, University of Essex); Chris Brewster (Henley Business School, University of Reading)
    Abstract: The literature on legal origin argues that legal institutions mold what firms do: within common law systems, shareholder rights are much stronger, reducing agency issues. We explore whether publicly-listed companies are more likely to have corporate social responsibility (CSR) codes than privately-held companies, and whether the association between a public listing and the existence of a CSR code is affected by the company’s location within a specific institutional and cultural setting. We conclude that proposals to introduce more ethical dimensions to the behavior of firms need to be thought through: what works in one location may be inappropriate in another.
    Keywords: Corporate Social Responsibility, public listing, context, legal origin, comparative management
    Date: 2015–11
  6. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Zhiyao Lu (Peterson Institute for International Economics)
    Abstract: On August 30, 2016, European Competition Commissioner Margrethe Vestager demanded that Ireland reclaim €13 billion ($14.5 billion) from Apple Inc. to redress improper “state aids” conferred on the company through Irish tax rulings in 1991 and 2007. The European Commission’s demands triggered a huge uproar—from Ireland, Apple, other multinational corporations, and the US Treasury Department. According to the Commission, Apple paid an effective corporate tax rate of less than 1 percent between 2003 and 2014, through a sweetheart tax deal with Irish tax authorities. The Commission alleged this to be a breach of EU state aid rules and instructed Ireland to claim unpaid taxes from Apple. Both Apple and Ireland announced they would appeal. Apple denied the extremely low effective tax rate claimed by the Commission and insisted that it had paid all taxes in accordance with existing treaties, laws, regulations, and rulings. Ireland appealed in light of its position as a favored site for multinational corporations doing business in Europe. The US Treasury Department, aligning with Apple and Ireland, criticized the Commission’s new approach as applied in the Apple case, as well as the retroactive component of the decision and its detrimental impact on the ability of member states to honor bilateral tax treaties.
    Date: 2016–10
  7. By: UEDA Kenichi; Stijn CLAESSENS
    Abstract: Supported by most theories, employment protection often is found to reduce economic growth. Almost all existing empirical studies, however, are based on data from continental Europe and Japan, where labor protection is generous. Using data for the United States, where labor protection is minimal, we find, by contrast, positive effects but only in knowledge-intensive industries. To reconcile these facts, we propose a simple theoretical model based on a hold-up problem arising from firm-specific investment. This makes some job security efficient and the relationship between job security and growth an inverted U-shaped, i.e., basic labor protection increases growth, but generous protection reduces it. Importantly, we show that a firm faces a time inconsistency problem so that its promise of job security is not credible. Thus, legal restrictions become valuable if they are well designed. Since job security is even less for financially distressed firms, interactions also arise between financial and labor laws, as powerful banks can demand more layoffs. Using U.S. state-industry data, we confirm these effects of bank competition and employment protection, as well as their interactions.
    Date: 2016–10
  8. By: Schmid, Günther (WZB - Social Science Research Center Berlin)
    Abstract: Industry 4.0 and robots are said to speed up productivity thereby inducing a 'quantum leap' towards the 'end of work' and calling for a complete change of social security institutions that have so far been closely linked to employment. Unconditional basic income is the cry of the day, curiously advocated in particular by, for example, employers in high-tech industries and modern financial or distributive services. In the name of freedom, liberty and flexibility they suggest a form of security without any institutional complexity. The hidden agenda in the remaining empty institutional black box, however, is the dream of freedom from any bureaucracy and painstaking negotiations between competing interests or even getting rid of any responsibility to the new risks related to the digital revolution. This paper argues that the productivity leap promise of the digital economy is far from empirical evidence and that the proper answer to the new world of work are active securities, fair risk-sharing between employees, employers and the state and 'negotiated flexicurity' calling for a higher complexity of institutions corresponding to the increasing variability of employment relationships. The paper (1) starts with stylised facts about the new world of work with a focus on non-standard forms of employment in the EU28 member states and briefly explains the main determinants of this development. It (2) then proceeds with an analytical framework of the role of institutions and (3) applies this framework to develop suggestions of new security provisions to the main forms of non-standard employment. (4) The paper concludes by reflecting on the consequences for the prospective European Pillar of Social Rights.
    Keywords: Europe, non-standard employment, inclusion, productivity, flexibility, security, labour market policy, transitional labour markets, social rights
    JEL: J21 J38 J41 J48 J68 R28
    Date: 2016–10
  9. By: Simplice Asongu (Yaoundé/Cameroun); Oasis Kodila-Tedika (University of Kinshasa)
    Abstract: This article complements existing literature by assessing determinants of property rights protection with particular emphasis on history, geography and institutions in Sub-Saharan Africa. The empirical evidence is based on a sample of 47 countries for the period 2000-2007. Random effects GLS regressions are employed using property rights measurements from the Mo Ibrahim and Heritage foundations. The results broadly show that ethnic fractionalisation, Polity IV and GDP per capita have positive effects on property rights institutions while the following have negative effects: military rule, the Protestant religion, maturity from colonial independence and population density. The findings have relevant policy implications for countries in the sub-region currently on the path to knowledge-based economies.
    Keywords: Property rights protection; Panel data; Africa
    JEL: F42 K42 O34 O38 O57
    Date: 2016–03
  10. By: Brilli, Ylenia (Department of Economics, School of Business, Economics and Law, Göteborg University); Tonello, Marco (Bank of Italy, Economic Research Department, Territorial Economic Research Unit)
    Abstract: This paper estimates the contemporaneous effect of education on adolescent crime by exploiting the implementation a reform that increases the school leaving age in Italy by one year. We find that the Reform increases the enrollment rate of all ages, but decreases the offending rate of 14-year-olds only, who are the age group explicitly targeted by the Reform. The effect mainly comes from natives males, while females and immigrants are not affected. The Reform does not induce crime displacement in times of the year or of the day when the school is not in session, but it increases violent crimes at school. By using measures of enrollment and crime, as well data at the aggregate and individual level, this paper shows that compulsory education reforms have a crime reducing effect induced by incapacitation, but may also lead to an increase of crimes in school facilities plausibly due to a higher students concentration.
    Keywords: adolescent crime; school enrollment; crime displacement; incapacitation
    JEL: I21 I28 J13 K42
    Date: 2016–10–18
  11. By: David Fadiran; Mare Sarr
    Abstract: Path dependence theory, within the institutions context, means that the path of institutions promulgated within a system historically determines the nature of institutions that will ensue within the same system in the present and in the future. The paper makes use of a newly constructed index of institutions quality, and addresses three related questions; the existence of path dependence in institutions, the interdependence and causality between political and economic institutions, and lastly the interdependence between economic development and institutions. In addressing the first question, I use unit root tests to test the hypothesis that institutions promulgated during colonial times still influence institutions promulgated during the post colonial era. I also test for interdependence between institutions in Nigeria using an error correction model in analysing the extent of interdependence between political and economic institutions. Lastly, I test the critical juncture hypothesis—which argues that better institutions lead to economic development and the modernisation hypotheses—which argues that economic development leads to better institutions. The results show support for early path dependence in both political and economic institutions. I also find evidence in support of interdependence running from economic to political institutions. Lastly, there is evidence of a long-run association between institutions and economic development, with the evidence supporting the critical juncture hypothesis, more than the modernisation hypothesis.
    Keywords: institutions, Legislations, Persistence, Economic Growth and Development, Nigeria
    JEL: K00 K11 N00 N1 N47 O1 O11
    Date: 2016–10
  12. By: Kenneth Houngbedji (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics)
    Abstract: This paper investigates the change in labour supply patterns by agricultural households as a result of formalization of their land-use rights. The findings are based on panel data collected before and after a land registration programme which demarcated and provided legal recognition of the landholdings of households in the Amhara region in Ethiopia. Using a semi-parametric difference-in-difference strategy, we find that the provision of documentary evidence of land rights freed household time otherwise allocated to safeguard their landholdings from encroachment. The reduction in labour supply is driven by a decrease of time allocated to pre-planting activities requiring households to leave their land vacant until the most suitable time for planting. Indeed disputes over land boundaries are associated with neighbouring landholders pushing the boundaries of their holdings during ploughing.
    Keywords: Land administration,Time allocation,Agricultural investment,Ethiopia,Property rights
    Date: 2015–04
  13. By: Kaushal Kishore (Department of Economics, University of Pretoria, Pretoria)
    Abstract: In a dynamic two-period model of tax competition, where an investor has home bias for the country where he/she invests in the initial period, we show that tax revenue under a non-preferential taxation scheme is strictly higher compared to a preferential taxation scheme. A non-preferential taxation scheme not only increases tax revenue in the later period, it also reduces competition in the initial period. The gain from having a non-preferential regime is strictly increasing in home bias as long as home bias is not large enough. When home bias is above a critical level, the gain from having a non-preferential agreement is independent of home bias. While the literature on tax competition has identified that ``home bias" can make non-preferential taxation preferable to a preferential regime when investors are small with heterogeneous home bias, we show that even when investors are large with a discrete home bias, a non-preferential regime generates higher tax revenue compared to a preferential regime. We show that even when only one of the capital bases has home bias, a non-preferential regime generates higher tax revenue compared to a preferential regime. This paper also quantify the gain from a non-preferential regime with a parameter which captures home bias and provide clear comparative statics. Moreover, we also show that a country has an incentive to unilaterally commit to a non-preferential agreement.
    Keywords: Dynamic Tax Competition; Non-preferential regime; Preferential regime; Home Bias
    JEL: F21 H21 H25 H87
    Date: 2016–10

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