nep-law New Economics Papers
on Law and Economics
Issue of 2017‒04‒02
seven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Publicly announced speed limit enforcement and its impact on road safety: Evidence from the German Blitzmarathons By Molitor, Ramona
  2. Shades of Grey: Business Compliance with Fiscal and Labour Regulations By Katherine Cuff; Steeve Mongrain; Joanne Roberts
  3. Intellectual Giftedness for Leadership: How Robust is the Crime Reducing Effect of Intellectual Class? By Burhan, Nik Ahmad Sufian; Che Razak, Razli; Selamat, Muhamad Rosli; Rosli, Muhamad Ridhwan
  4. Whistle-Blower Protection: Theory and Experimental Evidence By Mechtenberg, Lydia; Muehlheusser, Gerd; Roider, Andreas
  5. The Inner Working of the Board : Evidence from the Emerging Markets By de Haas, Ralph; Ferreira, Daniel; Kirchmaier, Tom
  6. Close interaction, incompatible regimes, contentious challenges: The transnational movement to protect privacy By Tarrow, Sidney
  7. Collusion, Managerial incentives and antitrust fines. By Florence THEPOT; Jacques THEPOT

  1. By: Molitor, Ramona
    Abstract: This paper studies a unique traffic law enforcement campaign in Germany and its impact on road safety. Key features of the campaign are (1) repeated one-day lasting massive speed limit monitoring (so called Blitzmarathons) and (2) a media campaign that informs the public in advance about the timing, extent, and purpose of the speed limit monitoring. Using administrative records on all police reported vehicle crashes in Germany from 2011 to 2014 and generalized difference-indifferences estimations, we find an eight percent reduction in the number of traffic accidents and a nine percent reduction in the number of slightly injured during Blitzmarathon-day compared to regular days. The effect begins to emerge with the onset of the media campaign, one to three days before a Blitzmarathon. However, while the initiators of the Blitzmarathons intended a permanent change in road safety, we do not find that the reduction in traffic accidents persists beyond a Blitzmarathon-day. In terms of mechanisms, we show that a substitution of traffic from motorized vehicles to other modes of transport not targeted by the Blitzmarathons does not drive our results, and we demonstrate that overall driving speed is lower during a Blitzmarathon-day compared to other days. Given the general relevance of traffic law enforcement strategies, our result have important implications for policy makers beyond the German context.
    Keywords: traffic,law enforcement,safety,accidents
    JEL: H76 K42 R41
    Date: 2017
  2. By: Katherine Cuff (McMaster University); Steeve Mongrain (Simon Fraser University); Joanne Roberts (University of Calgary)
    Abstract: Firms face many legal regulations, including corporate tax laws and labour laws. There are many ways for firms to evade these legal requirements. Firms may employ workers informally to skip out on safety or health standards or to avoid paying payroll taxes. Firms may also misreport sales transactions to minimize sales or business tax liabilities. Much of the literature examining firm behaviour assumes that a firm's decision to evade one type of regulation (such as labour regulation) is perfectly linked to the decision to evade another (such as corporate income 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 business taxes. We find that the design of the tax system and firm entry decisions generate both positive and negative correlations between these two evasion decisions. We characterize the firms’ optimal entry and evasion behavior and derive the government's optimal tax policies. A pure pro t tax system with no payroll tax system, which is optimal in absence of business tax evasion, is no longer desirable when such evasion must be considered.
    Keywords: Informal Labour Market; Labour Regulation; Tax Evasion; Payroll taxes; Corporate Income Taxes
    JEL: H32 H26 K42
    Date: 2017–03
  3. By: Burhan, Nik Ahmad Sufian; Che Razak, Razli; Selamat, Muhamad Rosli; Rosli, Muhamad Ridhwan
    Abstract: This paper aims to reassess Burhan et al.’s (2014, Intelligence, 47, 12–22) findings on the impact of intelligence (IQ) on the crime rates at a cross-country level. People who belong to the intellectual group, characterized by IQ at the 95th percentile of a normal distribution were found to have a tremendous impact in terms of crime rate reduction, compared to those with average ability (50th percentile IQ). This was proven using the ordinary least squares (OLS). Other than that, people of non-intellectual class (5th percentile IQ) were found to be least important in reducing crime. However, in their study, many independent variables were stated as not significantly related to the crime rates, which contradicts with other literature. It is questionable if the presence of serious outliers in the samples causes the objectionable finding. In this study, we analyzed the impact of IQ classes on the rate of eight different types of crimes, namely homicide, rape, kidnapping, robbery, assault, burglary, property crimes, and vehicle theft. Analysis was carried out using the Tukey’s Bisquare robust M-estimator that mitigates the effects of outliers in the samples. In conclusion, we have proved that those from the intellectual class have more significant role than people of average ability and non-intellectual class in reducing the crime rates. Thus, educational policies for the gifted are recommended in order for them to become active participants of the future transformation of their societies, by enhancing functionality and quality of the institutions across nations, and thereby, reducing crimes.
    Keywords: intelligence; intellectuals; non-intellectuals; crime rates; leadership
    JEL: I25 J24 K42 Z13
    Date: 2017–01
  4. By: Mechtenberg, Lydia; Muehlheusser, Gerd; Roider, Andreas
    Abstract: Whistle-blowing by employees plays a major role in uncovering corporate fraud. Various recent laws aim at improving protection of whistle-blowers and enhancing their willingness to report. Evidence on the effectiveness of such legislation is, however, scarce. Moreover, critics have raised worries about fraudulent claims by low-productivity employees. We study these issues in a theory-guided lab experiment. Easily attainable ("belief-based") protection indeed leads to more reports, both truthful and fraudulent. Fraudulent claims dilute prosecutors' incentives to investigate, and thereby hamper deterrence. These effects are ameliorated under more stringent ("fact-based") protection.
    Keywords: Business Ethics; Cheap-Talk Games; Corporate Fraud; Corruption; Lab Experiment; Whistle-Blowing
    JEL: C91 D73 D83 K42 M59
    Date: 2017–03
  5. By: de Haas, Ralph (Tilburg University, Center For Economic Research); Ferreira, Daniel; Kirchmaier, Tom
    Abstract: We survey non-executive directors in emerging markets to obtain detailed information about the inner workings of corporate boards across a variety of institutional settings. We document substantial variation in the structure and conduct of boards as well as in directors’ perceptions about the local legal environment. Further analysis indicates that directors who feel adequately empowered by local legislation are less likely to actively vote against board proposals. They also form boards that play a stronger role in the company’s strategic decision-making. This suggests that a supportive legal environment allows directors to focus more on their advisory, as opposed to their monitoring, role.
    Keywords: boards of directors; corporate governance; emerging markets
    JEL: G30 G38 K22
    Date: 2017
  6. By: Tarrow, Sidney
    Abstract: Scholars and legal practitioners have found profound differences between the privacy practices of Europe and the United States. This has produced incompatible regimes of regulation, causing serious normative and political issues. This conflict - originally centered on the exchange of commercial data - became increasingly more acute after 9/11, as American policy-makers saw digital data as a major source of intelligence and Europeans become frightened of the impact of American surveillance. On the cusp of 9/11, the EU and the US had negotiated a peculiar mixedlevel agreement - the "Safe Harbor" agreement - to regulate the behavior of firms exchanging data across the Atlantic. The Snowden affair and related revelations showed how badly this agreement worked, producing incentives for European advocates to challenge "Safe Harbor" in court in 2015, resulting in a new - but still untested - agreement in 2016, and influencing the shape of the EU's new data regulatory authority. These interactions raise three kinds of problems for scholars of global governance and social movements: First, how does the combination of close interaction and incompatible regimes affect the capacity of states and other actors to resolve problems of international collaboration? Second, how have international institutions responded to these challenges? Third, such disputes raise the puzzle of how digital globalization has affected the difficult process of the formation of transnational movements. I will argue that - two decades after the start of digital globalization - it has taken critical junctures like 9/11 and the Snowden revelations to produce the political opportunity for the formation of a trans-Atlantic movement on behalf of privacy.
    Keywords: privacy,transatlantic movements,safe harbor,privacy shield,Datenschutz,transatlantische Bewegung,safe harbor,privacy shield
    Date: 2017
  7. By: Florence THEPOT (School of Law, University of Glasgow); Jacques THEPOT (LARGE Research Center, Université de Strasbourg)
    Abstract: Based on a duopoly price competition model, this paper argues that collusion on managerial incentive compensations may have the equivalent effects to collusion on prices. This paper also provides an analysis of the effect of different antitrust fines regimes in the context of a game between two companies each composed of two-level of decision making (the board of directors and the sales manager). The contribution of this paper is two-fold: it identifies" backstage arrangements" that may be used by companies in order to achieve monopoly pricing outcome without entering into explicit price-fixing practices. It also highlights the inefficiency of fining regimes based on sales when companies have a multi-layer decision-making structure
    Keywords: duopoly, antitrust law, governance. JEL classification : K21, L13, L41
    Date: 2017

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