nep-law New Economics Papers
on Law and Economics
Issue of 2017‒04‒16
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. On Monetary and Non-Monetary Interventions to Combat Corruption By Banerjee, Ritwik; Mitra, Arnab
  2. Whistle-Blower Protection: Theory and Experimental Evidence By Mechtenberg, Lydia; Muehlheusser, Gerd; Roider, Andreas
  3. Examination workloads, grant decision bias and examination quality of patent office By Jun Byoung Oh; Yee Kyoung Kim
  4. The Valuation of Moral Rights: A Field Experiment By Stefan Bechtold; Christoph Engel
  5. Early Predictability of Asylum Court Decisions By Chen, Daniel L.; Dunn, Matt; Sagun, Levent; Sirin, Hale
  6. Royalty stacking in the U.S. freight railroads: Cournot vs. Coase By Alexandrov, Alexei; Pittman, Russell; Ukhaneva, Olga
  7. Laws and Authority By George J. Mailath; Stephen Morris; Andrew Postlewaite
  8. Lenders and Risky Activities: Strict Liability or Negligence Rule? By Gérard Mondello
  9. Regulation, Institutions and Productivity: New Macroeconomic Evidence From OECD Countries By Balázs Égert
  10. Collusion in Auctions with Constrained Bids: Theory and Evidence from Public Procurement By Sylvain Chassang; Juan Ortner
  11. On the Implications of Immigration Policy Restricting Citizenship: Evidence from the Dominican Republic By Amuedo-Dorantes, Catalina; Gratereaux Hernández, Carlos; Pozo, Susan
  12. Making Friends in Violent Neighborhoods: Strategies among Elementary School Children By Anjanette M. Chan Tack; Mario Small

  1. By: Banerjee, Ritwik (Indian Institute of Management); Mitra, Arnab (Portland State University)
    Abstract: The paper studies the relative effectiveness of extrinsic monetary disincentives and intrinsic non-monetary disincentives to corruption. In doing so, we also test the Beckarian prediction that at the same level of expected payoff, a low probability of detection with high penalty is a stronger deterrent to corruption than a high probability of detection with low penalty. In Experiment 1, two treatments are designed to study the effect of a low probability of detection with high penalty, and a high probability of detection with low penalty, on bribe taking behavior in a harassment bribery game. In Experiment 2, subjects participate in the same baseline harassment bribery game either without or after having gone through a four-week ethics education program. Results show that a) a low probability of detection with high penalty reduces both the amount and the likelihood of bribe demand, b) a high probability of detection with low penalty has no effect on bribe demand behavior, c) normative appeals of ethics education has a small effect on the likelihood but not on the amount of bribe demand, when measured immediately after the intervention, d) the effect of ethics education vanishes when measured four weeks after the intervention, e) extrinsic monetary intervention, particularly low probability of detection with high penalty, is more effective than normative appeal driven non-monetary intervention that aim to increase intrinsic moral cost, f) analysis of belief about acceptability of bribe demand indicates that the underlying channels through which monetary and non-monetary interventions work are very different.
    Keywords: corruption, harassment bribes, penalty, probability of audit, ethics education
    JEL: C91 C92 D03 K42
    Date: 2017–03
  2. By: Mechtenberg, Lydia (University of Hamburg); Muehlheusser, Gerd (University of Hamburg); Roider, Andreas (University of Regensburg)
    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: corporate fraud, corruption, whistle-blowing, business ethics, cheap-talk games, lab experiment
    JEL: C91 D83 D73 K42 M59
    Date: 2017–03
  3. By: Jun Byoung Oh (Department of Economics, Inha University); Yee Kyoung Kim (Korea Institute of S&T Evaluation and Planning)
    Abstract: This paper investigates how increased examination workloads at patent office affect the patent examination process and tests whether workloads have any external effect on examiners' decisions. Using novel micro-level data, we provide the first empirical evidence that examiner decisions are systematically biased as workload increases, with examiners being more likely to grant a patent than to reject it. The regression results also indicate that the quality of examinations decreases as workload increases. In appeal trials, the likelihood of grant decision reversal significantly increases as workload increases, while the likelihood of the revocation of a refusal decision exhibits statistically significant negative relationship with increased workloads. These results imply that an examiner who lacks sufficient time for a prior art search tends to grant a patent and, consequently, a large workload decreases the quality of examinations by resulting in unqualified patents.
    Keywords: Examination workloads, grant decision bias, type II error, quality of examinations
    JEL: K0 O30 O38
    Date: 2017–04
  4. By: Stefan Bechtold (ETH Zürich); Christoph Engel (Max Planck Institute for Research on Collective Goods)
    Abstract: U.S. intellectual property law is firmly rooted in utilitarian principles. Copyright law is viewed as a means to give proper monetary incentives to authors for their creative effort. Many European copyright systems pursue additional goals: Authors have the right to be named as author, to control alterations and to retract their work in case their artistic beliefs have changed. Protecting these “moral rights” might be justified by the preferences of typical authors. We present the first field experiment on moral rights revealing the true valuation of these rights by over 200 authors from 24 countries. A majority of authors are not willing to trade moral rights in the first place. They demand substantial prices in case they decide to trade. The differences between authors from the U.S. and Europe are small. These results call into question whether moral rights protection should differ across the Atlantic and whether a purely profit-based theory of copyright law is sufficient to capture the complex relationship between human behavior and creativity.
    Keywords: intellectual property, copyright, creativity, invention, moral right, willingness to pay
    JEL: C93 D03 K11 L82 O31 O34 O38
    Date: 2017–03
  5. By: Chen, Daniel L.; Dunn, Matt; Sagun, Levent; Sirin, Hale
    Abstract: Early Predictability of Asylum Court Decisions with M. Dunn and L. Sagun In the United States, foreign nationals who fear persecution in their home country can apply for asylum under the Refugee Act of 1980. Unfortunately, over the past decade, legal scholarship has uncovered significant disparities in asylum adjudication by judge, by region of the United States in which the application is filed, and by the applicant’s nationality. These disparities raise concerns about whether applicants are receiving equal treatment before the law. Using machine learning to predict judges’ decisions, we document another concern that may violate our notions of justice: significant variation among the degree of predictability of judges at the time the case is assigned to a judge. Highly predictable judges are those who almost always grant or deny asylum. Our predictive model corroborates prior work as the final outcome of the case is overwhelmingly driven by the adjudicating judge and the applicant’s nationality. We are able to predict the final outcome of a case with 80% accuracy at the time the case opens. Additionally, this study shows that highly predictable judges tend to make use of fewer hearing sessions before making their decision. The contribution of this study is twofold. First, early prediction of a case with 80% accuracy could assist asylum seeker in their process of application. Secondly, by demonstrating the variation of predictability among the judges, based solely on a minimal subset of case information, this study raises questions about whether the specifics of each case are being given their due weight in asylum adjudications.
    Date: 2017–03
  6. By: Alexandrov, Alexei; Pittman, Russell; Ukhaneva, Olga
    Abstract: Monopolists selling complementary products charge a higher price in a static equilibrium than a single multiproduct monopolist would, reducing both the industry profits and consumer surplus. However, firms could instead reach a Pareto improvement by lowering prices to the single monopolist level. We analyze administrative nationally-representative pricing data of railroad coal shipping in the U.S. We compare a coal producer that needs to ship from A to C,with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We find no price difference between the two cases, suggesting that the complementary monopolist pricing inefficiency is absent in this market. For our main analysis, we use a specification used by previous literature; however, we confirm our findings using propensity score blocking and machine learning algorithms. Finally, we confirm the results by using a difference-in-differences analysis to gauge the impact of a merger that made two routes wholly-owned (switched from case 2 to case 1). Our results have implications for royalty stacking and patent thickets, vertical mergers, tragedy of anti-commons, and mergers of firms selling complements.
    Keywords: Vertical mergers, complementary products mergers, railroads, end-to-end mergers, royalty stacking, patent thickets, Cournot, Coase
    JEL: D43 K21 L42 L92 O31
    Date: 2017–03–20
  7. By: George J. Mailath (University of Pennsylvania); Stephen Morris (Princeton University); Andrew Postlewaite (University of Pennsylvania)
    Abstract: A law prohibiting a particular behavior does not directly change the payoff to an individual should he engage in the prohibited behavior. Rather, any change in the individual’s payoff, should he engage in the prohibited behavior, is a consequence of changes in other peoples' behavior. If laws do not directly change payoffs, they are “cheap talk,†and can only affect behavior because people have coordinated beliefs about the effects of the law. Beginning from this point of view, we provide definitions of authority in a variety of problems, and investigate how and when individuals can have, gain, and lose authority.
    JEL: K00
    Date: 2016–11
  8. By: Gérard Mondello (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: The amendments made to CERCLA in 1996 reinforced the exemption of lenders that finance ultra-hazardous activities. Then, they become involved in liability only if they manage or own polluting activities. The paper compares strict liability and negligence rule in an agency model of vicarious liability type, and proposes to restore lenders as principal by applying negligence rules to them while operators would resort to a strict liability rule. This scheme leads the lender to propose to the borrower the most favorable loan level that induces the latter to provide the socially optimal security level.
    Keywords: Strict liability, negligence rule, moral hazard, judgment-proof, lenders, risky activities
    JEL: K0 K32 Q01 Q58
    Date: 2017–04
  9. By: Balázs Égert
    Abstract: Empirical research on the drivers of multi-factor productivity (MFP) is abundant at the firm- and industry level but surprisingly little research has been conducted on the determinants of MFP at the macroeconomic level. In this paper, we seek to understand the drivers of country-level MFP with a special emphasis on product and labour market policies and the quality of institutions. For a panel of OECD countries, we find that anticompetitive product market regulations are associated with lower MFP levels and that higher innovation intensity and greater openness go in tandem with higher MFP. We also find that the impact of product market regulations on MFP may depend on the level of labour market regulations. Better institutions, a more business friendly environment and lower barriers to trade and investment amplify the positive impact of R&D spending on MFP. Finally, we also show that cross-country MFP variations can be explained to a considerable extent by cross-country variation in labour market regulations, barriers to trade and investment and institutions (including corruption).
    Keywords: multi-factor productivity, trade openness, innovation, product market regulation, labour market regulation, institutions, policy interactions, OECD.
    JEL: C23 C51 J2 L43 L51 O4
    Date: 2017
  10. By: Sylvain Chassang (New York University); Juan Ortner (Boston University)
    Abstract: We study the mechanics of cartel enforcement and its interaction with bidding constraints in the context of repeated procurement auctions. Under collusion, bidding constraints weaken cartels by limiting the scope for punishment. This yields a test of repeated collusive behavior exploiting the counter-intuitive prediction that introducing minimum prices can lower the distribution of winning bids. The model’s predictions are borne out in procurement data from Japan, where we find evidence that collusion is weakened by the introduction of minimum prices. A robust design insight is that setting a minimum price at the bottom of the observed distribution of winning bids necessarily improves over a minimum price of zero.
    Keywords: collusion, cartel enforcement, minimum prices, entry deterrence, procurement
    JEL: D44
    Date: 2017–02
  11. By: Amuedo-Dorantes, Catalina (San Diego State University); Gratereaux Hernández, Carlos (Ministry of Economics, Dominican Republic); Pozo, Susan (Western Michigan University)
    Abstract: In 2010, an amendment to the Dominican constitution weakened the concept of jus soli citizenship by denying Dominican nationality to individuals born on Dominican soil to irregular immigrants. A few years later, in 2013, the Dominican High Court denationalized large numbers of individuals by reinterpreting language in the prior constitution to, in effect, apply the newer citizenship requirements retroactively to 1929. We gauge the impacts of changes to Dominican citizenship laws on Haitian immigrants and their descendants, to whom, many believe, these policies were directed. We find that the constitutional amendment affected informal employment of some Haitians and their descendants. Furthermore, the High Court's ruling resulted in a significant reduction in the share of Haitian-descendant youth registered in school. Non-attendance was attributed primarily to lack of appropriate documents. Given the rise of nationalist sentiments and discussions to further restrict and revoking citizenship in various regions of the world today, it is important to further explore how these policies ultimately impact targeted and vulnerable populations.
    Keywords: immigration policy, birthright citizenship, Dominican Republic, Haiti
    JEL: F22 F63 F66 F68 J61 K37
    Date: 2017–03
  12. By: Anjanette M. Chan Tack (University of Chicago); Mario Small (Harvard University)
    Abstract: While many studies have examined friendship formation among children in conventional contexts, comparatively fewer have examined how the process is shaped by neighborhood violence. The literature on violence and gangs has identified coping strategies that likely affect friendships, but most children in violent neighborhoods are not gang members and not all friendship relations involve gangs. We examine the friendship formation process based on in-depth interviews with 72 students, parents, and teachers in two elementary schools in violent Chicago neighborhoods. All students were African American boys and girls ages 11 to 15. We find that while conventional studies depict friendship formation among children as largely affective in nature, the process among the students we observed was, instead, primarily strategic. The children’s strategies were not singular but heterogeneous and malleable in nature. We identify and document five distinct strategies: protection-seeking, avoidance, testing, cultivating questioners, and kin-reliance. Girls were as affected as boys were, while they also reported additional preoccupations associated with sexual violence. We discuss implications for theories of friendship formation, violence, and neighborhood effects.
    Keywords: friendship formation, networks, violence, neighborhood effects, Child Development
    JEL: R23 J15 J16 K14
    Date: 2017–04

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