nep-law New Economics Papers
on Law and Economics
Issue of 2017‒06‒11
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Exploring the nexus between certainty in injury compensation and treatment selection By Bertoli, P.; Grembi, V.;
  2. How Should we Model Property? Thinking with my Critics By Benito Arruñada
  3. Cartel dating By H. Peter Boswijk; Maurice J.G. Bun; Maarten Pieter Schinkel
  4. Optimizing Criminal Behavior and the Disutility of Prison By Mastrobuoni, Giovanni; Rivers, David A.
  5. Organized Crime and Technology By Mustafa Caglayan; Alessandro Flamini; Babak Jahanshahi
  6. From pyramids to diamonds: legal process offshoring, employment systems, and labor markets for lawyers in the United States and India By Sarosh Kuruvilla; Ernesto Noronha
  7. Proposal of “Lex Ferenda†in Reference to the Punishment of Life Imprisonment By Eliodor Tanislav
  8. Adults Behaving Badly: The Effects of Own and Peer Parents' Incarceration on Adolescent Criminal Activities By Fletcher, Jason M.
  9. Governance and Stakeholders By Vikas Mehrotra; Randall Morck

  1. By: Bertoli, P.; Grembi, V.;
    Abstract: We study the effect of reduced medical liability due to the implementation of scheduled damages on the overuse of cesarean sections. Using data from inpatient discharge records on deliveries in Italy, we exploit the fact that hospitals are distributed across court districts and that only some courts introduced schedules during the period of observation. This allows us to identify the effect of a decrease in liability using a difference-in-difference approach while minimizing the heterogeneities between treated and control hospitals. We show that decreased medical liability increases the incidence of unnecessary cesarean sections by 7 percentage points, which corresponds to a 20% increase at the mean of cesarean sections. The magnitude of the response is higher for hospitals with lower quality and that are far from consumer association headquarters. Lower schedules and higher levels of reimbursements per delivery also increase the overuse of cesarean section. The analysis of the response times, combining the difference-in-difference approach with a regression discontinuity design, shows that the response to decreased liability is already detectable in the short run. Our findings are robust to several sets of robustness checks and are not driven by anticipatory effects or a change in the composition of the treated patients.
    Keywords: Scheduled Damages; Cesarean Sections; Difference in Difference;
    JEL: K13 K32 I13
    Date: 2017–06
  2. By: Benito Arruñada
    Abstract: Inspired by comments made by Allen (2017), Lueck (2017), Ménard (2017) and Smith (2017), this response clarifies and deepens the analysis in Arruñada (2017a). Its main argument is that to deal with the complexity of property we must abstract secondary elements, such as the physical dimensions of some types of assets, and focus on the interaction between transactions. This sequential-exchange framework captures the main problem of property in the current environment of impersonal markets. It also provides criteria to compare private and public ordering, as well as to organize public solutions that enable new forms of private ordering. The analysis applies the lessons in Coase (1960) to property by not only comparing realities but also maintaining his separate treatment of the definition of property rights and transaction costs. However, it replaces his contractual, single-exchange, framework for one in which contracts interact, causing exchange externalities.
    Keywords: D23, K11, K12, G38, H41, O17, P48
    Date: 2017–05
  3. By: H. Peter Boswijk; Maurice J.G. Bun; Maarten Pieter Schinkel (University of Amsterdam)
    Abstract: The begin and end dates of cartels are often ambiguous, despite competition authorities stating them with precision. The legally established infringement period(s), based on documentary evidence, need not coincide with the period(s) of actual cartel effects. In this paper, we show that misdating cartel effects leads to a (weak) overestimation of but-for prices and an underestimation of overcharges. Total overcharges based on comparing but-for prices to actual prices are a (weak) underestimation of the true amount overcharged, irrespective of the type and size of the misdating. The bias in antitrust damage estimation based on predicted cartel prices can have either sign. We extend the before-during-and-after method with an empirical cartel dating procedure that uses multiple structural break tests to determine the actual begin and end date(s) of the effects of collusive agreements. Empirical findings in the European Sodium Chlorate cartel corroborate our theoretical results.
    Date: 2016–10–31
  4. By: Mastrobuoni, Giovanni (University of Essex); Rivers, David A. (University of Western Ontario)
    Abstract: We use rich microdata on bank robberies to estimate individual-level disutilities of imprisonment. The identification rests on the money versus apprehension trade-off that robbers face inside the bank when deciding whether to leave or collect money for an additional minute. The distribution of the disu-tility of prison is not degenerate, generating heterogeneity in behavior. Our results show that unob-served heterogeneity in ability is important for explaining outcomes in terms of haul and arrest. Fur-thermore, higher ability robbers are found to have larger disutilities, suggesting that increased sen-tence lengths might effectively target these more harmful criminals.
    Keywords: crime, deterrence, severity, sentencing enhancements, robberies, disutility of prison
    JEL: K40 K42 H11
    Date: 2017–05
  5. By: Mustafa Caglayan (Heriot-Watt University); Alessandro Flamini (Department of Economics and Management, University of Pavia); Babak Jahanshahi (Department of Economics and Management, University of Pavia)
    Abstract: This paper investigates the relation between the presence of organized crime and the technology level in north Italy. Our analysis proposes two provincial indexes. The first portrays technology at a fine-grained industrial sector level. The second describes mafia-type organizations in line with the investigation approach currently used by Italian National Antimafia Directorate (DNA) and Antimafia District Directorates (DDAs). With these indexes, we provide empirical evidence that in north Italy, the larger the presence of organized crime, the less innovation and the technological level of the industrial fabric. Our reading of this finding is that without organized crime, Nature selects agents according to their capacity to innovate. Instead, with organized crime, agents can choose an alternative strategy: relate with organized crime, which hinders innovation. Modelling the interaction innovation - relation with mafias by evolutionary game theory, we show that the presence of organized crime, through natural selection, leads to low levels of technology. Our model also shows how to use sanctions and indemnities to address the problem.
    Keywords: organized crime, evolutionary game theory, innovation, silent mafia, technology, technology index, mafia index, north Italy.
    JEL: O17 O30 C73 R11 K14 K42
    Date: 2017–05
  6. By: Sarosh Kuruvilla; Ernesto Noronha
    Abstract: In this article, the authors argue that offshoring of legal work from the United States has contributed to the fracturing of the longestablished internal labor market arrangements in large U.S. law firms. Drawing on evidence from the United States and India on legal employment, the growth of offshoring, and the rapidly changing nature of work that is offshored, the authors contend that the changes in employment systems in law firms are likely to be permanent, in contrast to other researchers who suggest they are temporary adjustments to the financial crisis. As U.S. law firms are dismantling their internal labor market systems, Indian law firms are partially recreating them.
    Keywords: law firms; globalization; offshoring; labor markets for professionals
    JEL: R14 J01 J50
    Date: 2016–03
  7. By: Eliodor Tanislav (Athenaeum University of Bucharest, Romania)
    Abstract: According to the article 56 of the Romanian Criminal Code, “life imprisonment†is defined as the deprivation of liberty for an unlimited period of time and is executed according to the Law that governs the enforcement of punishments In the event that the national legislation allows for a re-examination of the life imprisonment sentence of a convict to a jail time or to allow for a parole, we believe that the requirements of the European Convention of Human Rights are fulfilled. (case Trabelsi vs. Belgium, Decision from 4th of September 2014). With respect to the enforcement of the life imprisonment sentence, in a few European countries there are particular previsions by the Law (Croatia, Norway, Slovenia), but in Portugal it’s banned by the Constitution; in Belgium, the life imprisonment sentence is defined as a sanction for the rest of the life, while in Cyprus there is no option for parole since the Law doesn’t allow it, but it can be affected only by presidential pardon.
    Keywords: Penal Code, life imprisonment, changes to legal framework, female inmates, minors convicts
    Date: 2017–01
  8. By: Fletcher, Jason M. (University of Wisconsin-Madison)
    Abstract: A maturing literature across the social sciences suggests important impacts of the intergenerational transmission of crime as well as peer effects that determine youth criminal activities. This paper ex-plores these channels by examining gender-specific effects of maternal and paternal incarceration from both own-parents and classmate-parents. This paper also adds to the literature by exploiting across-cohort, within school exposure to peer parent incarceration to enhance causal inference. While the intergenerational correlations of criminal activities are similar by gender (father-son/mother-son), the results suggest that peer parent incarceration transmits effects largely along gender lines, which is suggestive of specific learning mechanisms. Peer maternal incarceration increases adolescent female criminal activities and reduces male crime and the reverse is true for peer paternal incarceration. These effects are strongest for youth reports of selling drugs and engaging in physical violence. In contrast, the effects of peer parental incarceration on other outcomes, such as GPA, do not vary by gender.
    Keywords: crime, peer effects, intergenerational transmission
    JEL: J00 J24 J62
    Date: 2017–05
  9. By: Vikas Mehrotra; Randall Morck
    Abstract: Economic models routinely assume firms maximize shareholder wealth; however common law legal systems only require that officers and directors pursue the interests of the corporation, leaving this ill-defined. Economic arguments for shareholder wealth maximization derived from shareholders’ status as residual claimants are vulnerable on several fronts. Share valuations fluctuate as sentiment shifts. Introductory finance casts firms as maximizing expected net present values, which are quasirents, expected earnings beyond expected costs of capital from investors, to which shareholders have no obvious claim. Other stakeholders – entrepreneurial founders or CEOs, employees, employees, customers, suppliers, communities or governments, having made firm-specific investments, may exert stronger claims than atomistic public shareholders have to shares of their firms’ quasirents. Consistent with this, their contractual claims are often augmented by residual claims and liabilities. Still, shareholder value maximization constitutes something of a bright line; whereas stakeholder welfare maximization is an ill-defined charge to assign boards that gives self-interested insiders broader scope for private benefits extraction. The common law concept of “the interests of the corporation” captures this ambiguity.
    JEL: G3 K12 K22 L2 P1
    Date: 2017–06

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