nep-law New Economics Papers
on Law and Economics
Issue of 2016‒11‒20
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Clicking on Heaven's Door: The Effect of Immigrant Legalization on Crime By Pinotti, Paolo
  2. After Halliburton: Event studies and their role in federal securities fraud litigation By Fisch, Jill E.; Gelbach, Jonah B.; Klick, Jonathan
  3. Tort Reform and the Length of Physician Office Visits By Panthöfer, Sebastian
  4. Immigrant Crime and Legal Status: Evidence from Repeated Amnesty Programs By Fasani, Francesco
  5. Posner’s Wealth Maximization for Welfare Maximization: Separating Efficiency and Equality Considerations By Yew-Kwang Ng
  6. A microeconomic model of opportunistic financial crimes: prosecutorial strategy when firms are too big to jail By Nick Werle
  7. Firms Behaving Badly: How Law-Trained Executives Affect Investor Reaction to Corporate Social Irresponsibility By Vamsi K. Kanuri; Reza Houston; Michelle Andrews
  8. The Human Rights Act should not be repealed By Conor Gearty
  9. Corruption, innovation and firm growth: Firm-level evidence from Egypt and Tunisia By Goedhuys, Micheline; Mohnen, Pierre; Taha, Tamer
  10. The Strategic Use of Abatement by a Polluting Monopoly By Guiomar Martín-Herrán; Santiago J. Rubio
  11. Takeover Rules: In Support of the Longer Minimum Bid Period By Sharon Geraghty

  1. By: Pinotti, Paolo
    Abstract: We estimate the effect of immigrant legalization on the crime rate of immigrants in Italy by exploiting an ideal regression discontinuity design: fixed quotas of residence permits are available each year, applications must be submitted electronically on specific ``Click Days'', and are processed on a first-come, first-served basis until the available quotas are exhausted. Matching data on applications with individual-level criminal records, we show that legalization reduces the crime rate of legalized immigrants by 0.6 percentage points on average, on a baseline crime rate of 1.1 percent.
    Keywords: crime; legal status; regression discontinuity design
    JEL: J61 K37 K42
    Date: 2016–11
  2. By: Fisch, Jill E.; Gelbach, Jonah B.; Klick, Jonathan
    Abstract: Event studies have become increasingly important in securities fraud litigation after the Supreme Court's decision in Halliburton II. Litigants have used event study methodology, which empirically analyzes the relationship between the disclosure of corporate information and the issuer's stock price, to provide evidence in the evaluation of key elements of federal securities fraud, including materiality, reliance, causation, and damages. As the use of event studies grows and they increasingly serve a gatekeeping function in determining whether litigation will proceed beyond a preliminary stage, it will be critical for courts to use them correctly. This Article explores an array of considerations related to the use of event studies in securities fraud litigation. It starts by describing the basic function of the event study: to determine whether a highly unusual price movement has occurred and the traditional statistical approach to making that determination. The Article goes on to identify special features of securities fraud litigation that distinguish litigation from the scholarly context in which event studies were developed. The Article highlights the fact that the standard approach can lead to the wrong conclusion and describes the adjustments necessary to address the litigation context. We use the example of six dates in the Halliburton litigation to illustrate these points. Finally, the Article highlights the limitations of event studies - what they can and cannot prove - and explains how those limitations relate to the legal issues for which they are introduced. These limitations bear upon important normative questions about the role event studies should play in securities fraud litigation.
    Date: 2016
  3. By: Panthöfer, Sebastian
    Abstract: By holding healthcare providers accountable for medical errors, the medical malpractice system should steer physicians towards providing adequate levels of care. This paper tests whether tort reforms induce physicians to be more or less careful when treating patients, using the length of office visits as a proxy for physician efforts. Analyzing data from the National Ambulatory Medical Care Survey on more than half a million physician office visits between 1993 and 2011, I find that caps on noneconomic damages, caps on punitive damages, and reforms of the joint-and-several liability rule have no impact on the time physicians spend with patients. Reforms of the collateral-source rule decrease the length office visits in some specifications and act as a substitute for managed care.
    Keywords: Managed care; Tort reform; Liability pressure
    JEL: K13 L11
    Date: 2016–11–07
  4. By: Fasani, Francesco
    Abstract: Do general amnesty programs lead to reductions in the crime rate among immigrants? We answer this question by exploiting both cross-sectional and time variation in the number of immigrants legalized generated by the enactment of repeated amnesty programs between 1990 and 2005 in Italy. We address the potential endogeneity of the "legalization treatment'' by instrumenting the actual number of legalized immigrants with alternative predicted measures based on past amnesty applications patterns and residential choices of documented and undocumented immigrants. We find that, in the year following an amnesty, regions in which a higher share of immigrants obtained legal status experienced a greater decline in non-EU immigrant crime rates, relative to other regions. The effect is statistically significant but relatively small and not persistent. In further results, we fail to find any evidence of substitution in the criminal market from other population groups - namely, EU immigrants and Italian citizens - and we observe a small and not persistent reduction in total offenses.
    Keywords: illegal migration; legalization; migration policy
    JEL: F22 J61 K37
    Date: 2016–11
  5. By: Yew-Kwang Ng (Division of Economics, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332.)
    Abstract: Posner’s proposal for wealth maximization in judiciary decisions has not been widely accepted, but the influence of the economic analysis of law it propelled has increased tremendously. In the face of criticism, Posner himself has retreated into a pragmatism with wealth maximization not the only principle used. This leads to a lack of both moral justification and consistency. This paper argues that, if not used as the ultimate objective, but as an instrument for welfare maximization, wealth maximization is much more acceptable, if it is also supplemented by appropriate redistribution in the general equality policy. This is especially so as efficiency supremacy in specific issues including the judiciary (close to wealth maximization) would then make every income group better off. This is so despite the presence of disincentive effects in general redistribution. The separation of the judiciary and the legislative may then also be justified.
    Keywords: Wealth maximization; efficiency; welfare; utilitarianism; judiciary.
    JEL: K0 H0
    Date: 2016–11
  6. By: Nick Werle
    Abstract: In the cases of corporate crime, US prosecutors can lodge charges against the corporation, its managers, or both. However, the emergence of systemically important firms, most notably in the financial sector, constrains prosecutors. This paper develops a new model of corporate criminal liability and shows how the Too Big To Jail problem reduces the deterrence effect of a crime control policy relying primarily on large corporate fines. Furthermore, this paper shows how corporate criminal liability may not incentivize a Too Big to Jail firm to invest in internal controls and may even attempt to subsidize an employees’ criminal activity. In the presence of Too Big to Jail firms, prosecutors should shift resources toward prosecutions of individual managers, so they bear a substantial personal risk from dealing dishonestly.
    JEL: F3 G3
    Date: 2015
  7. By: Vamsi K. Kanuri; Reza Houston; Michelle Andrews
    Abstract: Corporate social irresponsibility (CSI) regularly headlines the popular press, although the topic has drawn limited academic attention. We address this gap by investigating the association between the percent of law-educated board members and top management team executives in a firm and investor reaction to CSI. We hypothesize that legal degrees of executives will affect investor perceptions of firm foresight, and in turn their judgment of blame and consequent punishment. Based on abnormal returns to 662 announcements of CSI, we find that both too few and too many executives with law degrees lead investors to mete out harsher punishment. We further find that firm size, risk, and industry concentration amplify this inverted U-shaped link. Our findings contribute to research on CSI, attribution, and the executive education-firm performance link.
    Keywords: Corporate social irresponsibility, Investors, Law education, Attribution, Stock returns.
    Date: 2016–08
  8. By: Conor Gearty
    Abstract: There is no reason to repeal the Human Rights Act and the government’s manifesto commitment to do so should be dropped. The objections to it are misconceived, the arguments against it being based either on inaccurate understandings of what it says or error-strewn assertions about the nature of its impact. The political motive for attacking the Act – to undermine the UK’s association with Europe – has been overtaken by the much greater European disengagement of BREXIT.
    Keywords: Human Rights Act; BREXIT; European Convention on Human Rights; British Bill of Rights
    JEL: K19
    Date: 2016–09–07
  9. By: Goedhuys, Micheline (UNU‐MERIT); Mohnen, Pierre (UNU-MERIT, and Maastricht University); Taha, Tamer (UNU-MERIT)
    Abstract: Using recently collected firm-level data from Egypt and Tunisia, this paper explores the effect of institutional obstacles and corruption on the innovative behaviour of firms and their effect on firms' employment growth. We estimate the micro-level interactions between corruption and institutional obstacles and test the hypothesis that corruption 'greases the wheels' of firm performance when bureaucratic procedures are more severe and hampering innovation. Accounting for endogeneity and simultaneity, the paper uses a conditional recursive mixed-process model (CMP). The results show that corruption has a direct negative effect on the likelihood that a firm is an innovator, but a positive effect when interacted with institutional obstacles. This provides support for the hypothesis that corruption serves as a mechanism to bypass the bureaucratic obstacles related to obtaining the necessary business permits and licences for product innovation. These effects also resonate into firm growth, through their effect on product innovation.
    Keywords: Innovation, corruption, employment growth, Egypt, Tunisia
    JEL: L25 D73
    Date: 2016–10–11
  10. By: Guiomar Martín-Herrán (Department of Applied Economics and IMUVa, University of Valladolid); Santiago J. Rubio (Department of Economic Analysis and ERI-CES, University of Valencia)
    Abstract: This paper evaluates the effects of the lack of regulatory commitment on emission tax applied by the regulator, abatement effort made by the monopoly and social welfare comparing two alternative policy games. The first game assumes that the regulator commits to an ex-ante level of the emission tax. In the second one, in a first stage the regulator and the monopolist simultaneously choose the emission tax and abatement respectively, and in a second stage the monopolist selects the output level. We find that the lack of commitment leads to lower taxation and abatement that yield larger emissions and, consequently, a larger steady-state pollution stock. Moreover, the increase of environmental damages because of the increase in the pollution stock more than compensates the increase in consumer surplus and the decrease in abatement costs resulting in a reduction of social welfare. Thus, our analysis indicates that the lack of commitment has a negative impact of welfare although this detrimental effect decreases with abatement costs.
    Keywords: Monopoly, Commitment, Emission Tax, Abatement, Stock Pollutant
    JEL: H23 L12 L51 Q52 Q55
    Date: 2016–09
  11. By: Sharon Geraghty
    Keywords: Innovation and Business Growth
    JEL: G34 K22
    Date: 2016–11

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