nep-law New Economics Papers
on Law and Economics
Issue of 2016‒12‒18
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. On Punishment Severity and Crime Rates By Tim Friehe; Thomas J. Miceli
  2. Deterring corruption and cartels : in search of a coherent approach By Auriol, Emmanuelle; Hjelmeng, Erling; Søreide, Tina
  3. Access to what? Legal agency and access to justice for indigenous peoples in Latin America By Daniel M. Brinks
  4. Avoiding Convictions: Regression Discontinuity Evidence on Court Deferrals for First-Time Drug Offenders By Mueller-Smith, Michael; Schnepel, Kevin T.
  5. Cheat or Perish? A Theory of Scientific Customs By Benoît Le Maux; Sarah Necker; Yvon Rocaboy
  7. Screening for Patent Quality: Examination, Fees and the Courts By Schankerman, Mark; Schuett, Florian
  8. Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance By Simplice Asongu; Jacinta Nwachukwu
  9. Universal Economic Plan Based Law Constitutions of Kingdom and Nations By Kavak, Mesut
  10. Status Quo Institutions and the Benefits of Institutional Deviations By Elert, Niklas; Henrekson, Magnus
  11. Deterrence, peer effect, and legitimacy in anti-corruption policy-making: An experimental analysis By Amadou Boly; Robert Gillanders; Topi Miettinen
  12. Adjudication: Type-I and Type-II Errors By Matteo Rizzolli
  13. Drug Shortages, Pricing, and Regulatory Activity By Christopher Stomberg

  1. By: Tim Friehe (University of Marburg); Thomas J. Miceli (University of Connecticut)
    Abstract: Punishment severity and crime rates vary across jurisdictions. Some countries have punitive sanctions and nevertheless experience relatively high crime rates. This paper explores potential sources of the interjurisdictional heterogeneity in the optimal law enforcement model, paying particular attention to the possibility that the high crime despite high sanctions outcome can be socially optimal. JEL Classification:K42 Key words: crime, deterrence, optimal sanctions, fairness, political economy
    Date: 2016–12
  2. By: Auriol, Emmanuelle; Hjelmeng, Erling; Søreide, Tina
    Abstract: This article addresses how the rules intended to protect consumers and taxpayers from economic crime, namely leniency and cartel settlements in competition law, criminal sanctions and debarment of suppliers from participation in public tenders for bribery, work together. While the economic reasoning behind these rules makes sense when considering each one of them in isolation, their impact is weaken when they are opposing each other. Competition authorities are narrowly mandated to control competition, and they do not seek out corruption. For criminal law investigators problems are created if they interfere (because it would undermine the leniency program); conversely, there are problems if they stay away (because that would undermine enforcement of corruption and other economic crimes). We propose to strengthen the regulation of corporate misconduct through better collaboration and integration of the other law enforcement functions and institutions that exist. The first step is to maintain and share a centralized database on firms’ offenses and settlements with anti-trust and procurement authorities. The second step is to expand the mandate and competence of competition authorities to search for, and react against, corruption.
    Date: 2016–11
  3. By: Daniel M. Brinks
    Abstract: In this paper I issue a call for a primary focus on expanding and strengthening alternative, community-based justice system, as a strategy for securing the full benefits of legal agency to indigenous and other culturally distinct groups. I do so because what lies within the formal justice system—the very system to which so many well-meaning programmes promise access—is, for these groups and their members, often partial justice at best. Many of the substantive justice claims of the indigenous are simply incommensurable with the substantive content of state-based law. Increasing access to that law, therefore, still falls short of legal agency. Efforts to increase the space governed by autochthonous justice are more likely to produce true legal agency for both the communities and their members, although they raise important issues for included subgroups, such as women or culturally nonconforming groups. Somewhat paradoxically, indigenous groups’ engagement with the very apex of formal systems, through constitutional litigation, has been one avenue for increasing that space, thus reflecting the exercise of collective legal agency in the pursuit of collective and individual legal agency.
    Keywords: access to justice, indigenous rights, legal agency, legal empowerment
  4. By: Mueller-Smith, Michael; Schnepel, Kevin T.
    Abstract: This paper studies the causal impact of court deferrals, a legal strategy to help defendants avoid a felony conviction record, on the future criminal and labor market outcomes of first-time felony drug offenders. To accomplish this, we exploit two natural experiments in Harris County, Texas, in which defendants appearing in court one day versus the next experienced abruptly different likelihoods of deferral. In 1994 deferral rates dropped by 34 percentage points the day following the implementation of a penal code reform; in 2007 deferral rates increased by 22 percentage points the day after the unexpected failure of a ballot initiative to expand the county jail. Using administrative data and local polynomial regression discontinuity methods, we find robust evidence consistent across both experiments that regimes with expanded use of court deferrals generated substantially lower rates of reoffending and unemployment over a five-year follow-up period. Additional analysis delves further into the timing, nature and incidence of these impacts. Together our results suggest that increasing the use of deferral programs may be an attractive and feasible option for a jurisdiction seeking to reduce the fiscal cost and community impact of its criminal justice system.
    Keywords: felony records, criminal justice, drug offenders, recidivism, labor market
    Date: 2016–11
  5. By: Benoît Le Maux (CREM-CNRS and Condorcet Center, University of Rennes 1, France); Sarah Necker (University of Freiburg, Walter-Eucken Institute, Deutschland); Yvon Rocaboy (CREM-CNRS and Condorcet Center, University of Rennes 1, France)
    Abstract: We develop a theory of the evolution of scientific misbehavior. Our empirical analysis of a survey of scientific misbehavior in economics suggests that researchers’ disutility from cheating varies with the expected fraction of colleagues who cheat. This observation is central to our theory. We develop a one-principal multi-agent framework in which a research institution aims to reward scientific productivity at minimum cost. As the social norm is determined endogenously, performance-related pay may not only increase cheating in the short run but can also make cheat-ing increasingly attractive in the long run. The optimal contract thus depends on the dynamics of scientific norms. The premium on scientific productivity should be higher when the transmission of scientific norms across generations is lower (low marginal peer pressure) or the principal cares little about the future (has a high discount rate). Under certain conditions, a greater probability of detection also increases the optimal productivity premium.
    Keywords: Economics of Science, Contract Theory, Scientific Misbehavior, Social Norms
    JEL: A11 A13 K42
    Date: 2016–12
  6. By: Ronconi, Lucas; Kanbur, Ravi
    Abstract: This paper provides, to our knowledge for the first time, cross-country measures of enforcement of labor law across almost every country in the world. The distinction between de jure and de facto regulation is well understood in theory, but almost never implemented in crosscountry empirical work because of lack of data. As a result, influential papers like the one by Botero et. al. (2004) published in the Quarterly Journal of Economics, which have shaped the policy debate by finding strong negative consequences of labor regulation on labor market outcomes, are based entirely on measures of de jure stringency of regulations. We show that this neglect of regulation enforcement matters. There is, on average, a negative correlation between the stringency of labor regulation and the intensity of its enforcement. The strong results of Botero et. al. (2004) on the consequences of labor regulation, and the hypotheses of La Porta et. al (2008) on the legal origin theory of regulation stringency, no longer hold for effective labor regulation.
    Keywords: Labor Regulation, Enforcement, Effective Regulation, Legal Origin Theory, Labor Market Outcomes, Labor and Human Capital, Marketing, J88, K42,
    Date: 2016–02
  7. By: Schankerman, Mark; Schuett, Florian
    Abstract: We develop an integrated framework to study how governments can improve the quality of patent screening. We focus on four key policy instruments: patent office examination, pre- and post-grant fees, and challenges in the courts. We show that there are important complementarities among these instruments, and identify conditions under which they can be used to achieve either partial or complete screening. We simulate the model to study the welfare effects of different policy reforms. We show that intensifying patent office examination, frontloading patent fees and capping litigation costs all generate welfare gains, while replacing examination with a pure registration system reduces welfare.
    Keywords: courts; innovation; litigation; patent fees; patents; screening
    JEL: D82 K41 L24 O31 O34 O38
    Date: 2016–12
  8. By: Simplice Asongu (Yaoundé/Cameroun); Jacinta Nwachukwu (Coventry University, UK)
    Abstract: This study investigates the effect of governance on capital flight by bundling and unbundling governance. The empirical evidence is based on 37 African countries for the period 1996-2010 and the Generalised Method of Moments. Governance is bundled by principal component analysis, namely: (i) political governance from political stability and ‘voice and accountability’; (ii) economic governance from government effectiveness and regulation quality and (iii) institutional governance from corruption-control and the rule of law. The following findings are established. (i) Political stability and ‘voice and accountability’ reduce capital flight while the collective effect of political governance is not significant. (ii) Economic governance increases capital flight whereas the individual effects of regulation quality and government effectiveness are not significant. (iii) Corruption-control and institutional governance negatively affect capital flight whereas the impact of the rule of law is not significant. (iv) Taken together, Corruption-control is the most effective governance weapon in the fight against capital flight. (v) Priority in the Washington Consensus is more effective at fighting capital flight compared to the Beijing Model. Policy implications are discussed.
    Keywords: Econometric modelling; Capital flight; Governance; Africa
    JEL: C50 E62 F34 O55 P37
    Date: 2016–04
  9. By: Kavak, Mesut
    Abstract: In this work, touched on some social issues whatever the result, and a raising awareness was aimed by some new technological upgrades for vital infrastructures of states, social order and economic plan. The main aim is one world order which has no king and accepts nations as local governances as a requirement of hierarchical order. It is completely based on economic benefits of all nations as there is no alternative to establish a healthy economic order as economic management is directly related with laws. As the important is a law exists or not, or is just or not for justice, also it encourages to develop organic laws in state institutions as it recognizes any state institution as autonomous. This building is a building which is actually dependent of economy, counts states of the world as local governances as a requirement of one world order; does not stipulate working and military service; promises that no charge for houses, energy, education, judgment, security, health care, public transport, marriage; promises removing armies limited manner, removing nuclear weapons and establishing in space but the special conditions. Also there are many new technological upgrades for vital infrastructure of states, space technologies are included as well.
    Keywords: colonial order, kingdom constitution, constitution of nations, universal economic plan
    JEL: K00
    Date: 2016
  10. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: The purpose of this paper is to nuance the widely held view that well-functioning institutions are the ultimate prerequisite for innovation and entrepreneurship. This is done by putting the spotlight on the role that formal and informal institutions have in serving the economic status quo, conserving old habits and incumbent economic interests. Therefore, existing institutions often act as impediments to entrepreneurship and innovation. We argue that a common yet underappreciated source of institutional change arises when individuals deviate from the behavior stipulated by existing institutions. All types of deviations are certainly not beneficial, but when they take the form of innovations introduced by entrepreneurs, they can be a particularly powerful source of economic and institutional change. An institutional setup should strike a balance between the need for stability that protects people’s expectations and flexibility and adaptability to innovations and the ensuing entrepreneurship.
    Keywords: Regulation; Norms; Innovation; Entrepreneurship
    JEL: L50 M13 O31
    Date: 2016–12–08
  11. By: Amadou Boly; Robert Gillanders; Topi Miettinen
    Abstract: In our framed laboratory experiment, two Public Officials, A and B, make consecutive decisions regarding embezzlement from separate funds. Official B observes Official A’s decision before making their own. There are four treatments: three with deterrence and one without. We find a peer effect in embezzlement in that facing an honest Official A reduces embezzlement by Official B. Likewise, deterrence matters in that higher detection probabilities significantly decrease embezzlement. Crucially, detection is more effective in curbing embezzlement when chosen by an honest Official A compared to a corrupt Official A at almost all individual detection levels. This ‘legitimacy’ effect may help explain why anti-corruption policies can fail in countries where the government itself is believed to be corrupt.
    Keywords: corruption, deterrence, embezzlement, laboratory experiment, legitimacy, peer effect
  12. By: Matteo Rizzolli (LUMSA University)
    Abstract: Adjudicative procedures meant at establishing truth about facts on defendants’ behavior are naturally prone to errors: defendants can be found guilty/liable when they truly were not (type-I errors) or they can be acquitted when they should have been convicted (type-II errors). These errors alter the incentives of defendants to comply with norms. We review the literature with a particular focus on type-I errors.
    Keywords: type-I errors, wrongful convictions; justice concerns, burden of proof, deterrence; law enforcement
    JEL: K4
    Date: 2016–12
  13. By: Christopher Stomberg
    Abstract: This study examines the patterns and causes of shortages in generic non-injectable drugs (e.g., tablets and topicals) in the United States. While shortages for injectable drugs have garnered more attention, shortages of other forms of prescription drugs have also been on the increase. In fact, they follow a strikingly similar trend with a number of important tablet drugs having recently been affected by shortage. This poses important questions about the root causes of these trends since most explanations found in the literature are specific to generic injectable drugs. Using a simple heuristic framework, three contributing factors are explored: regulatory oversight, potential market failures in pricing/reimbursement, and competition. This paper features an empirical examination of the contribution of changes in regulatory oversight to drug shortages. A pooled dynamic regression model using FDA data on inspections and citations reveals a statistically significant relationship between FDA regulatory activity (inspections and citations) and drug shortage rates. This result cuts across both injectable and non-injectable drugs, and could reveal a transition in equilibrium quality that should be transitory in nature, but it should also be interpreted with care given the other factors likely affecting shortage rates.
    JEL: I11 L11 L5
    Date: 2016–12

This nep-law issue is ©2016 by Eve-Angeline Lambert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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