nep-law New Economics Papers
on Law and Economics
Issue of 2017‒06‒25
fourteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Right-to-Carry Laws and Violent Crime: A Comprehensive Assessment Using Panel Data and a State-Level Synthetic Controls Analysis By John J. Donohue; Abhay Aneja; Kyle D. Weber
  2. Econometric tests to detect bid-rigging cartels: does it work? By Imhof, David
  3. The Origins of Private Property By Colombatto, Enrico; Tavormina, Valerio
  4. Spatial Nexus in Crime and Unemployement in Times of Crisis By Povilas Lastauskas; Eirini Tatsi
  5. Whistleblower Rewards, False Reports, and Corporate Fraud By Paolo Buccirossi; Giovanni Immordino; Giancarlo Spagnolo
  6. Evidence of the Impacts of Minimum Wage on Labor Market Outcomes: The Case of Bolivia By Marcelo Nicolas Claure Ramirez Author-Name: Alejandra Leyton Author-Name: Christian Valencia Author-Name: Karenth Vanessa Sanchez Bohrquez Author-Name: Jorge Davalos
  7. Personal Bankruptcy, Bank Portfolio Choice and the Macroeconomy By Eglë Jakuèionytë
  8. Border adjustment mechanisms : Elements for economic, legal, and political analysis By Julien Bueb; Lilian Richieri Hanania; Alice Leclezio
  9. Utilising the judiciary to reject the popular will? : legal mobilization after the Arab uprising in Kuwait By Ishiguro, Hirotake
  10. Do Agricultural Marketing Laws Matter for Rural Growth? Evidence from the Indian States By Purnima Purohit; Katsushi S. Imai; Kunal Sen
  11. We study the welfare effects of input price discrimination when an upstream supplier that secretly contracts with two cost-asymmetric downstream firms undertakes R&D investments. We show that a ban on input price discrimination always increases the level of upstream R&D investments under linear contracts, however, it may well decrease R&D investments under two-part tariff contracts. Under linear contracting, a ban on input price discrimination always decreases welfare both in the short-run and the long-run. Under two-part tariff contracts, a ban on input price discrimination always decreases welfare in the short-run, however, it may well increase welfare in the long-run. By Ioannis N. Pinopoulos
  12. Reassessing the Ethicality of Some Common Financial Practices By Bagus, Philipp; Gabriel, Amadeus; Howden, David
  13. The economics of ownership, access and trade in digital data By Georgios Alaveras; Estrella Gomez-Herrera; Bertin Martens
  14. Taxing multinationals beyond borders: financial and locational responses to CFC rules By Sarah Clifford

  1. By: John J. Donohue; Abhay Aneja; Kyle D. Weber
    Abstract: The 2004 report of the National Research Council (NRC) on Firearms and Violence recognized that violent crime was higher in the post-passage period (relative to national crime patterns) for states adopting right-to-carry (RTC) concealed handgun laws, but because of model dependence the panel was unable to identify the true causal effect of these laws from the then-existing panel data evidence. This study uses 14 additional years of panel data (through 2014) capturing an additional 11 RTC adoptions and new statistical techniques to see if more convincing and robust conclusions can emerge. Our preferred panel data regression specification (the “DAW model”) and the Brennan Center (BC) model, as well as other statistical models by Lott and Mustard (LM) and Moody and Marvell (MM) that had previously been offered as evidence of crime-reducing RTC laws, now consistently generate estimates showing RTC laws increase overall violent crime and/or murder when run on the most complete data. We then use the synthetic control approach of Alberto Abadie and Javier Gardeazabal (2003) to generate state-specific estimates of the impact of RTC laws on crime. Our major finding is that under all four specifications (DAW, BC, LM, and MM), RTC laws are associated with higher aggregate violent crime rates, and the size of the deleterious effects that are associated with the passage of RTC laws climbs over time. We estimate that the adoption of RTC laws substantially elevates violent crime rates, but seems to have no impact on property crime and murder rates. Ten years after the adoption of RTC laws, violent crime is estimated to be 13-15% percent higher than it would have been without the RTC law. Unlike the panel data setting, these results are not sensitive to the covariates included as predictors. The magnitude of the estimated increase in violent crime from RTC laws is substantial in that, using a consensus estimate for the elasticity of crime with respect to incarceration of .15, the average RTC state would have to double its prison population to counteract the RTC-induced increase in violent crime.
    JEL: K0 K14 K4 K40 K42
    Date: 2017–06
  2. By: Imhof, David
    Abstract: This paper tests how well the method proposed by Bajari and Ye (2003) performs to detect bidrigging cartels. In the case investigated in this paper, the bid-rigging cartel rigged all contracts during the collusive period, and all firms participated to the bid-rigging cartel. The two econometric tests constructed by Bajari and Ye (2003) produce a high number of false negative results: the tests do not reject the null hypothesis of competition, although they should have rejected it. A robustness analysis replicates the econometric tests on two different sub-samples, composed solely by cover bids. On the first sub-sample, both tests produce again a high number of false negative results. However, on the second sub-sample, one test performs better to detect the bidrigging cartel. The paper interprets these results, discusses alternative methods, and concludes with recommendations for competition agencies.
    Keywords: Bid rigging; Detection methods; Screens; Conditional independence test; Exchangeability test
    JEL: C00 C40 D22 D40 K40 L40
    Date: 2017–06–12
  3. By: Colombatto, Enrico; Tavormina, Valerio
    Abstract: This paper focuses on the legitimacy of private property and analyses the process of first appropriation. In particular, we examine and comment the different views on the origin of private property rights that have emerged through the history of economic and legal thinking, from Democritus to de Jasay. These views have been grouped in two broad categories: consequentialism and fundamental principles. Although consequentialism is now dominant among economists and inchoate in the legal profession, we observe that it is in fact an alibi for discretionary policymaking by the authority. By definition, fundamentalist approaches generate rules that limit discretion. However, we show that some fundamental views rest on questionable a-priori statements. De Jasay’s argument based on the presumption of liberty is perhaps the only perspective that escapes this criticism.
    Keywords: Private property, Consequentialism, Natural rights, Appropriation, Intellectual property
    JEL: K11 B15 B25 B52
    Date: 2017–06
  4. By: Povilas Lastauskas (Bank of Lithuania); Eirini Tatsi (Stockholm University, Swedish Institute for Social Research (SOFI))
    Abstract: Space is important. In this paper we use the global financial crisis as an exogenous shock to the German labor market to elucidate the spatial nexus between crime and unemployment. Our contribution is twofold: first, we lay down a parsimonious spatial labor market model with search frictions, criminal opportunities, and, unlike earlier analyses, productivity shocks which link criminal engagement with employment status. Second, we seek empirical support using data on the 402 German regions and years 2009 – 2010, in a setting that not only allows for crime spatial multipliers but also circumvents reverse causality by exploiting exogenous changes in unemployment due to the crisis. As predicted by our theory, the destruction of the lowest productivity matches, measured by increases in unemployment rates, has a significant impact on pure property crime (housing burglary and theft of/from motor vehicles) and street crime. The analysis offers important implications for local government policy.
    Keywords: Crime, Unemployment, Spatial Econometrics, Global Financial Crisis
    JEL: C31 J64 K42 R10
    Date: 2017–02–02
  5. By: Paolo Buccirossi (LEAR); Giovanni Immordino (Università di Napoli Federico II and CSEF); Giancarlo Spagnolo (SITE - Stockholm School of Economics, EIEF, Tor Vergata University, and CEPR)
    Abstract: It is often claimed that .nancial incentives for whistleblowers should be avoided, because they will lead to fraudulent reports based on false or fabricated information. For existing US programs, however, this does not seem to have been a major problem. We develop a model of the interaction between rewards for whistleblowers, sanctions for fraudulently reporting fabricated information, judicial errors, and standards of proof in the two court cases . the one based on a whistleblower.s allegations and the specular one against the whistleblower for possibly false accusations. We show that an appropriate balance between the reward offered to successful whistleblowers, the sanctions against dishonest whistleblowers, and the court standards of proof, is essential for whistleblower policies to succeed. When the risk of retaliation against whistleblowers is severe, higher rewards are needed for the program to be effective, and even more severe sanctions against dishonest whistleblowers become necessary. The precision of the legal system must be sufficiently high for these programs to be at all viable; and internal reporting systems part of .rms. compliance programs may actually interfere with the external ones.
    Keywords: Whistleblowers rewards, False allegations, Judicial errors, Standard of proof, Corporate fraud
    Date: 2017–06–21
  6. By: Marcelo Nicolas Claure Ramirez Author-Name: Alejandra Leyton Author-Name: Christian Valencia Author-Name: Karenth Vanessa Sanchez Bohrquez Author-Name: Jorge Davalos
    Abstract: Economic theory suggests that minimum wages may lead to unemployment; nevertheless, empirical evidence in developed economies stays ambiguous. Evidence from developing countries is even more heterogenous due to the low law enforcement and weaker labor market institutions. Thus, our aim is to assess the impact of minimum wage increases on labor market outcomes in Bolivia, a country characterized by weak law compliance and high informality. Our identification strategy exploits differences in exposure to minimum wage increases across subsets of population for the period 2006-2013. Our results show positive and significant effects over real wages for men with no effects on employment, informalization or hours worked. Furthermore, we find evidence of gender discrimination since women are prone to suffer unemployment and informalization while not benefiting from higher real wages as men do.
    Keywords: Minimum wage, unemployment, informal employment
    JEL: J3 J4
    Date: 2017
  7. By: Eglë Jakuèionytë (Tinbergen Institute and the University of Amsterdam, the Netherlands)
    Abstract: This paper explores the spillover effects from increasing personal bankruptcy protection. Innovatively, the paper shows that the spillover effects can be influenced by the bank portfolio choice. Since a low level of personal bankruptcy protection keeps an insolvent individual liable until her debt is repaid in full, lender’s returns on mortgages are less uncertain than returns on other assets ceteris paribus. Risk-averse banks would prefer mortgages over other types of assets such as corporate loans. Corporate lending and thus equilibrium output would fall. In contrary to the popular view that creditor protection smooths credit provision and makes the allocation of resources more efficient, I show that in some cases a low level of personal bankruptcy protection can lead to aggregate consumption losses. Also I show that macroprudential policies (LTV ratios) can successfully complement higher personal bankruptcy protection in ensuring even higher welfare.
    Keywords: Personal bankruptcy, household debt, housing, general equilibrium, bank portfolio choice
    JEL: E44 G11 G21 K35 R21
    Date: 2017–04–24
  8. By: Julien Bueb (Centre d’analyse, de prévision et de stratégie (CAPS)); Lilian Richieri Hanania (Centre for Studies on Society and Technology (CEST)); Alice Leclezio (Centre de recherches internationales)
    Abstract: This paper examines, from a multidisciplinary perspective, plausible hypotheses for implementation of border carbon adjustment mechanisms, seen as a complement to strong environmental regulation. It highlights economic, legal, and political difficulties raised by border carbon adjustments. After thoroughly reviewing their economic practicability, it analyses these mechanisms from an International Trade Law perspective, particularly vis-à-vis the General Agreement on Tariffs and Trade, sustainable development, and the principle of shared but differentiated responsibilities. It concludes with an assessment of policy-related implications of such mechanisms and outlines, in particular, how border carbon adjustments may be used as an engine of economic and energy transition, for developed and developing countries equally.
    Keywords: environmental regulation; border carbon adjustment; international trade law; General Agreement on Tariffs and Trade; sustainable development; political economy
    Date: 2016–04
  9. By: Ishiguro, Hirotake
    Abstract: This study examines the role of the judiciary in the political process after the Arab Uprising, focusing on a Constitutional Court and its judgements in a case where the popular will was rejected via a judicial ruling. In particular, I will analyse a case of Kuwait where the Constitutional Court declared election void and ordered the dissolution of parliament, after the opposition had won a stable majority. This case conjures images of legal mobilization by the regime; however, considering the political context where the government and parliament were in a serious ongoing conflict, the constitutional rulings by the Constitutional Court can be evaluated as a mediator intended to ease the stalemate and prevent a fall into a more serious crisis concurrent with the political upheaval in other Arab countries.
    Keywords: Justice,Courts,Legal mobilization,Judicialization of politics,Democratization,Kuwait
    Date: 2017–03
  10. By: Purnima Purohit (The Adam Smith Business School, University of Glasgow, UK); Katsushi S. Imai (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan, and Department of Economics, The University of Manchester, UK); Kunal Sen (The Global Development Institute, University of Manchester, UK)
    Abstract: This article examines effects of the regulatory framework of post-harvest agricultural markets on agricultural growth across Indian states over the period 1970-2008. We propose a new measure that captures various legislative dimensions of a key ‘Act’ - the Agricultural Produce Markets Commission (APMC) Act & Rules - governing the agricultural markets, evolved from the dismal colonial history of India, and use this measure to estimate growth models using panel methods. We have applied Fixed-Effects, Feasible Generalized Least Squares, and Fixed-Effects Instrumental Variable models to the panel data to address the endogeneity associated with the regulatory framework. Our results show that the Act significantly promotes not only agricultural growth but the use and the adoption of agricultural technology. Evidence presented suggests that a policy to remove market regulation rather than advancing effective ones would fail consequentially to draw investments and improve agriculture growth.
    Keywords: Law, Regulation, Agricultural markets, Colonial institution, Technology, Economic growth, Panel data, Indian states
    JEL: C23 D02 K23 Q13 Q18
    Date: 2017–06
  11. By: Ioannis N. Pinopoulos (Department of Economics, University of Macedonia)
    Keywords: Input price discrimination; R&D investments; vertical contracting; welfare.
    JEL: D43 K21 L11 L42
    Date: 2017–06
  12. By: Bagus, Philipp; Gabriel, Amadeus; Howden, David
    Abstract: Depositors have perceived banks as acting unethically during the most recent recession. One area of consternation is the ambiguity of the legal obligations entailed by the deposit contract when it is backed with only fractional reserves. In this article we apply an existing analysis of the legitimacy and ethicality of banking practices to a wider range of financial transactions, including insurance policies, securities lending, perpetual bonds and callable loans. Securities lending in particular creates rights violations analogous to those in fractional-reserve banking. Both callable loans and perpetual bonds have clear legal obligations which are not inherently problematic, though we herein clarify what these obligations are. Finally, we apply our ethical framework to demonstrate that insurance products are distinct from banking deposit contracts, and that perceived parallels between the two products underestimate these differences.
    Keywords: insurance, banking, fractional reserves, callable loans, perpetual bonds, callable loans
    JEL: G0 K1 K12
    Date: 2016
  13. By: Georgios Alaveras (European Commission – JRC); Estrella Gomez-Herrera (European Commission – JRC); Bertin Martens (European Commission – JRC)
    Abstract: This study measures the extent of cross-border geo-blocking and the impact on product availability and pricing for three non-audio-visual digital media products (music, e-books and games) in the EU Digital Single Market. We find that cross-border access to online media stores is generally blocked for the products and distributors surveyed in this study, though it can usually be circumvented. By contrast, cross-border availability is high, reaching around 98.6% for e-books on Amazon, 90% for downloadable music on iTunes, and 81.1% and 90.5% respectively for PS3 and PS4 PlayStation games. We could not directly verify cross-border availability of music in streaming services but a small sample test suggests that it could reach around 96% on Spotify. We find that the frequency of cross-country price differentiation is limited for games in the Sony PlayStation stores (less than 4%) but higher for downloadable music in the Apple iTunes stores (11.5%) and Amazon e-book stores (26%). Much of this price differentiation is driven by exchange rates and rounding off prices in country stores not denominated in Euro. In music, price discrimination is used mostly to extract higher prices from high-income consumers and for more popular songs with a lower price elasticity of demand. Subscription prices for main music streaming services are strongly correlated with country per capita income levels. Geographical market differentiation and geo-blocking in digital media is often attributed to the territoriality of the copyright management regime. In most cases rights holders are in a position to issue multi-territorial licenses. For commercial reasons however they may prefer to exercise their rights on a territorial basis. The welfare effect of geo-blocking on sellers can be safely assumed to be positive otherwise sellers would not apply this commercial strategy. The impact on consumer welfare is a-priori ambiguous. Geo-blocking reduces the extent of product variety available to consumers. Whether it increases or reduces consumer welfare is an empirical question. The data required to empirically estimate the impact of (lifting) geo-blocking restrictions on welfare are held by the private platform operators. A future assessment can only be made if the required data on product prices and sales are made available to independent researchers. Lifting geo-blocking restrictions will induce price arbitrage between country markets. That may put pressure on sellers to reduce price differentiation and push some prices up, others down. The price response of sellers is hard to predict and may have repercussions not only on downstream consumers but also on upstream parts of the supply chain. Price convergence is unlikely to be perfect and some differentiation may continue to exist because trade costs between country stores may not fall to zero (exchange rates, means of payment, linguistic trade barriers, etc.).
    Keywords: digital single market, copyright, digital media, audio-visual, music, e-books, online games
    JEL: D23 K11
    Date: 2017–06
  14. By: Sarah Clifford (Department of Economics, University of Copenhagen)
    Abstract: Using a large panel dataset on worldwide operations of multinational firms, this paper studies one of the most advocated anti-tax-avoidance measures: Controlled Foreign Corporation rules. By including income of foreign low-tax subsidiaries in the domestic tax base, these rules create incentives for multinationals to move income away from low-tax environments. Exploiting variation around the tax threshold used to identify low-tax subsidiaries, we find that multinationals redirect profits into subsidiaries just above the threshold and place more new subsidiaries just above compared to just below the threshold. The resulting increase in global corporate tax revenue partly accrues to the rule-enforcing country.
    Keywords: CFC legislation; Multinational firms; Tax avoidance; Corporate taxation
    JEL: F23 H25 K34
    Date: 2017–02

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