nep-law New Economics Papers
on Law and Economics
Issue of 2016‒11‒13
twenty papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. On leniency and markers in antitrust: how many informants are enough? By Konstantinos Charistos; Christos Constantatos
  2. Judicial Compliance in District Courts By Chen, Daniel L.; Frankenreiter, Jens; Yeh, Susan
  3. The Negligence Rule Specificity under Radical Uncertainty By Gérard Mondello
  4. De jure and de facto institutions – disentangling the interrelationships By Jacek Lewkowicz; Katarzyna Metelska-Szaniawska
  5. The welfare cost of lawlessness: evidence from Somali piracy By Timothy Besley; Thiemo Fetzer; Hannes Mueller
  6. Informality and Optimal Public Policy By Bardey, David; Mejía, Daniel
  7. The Limits of the Judiciary within the Eurasian Integration Process By Maksim Karliuk
  8. Environmental human rights issues on international investment arbitration and economic development: perspectives and legal approach By Amaya Muñoz, Wilson Enrique; Barón Ortegón, Brayan Alexander; Páramo Herrera, Isis Catalina; Martínez Castellanos, Antonio José
  9. Social preferences or sacred values? Theroy and evidence of deontological motivations By Chen, Daniel L.; Schonger, Martin
  10. Policies Affect Preferences: Evidence from Random Variation in Abortion Jurisprudence By Chen, Daniel L.; Levonyan, Vardges; Yeh, Susan
  11. Evolution of the Judiciary: Political Cycles in Judicial Exits from the U.S. Courts of Appeals By Chen, Daniel L.
  12. Regulatory responsiveness in India: A normative and empirical framework for assessment By Anirudh Burman; Bhargavi Zaveri
  13. The role of innovation transfer mechanisms in economic development: perspectives and legal approach By Amaya Muñoz, Wilson Enrique; Barón Ortegón, Brayan Alexander; Páramo Herrera, Isis Catalina
  14. Implicit Egoism in Sentencing Decisions: First Letter Name Effects with Randomly Assigned Defendants By Chen, Daniel L.; Prescott, J.J.
  15. Legislative strategy for setting up an independent debt management agency. By Pandey, Radhika; Patnaik, Ila
  16. The impact on wages and worked hours of childbirth in France. By Bruno Rodrigues; Vincent Vergnat
  17. Economic Effects of Open Access to Scientific Publications By Marinov, Eduard
  18. You Are In Charge – Experimentally Testing the Motivating Power of Holding a Judicial Office By Christoph Engel; Lilia Zhurakhovska
  19. Analyzing the Influence of Occupational Licensing Duration on Labor Market Outcomes By Suyoun Han; Morris M. Kleiner
  20. Search costs in concentrated markets: An experimental analysis By Möllers, Claudia; Stühmeier, Torben; Wenzel, Tobias

  1. By: Konstantinos Charistos (Department of Economics, University of Macedonia); Christos Constantatos (Department of Economics, University of Macedonia)
    Abstract: In this paper we investigate the impact of leniency programs on firms’ decision to collude. We depart from previous literature by relaxing the assumption that evidence provided by a single firm suffices to convict an existing cartel with certainty. Assuming the conviction-probability to be increasing in the number of reporting firms, we show first that efficient cartel deterrence requires incentives for all firms to report. Under a regime that secures a marker for the first in line applicant, eligibility for leniency should be extended to at least a second informant. Further, we show that the introduction of the marker system has an ambiguous impact on cartel deterrence. In relation to the manner that the marker is secured and the cartel-related evidence is allocated, we derive the conditions under which allowing the first applicant to secure a marker enhances cartel deterrence.
    Keywords: antitrust enforcement, collusion, leniency programs.
    JEL: K21 L12 L41
    Date: 2016–11
  2. By: Chen, Daniel L.; Frankenreiter, Jens; Yeh, Susan
    Abstract: Public enforcement of law relies on the use of public agents, such as judges, to follow the law. Are judges motivated only by strategic interests and ideology, as many models posit, rather than a duty to follow the law? We use the random assignment of U.S. Federal judges setting geographically-local precedent to document the causal impact of court decisions in a hierarchical legal system. We examine lower court cases filed before and resolved after higher court decisions and find that lower courts are 29-37% points more likely to rule in the manner of the higher court. The results obtain when the higher court case was decided in the same doctrinal area as the pending case and when the higher court case was decided on the merits. Reversals by the higher court have no significant effects. These results provide clean evidence that judges are motivated to follow the law and are not solely motivated by policy preferences.
    Date: 2016–10
  3. By: Gérard Mondello (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: This article is an attempt to reassess the relationships between the strict liability regime and the negligence rule under radical uncertainty (ambiguity theory). In an accident model two representative agents (potential injurer and victim) form divergent beliefs about the probability distribution of an accident and the potential damage scale. It issues on the following results: 1) When the injurer's wealth cover the damage cost, then the socially first-best level of care is established by the injurer under strict liability only. When, the injurer's wealth is insufficient, this level is not reach (capped strict liability regime for instance). 2) Under negligence, the authorities (Regulator or Court) can choose as first best level of care either the level that favors the injurer's interests or the victim ones of. No rational rule can justify a choice rather than the other. 3) The efficiency of both regimes cannot be compared because they obey to different logics.
    Keywords: unilateral accident, tort law, safety, large risks, ambiguity, pessimism and optimism, strict liability, negligence, ultra-hazardous activities
    JEL: D62 K13 K23 K32 Q52 Q58
    Date: 2016–11
  4. By: Jacek Lewkowicz (Faculty of Economic Sciences, University of Warsaw); Katarzyna Metelska-Szaniawska (Faculty of Economi Sciences, University of Warsaw)
    Abstract: In this paper we contribute to the debate on the nature of institutions and their economic effects by extending the focus to the de jure – de facto institutional distinction. Firstly, we define and conceptualize de facto institutions, as well as elaborate on their place in the broad institutional system and identification. Then we investigate the possible interrelationships between de facto and de jure institutions. Finally, we make a link between these interrelationships and economic outcomes. In this way the paper fills an underexploited niche in institutional research, which is a major background for law and economics.
    Keywords: new institutional economics, de jure institutions, de facto institutions, formal institutions, informal institutions, institutional interrelationships
    JEL: B40 B52 K19 P21
    Date: 2016
  5. By: Timothy Besley; Thiemo Fetzer; Hannes Mueller
    Abstract: In spite of general agreement that establishing the rule of law is central to properly functioning economies, little is known about the cost of law and order breakdowns. This paper studies a specific context of this by estimating the effect of Somali piracy attacks on shipping costs using data on shipping contracts in the dry bulk market. To estimate the effect of piracy, we look at shipping routes whose shortest path exposes them to piracy and find that the increase in attacks in 2008 led to around an 8% to 12% increase in costs. From this we calculate the welfare loss imposed by piracy. We estimate that generating around 120 USD million of revenue for Somali pirates led to a welfare loss in excess of 630 USD million, making piracy an expensive way of making transfers.
    JEL: D23 H11 K42
    Date: 2015–04
  6. By: Bardey, David; Mejía, Daniel
    Abstract: This article tackles the feature of optimal public policy such as the level of enforcement and the supply of public goods in an economy characterized by a huge informal sector. We consider informality as the group of productive activities which,before hand, do not comply (totally or partially) with government regulations. The Government intervenes as a Stackelberg leader and has to decide how to allocate public expenditures, collected through the tax system, between the provision of a public good, which can only be used for formal activties, and enforcement effort, aimed at detecting informal firms that evade taxes. Taking the public policy as given, a representative family, owner of a representative ?rm, decides how to split a ?x amount of labour supply between formal and informal activities. Our results show that the greater are the distortions in the process of tax collection, the larger is the size of the informal sector. Finally, we derive the properties of the optimal public policy. In particular, we show that the shadow cost of public fund represent the rationale of enforcement spending. We also point out that the size of the tax distortion (e.g. the shadow cost of public funds) is inversely related to total income, the tax rate and the provision of the public good. Our calibration results reveal that higher values of the shadow cost of public funds call for more stick (more enforcement) and less carrot (public goods).
    Keywords: Informality, public good and enforcement.
    JEL: K10 K20 K42 O17
    Date: 2016–10
  7. By: Maksim Karliuk (National Research University Higher School of Economics)
    Abstract: The Eurasian Economic Union (EAEU) has its own judicial body tasked with ensuring the uniform application of EAEU law by member states and institutions. The EAEU Court has a number of important powers; however, it is noteworthy, that such crucial ones as the preliminary ruling procedure and the ability to review actions of member states upon request of the EAEU regulatory body are missing. This paper reviews the missing powers in a search for the reasons behind their removal, and the ensuing ramifications. It also uncovers other limitations of the Eurasian judiciary and its strained relationships with national judiciaries. It is argued, that the EAEU Court will struggle to fulfil its mission without solutions compensating its limited powers
    Keywords: Eurasian integration, Eurasian Economic Union, Eurasian judiciary, Court of the Eurasian Economic Union, preliminary ruling, infringements.
    JEL: K33
    Date: 2016
  8. By: Amaya Muñoz, Wilson Enrique; Barón Ortegón, Brayan Alexander; Páramo Herrera, Isis Catalina; Martínez Castellanos, Antonio José
    Abstract: English Abstract: This article explores the relationship between International Investment Arbitration and the international standards of Human Rights, including the ones related to the environment. We found that there is an opposition when applying the Human Rights to the International Investment Regimen. We argue that there are sufficient law foundations to make the investor, and specifically the corporations they own, responsible for their violations of other international standards, even though they are not expressly named in investments treaties. But, there is a problem reflected in the lack of enforceability of the International Human Rights Law in the International Investment Regimen. Spanish Abstract: Este artículo explora la relación entre el Arbitraje Internacional de Inversión y las normas internacionales de Derechos Humanos, incluyendo por tanto las relacionadas con el ambiente. Se encontró que existe una oposición para aplicar los Derechos Humanos en el Régimen Internacional de Inversiones. Consideramos que existen suficientes fundamentos de derecho para que el inversor, y específicamente las empresas que poseen, sea responsable de sus violaciones de los demás estándares internacionales, aunque no estén expresamente en los tratados de inversión. Sin embargo, hay un problema de falta de aplicabilidad de la legislación internacional de derechos humanos en el régimen internacional de inversiones.
    Keywords: international arbitration, international investment, human rights, environment, investment protection, development economics, arbitraje internacional, inversión internacional, derechos humanos, ambiente, protección de la inversión, economía del desarrollo
    JEL: K00 K20 K22 K32
    Date: 2015–12
  9. By: Chen, Daniel L.; Schonger, Martin
    Abstract: Recent advances in economic theory, largely motivated by experimental findings, have led to the adoption of models of human behavior where a decision-maker not only takes into consideration her own payoff but also others’ payoffs and any potential consequences of these payoffs. Investigations of deontological motivations, where a decision-maker makes her choice not only based on the consequences of a decision but also the decision per se have been rare. We propose an experimental method that can detect an individual’s deontological motivations by varying the probability of the decision-maker’s decision having consequences. It uses two states of the world, one where the decision has consequences and one where it has none. We show that a purely consequentialist decision-maker whose preferences satisfy first-order stochastic dominance will choose the decision that leads to the best consequences regardless of the probability of the consequential state. A purely deontological decision-maker is also invariant to the probability. However, a mixed consequentialist-deontological decision-maker’s choice changes with the probability. The direction of change gives insight into the location of the optimand for one’s duty. We provide a formal interpretation of major moral philosophies and a revealed preference method to detect deontological motivations and discuss the relevance of the theory and method for economics and law.
    Keywords: Consequentialism, deontological motivations, normative commitments, social preferences, revealed preference, decision theory, first order stochastic dominance, random lottery incentive method
    JEL: D6 K2
    Date: 2016–10
  10. By: Chen, Daniel L.; Levonyan, Vardges; Yeh, Susan
    Abstract: Whether policies shift preferences is relevant to policy design. We exploit the random assignment of U.S. federal judges creating geographically local precedent and the fact that judges’ politics, religion, and race predict decision-making in abortion jurisprudence. Instrumenting for abortion jurisprudence with exogenous judicial characteristics, we estimate the impact of abortion jurisprudence on state laws, campaign donations, and abortion attitudes. We verify information transmission in that pro-life abortion jurisprudence caused restrictive state laws and increased campaign donations to pro-choice causes. Pro-choice abortion decisions shifted preferences against legalized abortion in the short-run, but in the longer-run, abortion views followed court decisions. Pro-choice decisions affected Republicans while pro-life decisions affected Democrats. Counterfactual exercises suggest that had abortion cases in the last half-century been decided the opposite way, the increase in pro-life attitudes among Republicans would have been steeper and Democrats would have been more pro-choice. Our estimates complement a historical narrative that turning to the courts to vindicate rights often led to resistance and subsequent acceptance and we present a model consistent with these facts.
    Keywords: Backlash, Expressive Law, Abortion, Norms
    JEL: D72 P48 Z1
    Date: 2016–10
  11. By: Chen, Daniel L.
    Abstract: Using data from 1802 to 2004, I show that U.S. Courts of Appeals judges are less likely to retire in each of the three quarters preceding a Presidential election when the party of the President at the time the judge leaves is different from the party of the U.S. President who appointed the judge. Judges are more likely to resign in each of the four quarters after a Presidential election, when the party of the President at the time the judge leaves is the same as the party of the President that appointed the judge. My results suggest that 13% of retirements and 43% of resignations are politically motivated. Previous research has not found political cycles because they relied on judges’ self-reports or conducted yearly rather than quarter-to-election analysis. I also show that these political cycles have increased in recent years, which may raise concerns about the political evolution of the judiciary.
    Keywords: Judicial Tenure, Counter-Majoritarian Difficulty, Polarization
    JEL: K00 Z1
    Date: 2016–10
  12. By: Anirudh Burman (National Institute of Public Finance and Policy); Bhargavi Zaveri (Indira Gandhi Institute of Development Research)
    Abstract: This paper seeks to measure the extent to which Indian regulators are responsive in the performance of their functions. The paper focuses on one function common to all Indian statutory regulators, namely, regulation making. To measure responsiveness, the paper constructs an index of benchmarks of responsive conduct, with corresponding quantifiable outputs. It empirically measures the responsiveness of the telecom and securities markets regulators in India, on this index. The paper finds that there are significant differences among the laws governing Indian regulators in the context of the requirement to be responsive, and that the degree of responsiveness of Indian regulators is directly proportional to the legal requirement for following participatory processes.
    Keywords: Regulatory performance; regulatory accountability; regulatory responsiveness; regulatory benchmarking; legal basis for responsiveness
    JEL: K40 O17 P34 P37 P48
    Date: 2016–07
  13. By: Amaya Muñoz, Wilson Enrique; Barón Ortegón, Brayan Alexander; Páramo Herrera, Isis Catalina
    Abstract: English Abstract: Currently, innovation depends largely on the efficiency of the legislation concerning means to transform knowledge into innovation, and the mechanisms of international innovation transfer. The way and speed of knowledge transmission and know-how are crucial for the economic development of a nation. The following paper explores, first, the status of the legal framework for innovation transfer articulated with an economic analysis; then, the main features of the regulations on intangible property for the Colombian case are identified; finally, conclusions are drawn in terms of economic and legislative policies. Spanish Abstract: La innovación depende en gran medida de la eficiencia de la legislación concerniente a los medios para transformar el conocimiento en innovación, y los mecanismos de transferencia internacional de innovación. La forma y la velocidad de transmisión de conocimiento y el know-how resultan cruciales para el desarrollo económico de una nación. El siguiente trabajo explora, en primer lugar, el estado del marco legal para la transferencia de innovación y lo articula con un análisis económico; después, se identifican las principales características de la normatividad sobre propiedad intangible para el caso colombiano; finalmente, se extraen conclusiones de política económica y legislativa.
    Keywords: technology transfer, innovation transfer, free trade agreements, copyright, legal and institutional framework, economic development, transferencia de tecnología, transferencia de innovación, acuerdos de libre comercio, derechos de autor, marco institucional y legal, desarrollo económico
    JEL: K0 K2 O1
    Date: 2016–11–02
  14. By: Chen, Daniel L.; Prescott, J.J.
    Abstract: Implicit egotism—in particular, positive unconscious associations that individuals have with others who share their names or first initials—is a mainstay of modern psychology textbooks, but the interpretation of prior field studies has recently come under criticism for lack of adequate control, reverse causality, and ethnic heterogeneity. Using unique data from the New Orleans District Attorney’s Office on 48,988 defendants that were randomly assigned to judges from 1988-1999, we identify the causal effect of matching first initials. In contrast to positive affect, we find that judges assign 8% longer sentences on average (about two-three months) when they match on first initials. The effect is robust to controls and removal of outliers. No effect is found for second-letter matches, last-letter matches, or randomly reassigned names. The effects are somewhat larger for defendants categorized as Negroes by the New Orleans District Attorney’s Office, which could be due to sampling variation or due to behavioral biases playing a stronger role in evaluations when decision makers are nearly indifferent. The effects are also somewhat larger for judges categorized as Whites. The negative effect of sharing first initials explains 0.03% of variation. Finally, we interpret the negative behavioral effect as threatened egotism, in which individuals motivated to manage self-image (implicit egoism) create social distance from negatively- valenced targets perceived to be associated with the self.
    Date: 2016–10
  15. By: Pandey, Radhika (National Institute of Public Finance and Policy); Patnaik, Ila (National Institute of Public Finance and Policy)
    Abstract: The Public Debt Management Agency (PDMA) is a body that issues public debt with the objective of keeping long term costs of government borrowing low. In India, the existing legal framework obliges the government to give the task of managing its debt to the RBI. Pursuant to its role as debt manager, RBI set up market infrastructure such as an exchange and a depository. Carve-outs were made in the regulation of securities, to allow the RBI to regulate the bond market. Over the last 20 years, the proposal to establish an independent PDMA has been repeatedly put forward. In this paper, we work out the legal strategy to set up a PDMA. We show the transition path for the roll out and for the movement of the functions, accounts, records and systems to the new agency in a phased manner.
    Keywords: Public debt management ; Market infrastructure ; Market regulation, Government securities
    JEL: H63 H74 K10 L51
    Date: 2016–10
  16. By: Bruno Rodrigues; Vincent Vergnat
    Abstract: Using French administrative data, we estimate the impact of the birth of a first, second and third child on hourly wages, as well as for hours worked, for both women and men. We compute the impact on these out- come variables, two, four and six years after the birth of the child, and focus on the distinction between highly educated women and women with a high school degree or less. We also take the maternity leave (or pa- ternity leave in case of men) duration into account. Estimation is done with difference-in-differences and we compute bootstrapped confidence intervals. Results show both lower and highly educated women decrease significantly their working hours after the birth of their child. Men are, for the most part, not much impacted by the birth of their children. Ma- ternity leave duration influences the magnitude of the impact of the birth, especially on the hourly wages of educated women.
    Keywords: Fertility decisions, Labour Supply, Difference in Differences, Family pay gap.
    JEL: D10 J13
    Date: 2016
  17. By: Marinov, Eduard
    Abstract: With the development of digital technology and especially the possibilities for electronic publishing Open access publishing is becoming more and more a global phenomenon. Open access means unrestricted online access to scholarly research and research data. The paper presents the common definitions, the types and vehicles for delivering Open access to scientific publications. Because of its economic efficiency, the potential economic benefits of Open access might have an impact on many other groups besides the users and the authors themselves – publishers, scientific institutions, specific industries, etc. Economic effects of OA are analysed through the concept of its benefits which could generally be divided into two groups – individual and collective. Besides the economic benefits, one must also consider the “price” of OA, as well as its limitations. Together with the effects of Open access that support the development of science, its use could be regarded as a means to increase social welfare as well.
    JEL: K0 O31 O35
    Date: 2016–02
  18. By: Christoph Engel (Max Planck Institute for Research on Collective Goods); Lilia Zhurakhovska (University of Duisburg-Essen)
    Abstract: Apparently judges’ decisions are not motivated by maximizing their own profit. The literature uses two strategies to explain this observation: judges care about the long-term monetary consequences for themselves, or individuals who are more strongly motivated by the common good self-select into the profession. We suggest that there is an additional explanation, the "office motive". In a lab experiment, we rule out both traditional explanations by design. Nonetheless authorities do a reliable job at overcoming a social dilemma. Calling the authorities "public official" or "judge" increases their sensitivity towards the degree by which individuals are selfish, and it reduces the effect of their social value orientation (making them more neutral). This suggests that the socially desirable effect is not driven by anger or sympathy with the victims, but follows from the desire to fulfill the expectations that come with the assigned task. We test three extensions: When given an opportunity to announce an explicit policy, judges become less sensitive to the objective degree of reproach, and more sensitive to their social value orientation. If judges are elected or experienced, they react more intensely to norm violations. Experienced judges are more affected by their social value orientation.
    Keywords: judicial behavior, office motive, public-goods experiment, judicial frame, election, experience
    JEL: C91 D03 D63 D73 H11 H41 H83 K41
    Date: 2016–10
  19. By: Suyoun Han; Morris M. Kleiner
    Abstract: We analyze the labor market influence of the duration of occupational licensing statutes for 12 major universally licensed occupations over a 73 year period. These occupations comprise the vast majority of workers in these regulated occupations in the United States. Time from the start of state occupational licensing statutes (i.e., licensing duration) may matter in influencing labor market outcomes. Adding to or raising the entry barriers is likely easier once an occupation is established and has gained influence in a political jurisdiction. States often enact grandfather clauses and ratchet up requirements that protect existing workers and increase entry costs to new entrants. We provide among the first estimates of potential economic rents to grandfathering. We find that duration years of occupational licensing are positively associated with wages for continuing and grandfathered workers. The estimates show a positive relationship of duration with hours worked, but we find moderately negative results for participation in the labor market. The universally licensed occupations, however, exhibit heterogeneity in outcomes. Consequently, unlike some other labor market public policies, such as minimum wages or direct unemployment insurance benefits, occupational licensing would likely influence labor market outcomes when measured over a longer period of time.
    JEL: J08 J3 J38 J44 J8 J88 K0 K2 L12 L38 L51 L84 L88
    Date: 2016–11
  20. By: Möllers, Claudia; Stühmeier, Torben; Wenzel, Tobias
    Abstract: This paper experimentally studies the role of search cost in duopoly markets where sellers may be able to coordinate pricing decisions. We vary the level of search cost and whether sellers can communicate. While we find that consumers are more likely to invest in search when cost is reduced, we find that a reduction of search cost does not influence prices. This effect is not influenced by the availability of seller communication. Our results suggest that policy interventions that aim to increase the competitiveness of markets via reducing search cost may not be effective in concentrated markets.
    Keywords: Search,Collusion,Regulation
    JEL: K23 L13 L51
    Date: 2016

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