nep-law New Economics Papers
on Law and Economics
Issue of 2017‒07‒02
fourteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Diffusion of New Institutions: Evidence from Renaissance Venice's Patent System By Comino, Stefano; Galasso, Alberto; Graziano, Clara
  2. The Economic and Legal Significance of “Full” Deposit Availability By Bagus, Philipp; Howden, David
  3. Should Jurors Deliberate? By Guha, Brishti
  4. Screening for Bid-rigging – Does it Work? By David Imhof; YAVUZ KARAGÖK; SAMUEL RUTZ
  5. The Political Cost of Being Soft on Crime: Evidence from a Natural Experiment By Drago, Francesco; Galbiati, Roberto; Sobbrio, Francesco
  6. Mandatory Access Prescription Drug Monitoring Programs and Prescription Drug Abuse By Dhaval M. Dave; Anca M. Grecu; Henry Saffer
  7. Justice System Efficiency and Regional Economic Performance in Mexico By Chávez Juan Carlos; Fonseca Felipe J.; Gómez Zaldívar Manuel de Jesús
  8. The Lingering Effect of Capacity Coordination on Firm Behavior in Post-depression Periods: Evidence from a Laboratory Experiment By Keisaku Higashida; Kenta Tanaka
  9. Foundations of Welfare Economics and Product Market Applications By Daniel McFadden
  10. Contested Persuasion By Stergios Skaperdas; Samarth Vaidya
  11. Mining taxation in Africa: The gold mining industry in 14 countries from 1980 to 2015 By Bertrand LAPORTE; Céline DE QUATREBARBES; Yannick BOUTERIGE
  12. International Law in a Post-Post-Cold War World—Can It Survive? By Alison Pert
  13. Do State Laws Protecting Older Workers from Discrimination Reduce Age Discrimination in Hiring? Experimental (and Nonexperimental) Evidence By David Neumark; Ian Burn; Patrick Button; Nanneh Chehras
  14. Informal Homeownership Issues: Tracking Contract for Deed Sales in the Southeast By Carpenter, Ann; Lueders, Abram; Thayer, Chris

  1. By: Comino, Stefano; Galasso, Alberto; Graziano, Clara
    Abstract: What factors affect the diffusion of new economic institutions? This paper examines this question exploiting the introduction of the first regularized patent system which appeared in the Venetian Republic in 1474. We begin by developing a model which links patenting activity of craft guilds with provisions in their statutes. The model predicts that guild statutes that are more effective at preventing outsider's entry and at mitigating price competition lead to less patenting. We test this prediction on a new dataset which combines detailed information on craft guilds and patents in the Venetian Republic during the Renaissance. We find a negative association between patenting activity and guild statutory norms which strongly restrict entry and price competition. We show that guilds which originated from medieval religious confraternities were more likely to regulate entry and competition, and that the effect on patenting is robust to instrumenting guild statutes with their quasi-exogenous religious origin. We also find that patenting was more widespread among guilds geographically distant from Venice, and among guilds in cities with lower political connection which we measure exploiting a new database on noble families and their marriages with members of the great council. Our analysis suggests that local economic and political conditions may have a substantial impact on the diffusion of new economic institutions.
    Keywords: Competition; Guilds; institutions; patents
    JEL: K23 O33 O34
    Date: 2017–06
  2. By: Bagus, Philipp; Howden, David
    Abstract: Bank deposits have two characteristics: they are available on demand and at par value. Deposit redemptions face, at least given current technology, a lag between when they are requested and when they are delivered. This fact leads some to argue that as a deposit is not fully available, all deposits are, in fact, loans and that the legal obligation of the bank changes. We argue that this lag does not nullify the original economic intent of the deposit, and hence, does not alter the legal obligations that a depository faces. Deposits must be held safely to ensure that the depositor´s money will be available when an unforeseen event occurs.
    Keywords: Deposit availability, Demand deposits, Full availability, Legal obligations in deposit contracts, Safekeeping, Fractional reserve banking
    JEL: G1 G20 G21 K10 K20 K40
    Date: 2016
  3. By: Guha, Brishti
    Abstract: Does the accuracy of verdicts improve or worsen if individual jurors on a panel are barred from deliberating prior to casting their votes? I study this question in a model where jurors can choose to exert costly effort to improve the accuracy of their individual decisions. I find that, provided the cost of effort is not too large, there is a threshold jury size above which it is better to allow jurors to deliberate. For panels smaller than this threshold, it is more effective to instruct jurors to vote on the basis of their private information, without deliberations, and to use a simple majority rule to determine the collective decision (regardless of the voting rule used with deliberations). The smaller the cost of paying attention, the larger the threshold above which the switch to allowing deliberations becomes optimal. However, if the unanimity rule had to be maintained under the no-deliberations system, it would be better to allow deliberation. The results apply to binary decision making in any committee where the committee members incur some effort in reviewing the evidence. Examples are tenure and promotion committees and some board of director meetings on issues such as whether to dismiss a CEO.
    Keywords: Jury deliberations, free riding, costly attention, secret voting, committees.
    JEL: D7 D71 D82 K41
    Date: 2017–06–01
  4. By: David Imhof (Secretariat of the Swiss Competition Commission, Université Bourgogne Franche-Comté, CRESE); YAVUZ KARAGÖK (Secretariat of the Swiss Competition Commission); SAMUEL RUTZ (Avenir Suisse)
    Abstract: This paper proposes a method to detect bid-rigging by applying mutually reinforcing screens to a road construction procurement data set from Switzerland in which no prior information about collusion was available. The screening method is particularly suited to deal with the problem of partial collusion, i.e. collusion which does not involve all firms and/or all contracts in a specific data set, implying that many of the classical markers discussed in the corresponding literature will fail to identify bid-rigging. In addition to presenting new screens for collusion, it is shown how benchmarks and the combination of different screens may be used to identify subsets of suspicious contracts and firms. The discussed screening method succeeds in isolating a group of “suspicious” firms exhibiting the characteristics of a local bid-rigging cartel with cover bids and a – more or less pronounced – bid rotation scheme. Based on these findings the Swiss Competition Commission (COMCO) opened an investigation and sanctioned the identified “suspicious” firms for bid-rigging in 2016.
    Keywords: bid-rigging, screening method, variance screen, cover bidding screen, bid rotation test, partial collusion
    JEL: C00 C40 D22 D40 K40 L40 L41
    Date: 2017–06
  5. By: Drago, Francesco; Galbiati, Roberto; Sobbrio, Francesco
    Abstract: We provide evidence about voters' response to crime control policies. We exploit a natural experiment arising from the Italian 2006 collective pardon releasing about one third of the prison population. The pardon created idiosyncratic incentives to recidivate across released individuals and municipalities. We show that municipalities where resident pardoned individuals have a higher incentive to recidivate experienced higher recidivism. Moreover, in these municipalities: i) newspapers were more likely to report crime news involving pardoned individuals; ii) voters held worse beliefs on the incumbent governments ability to control crime and iii) with respect to the previous elections, the incumbent national government experienced a worse electoral performance in the April 2008 national elections relative to the opposition coalition. Overall, our findings indicate that voters keep incumbent politicians accountable by conditioning their vote on the observed effects of their policies.
    Keywords: accountability; crime; Natural Experiment; Recidivism.; voting
    JEL: D72 K42
    Date: 2017–06
  6. By: Dhaval M. Dave; Anca M. Grecu; Henry Saffer
    Abstract: Despite the significant cost of prescription (Rx) drug abuse and calls from policy makers for effective interventions, there is limited research on the effects of policies intended to limit such abuse. This study estimates the effects of prescription drug monitoring (PDMP) programs which is a key policy targeting the non-medical use of Rx drugs. Based on objective indicators of abuse as measured by substance abuse treatment admissions related to Rx drugs, estimates do not suggest any substantial effects of instituting an operational PDMP. We find, however, that mandatory-access provisions, which raised PDMP utilization rates by actually requiring providers to query the PDMP prior to prescribing a controlled drug, are significantly associated with a reduction in Rx drug abuse. The effects are driven primarily by a reduction in opioid abuse, generally strongest among young adults (ages 18-24), and underscore important dynamics in the policy response. Robustness checks are consistent with a causal interpretation of these effects. We also assess potential spillovers of mandatory PDMPs on the use of other illicit drugs, and find a complementary reduction in admissions related to cocaine and marijuana abuse.
    JEL: H0 I1 K0
    Date: 2017–06
  7. By: Chávez Juan Carlos; Fonseca Felipe J.; Gómez Zaldívar Manuel de Jesús
    Abstract: We analyze the relationship between the economic growth rate and a rule of law indicator in Mexican states during the period 2006-2013. Specifically, we employ information regarding the time it takes to solve commercial disputes in local courts, which we use as a proxy variable to measure the efficiency of the justice system. In principle, we expect that the shorter the time it takes to resolve commercial disputes, the higher the growth rates will be in the states where the firms are located. The results suggest that a 100-day decrease in the average time it takes to resolve a commercial dispute is associated with an increase of 0.6 percent in the growth rate of state per capita GDP.
    Keywords: Economic Growth;Justice System;Regional Economies
    JEL: O43
    Date: 2017–06
  8. By: Keisaku Higashida (School of Economics, Kwansei Gakuin University); Kenta Tanaka (Faculty of Economics, Musashi University)
    Abstract: This study experimentally examines whether capacity coordination in depression, which is sometimes allowed under antitrust laws, influences the firm behavior in periods after demand recovers. Following Hampton and Sherstyuk (2012), we conducted a series of laboratory experiment by adopting the two-stage capacity-price decision-making duopoly setting. We adopted three treatments in terms of capacity coordination: no coordination, weak coordination, and strong coordination. Under the strong coordination treatment, the subjects cannot deviate from the coordinated capacity, which they can do so under the weak coordination treatment. The results of the experiment indicate that the experiences of success and failure of coordination influence subjects’ capacity choices during periods after demand recovers even if capacity coordination is not allowed in those post-depression periods. In particular, capacity may be greater in the post-depression periods than in the pre-depression periods under the weak coordination.
    Keywords: Capacity coordination, demand shocks, lingering effect, laboratory experiment
    JEL: K21 L41
    Date: 2017–05
  9. By: Daniel McFadden
    Abstract: A common problem in applied economics is to determine the impact on consumers of changes in prices and attributes of marketed products as a consequence of policy changes. Examples are prospective regulation of product safety and reliability, or retrospective compensation for harm from defective products or misrepresentation of product features. This paper reexamines the foundations of welfare analysis for these applications. We consider discrete product choice, and develop practical formulas that apply when discrete product demands are characterized by mixed multinomial logit models and policy changes affect hedonic attributes of products in addition to price. We show that for applications that are retrospective, or are prospective but compensating transfers are hypothetical rather than fulfilled, a Market Compensating Equivalent measure that updates Marshallian consumer surplus is more appropriate than Hicksian compensating or equivalent variations. We identify the welfare questions that can be answered in the presence of partial observability on the preferences of individual consumers. We examine the welfare calculus when the experienced-utility of consumers differs from the decision-utility that determines market demands, as the result of resolution of contingencies regarding attributes of products and interactions with consumer needs, or as the result of inconsistencies in tastes and incomplete optimizing behavior. We conclude with an illustrative application that calculates the welfare impacts of unauthorized sharing of consumer information by video streaming services.
    JEL: D11 D12 D60 D61 K13 L51
    Date: 2017–06
  10. By: Stergios Skaperdas (Department of Economics, University of California-Irvine); Samarth Vaidya (School of Accounting, Economics and Finance, Deakin University University)
    Abstract: We show how contest and rent-seeking functions can be thought of as persuasion functions that can be derived in a Bayesian setting. Two contestants (such as lobbyists or politicians) produce evidence for a decision-maker (such as an agency head or a voter) who has prior beliefs and possibly other biases and engages in Bayesian updating. The probability of each contestant winning depends on the resources and organization of the contestant, on the biases of the decision-maker, on the truth as well as on other factors. We discuss how this approach can be applied to lobbying government at its three branches (legislative, executive, and judicial, the latter in terms of litigation); political campaigning; general policy formulation and advocacy in the wider media; and ideological struggles.
    Keywords: Contests; Lobbying; Rent-seeking
    JEL: D72 D73 D78 H50
    Date: 2016–05
  11. By: Bertrand LAPORTE (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Céline DE QUATREBARBES; Yannick BOUTERIGE
    Abstract: The lack of information about the sharing of mining resource rent between governments and investors is an easy statement to make for Africa. The existing datasets are often insufficient for a deep analysis of African tax law as applied to the natural resource sectors, which has limited the academic and operational approaches. This paper describes the first legal and tax database which specifies the tax regime applied to industrial gold mining companies in 14 African gold-producing countries from 1980 to 2015. The database has three major innovations: (i) an inventory of taxes and duties (rate, base and exemptions) payable during the prospecting phase and mining phase of a gold project; (ii) a new detailed historical record covering 1980 to 2015; (iii) the link between each piece of tax information and its legal source. This database is used to make a first analysis of mining tax regimes and rent sharing in the main gold-producing countries. The first results highlight the heterogeneity of tax regimes between English-speaking and French-speaking countries. There has been a convergence of the average effective tax rates across most of the countries, the effective tax rate has increased in most countries following the tax reforms undertaken since 2010.The database is downloadable following the link :
    Keywords: Mining sector, Gold, Taxation of natural resources, Database.
    JEL: C80 K34 Q38
    Date: 2017–06
  12. By: Alison Pert
    Abstract: Recent world developments pose a direct challenge to the authority and effectiveness of international law. The actions of Russia in Ukraine, and China in the South China Sea, represent a particular threat. These actions are in clear violation of international law, involving the threat or use of armed force and the seizure of territory, and Russia and China are permanent members of the UN Security Council – the body charged by the international community with maintaining international peace and security. Putting further potential strain on the international legal order is the marked shift towards nationalism in many states, most notably the United States under Donald Trump. This article argues that the international community should not accept these developments as inevitable. Support for multilateralism over isolationism and unequivocal condemnation of breaches of international law are needed now more than ever.
    Keywords: international law, multilateralism, good international citizenship, Russia, Ukraine, China, South China Sea, China-Philippines arbitration, lawfare, Putin, Trump
    Date: 2017–04–06
  13. By: David Neumark (University of California-Irvine); Ian Burn (University of California-Irvine); Patrick Button (Tulane University); Nanneh Chehras (University of California-Irvine)
    Abstract: We provide evidence from a field experiment — a correspondence study — on age discrimination in hiring for retail sales jobs. We collect experimental data in all 50 states and then relate measured age discrimination — the difference in callback rates between old and young applicants — to variation across states in antidiscrimination laws offering protections to older workers that are stronger than the federal age and disability discrimination laws. We do a similar analysis for nonexperimental data on differences across states in hiring rates of older versus younger workers. The experimental evidence points consistently to evidence of hiring discrimination against older men and, more so, against older women. However, the evidence on the relationship between hiring discrimination against older workers and state variation in age and disability discrimination laws is not so clear; at a minimum, there is not a compelling case that stronger state protections reduce hiring discrimination against older workers. In contrast, the non-experimental evidence suggests that stronger disability discrimination protections increase the relative hiring of older workers.
    Date: 2017–03
  14. By: Carpenter, Ann (Federal Reserve Bank of Atlanta); Lueders, Abram (Federal Reserve Bank of Atlanta); Thayer, Chris (Federal Reserve Bank of Atlanta)
    Abstract: Since the Great Recession, homeownership rates have dropped and the wealth divide has widened for low-income and racial and ethnic minority households. Homeownership is a significant contributor to household balance sheets and generator of household wealth, particularly for these populations. {{p}} A contract for deed is a seller-financed real estate contract consisting of installment payments. For households that desire the financial and physical security of owning a home, contracts for deed may provide an inexpensive option. However, risks may exist. Unlike the recipient of a mortgage, the purchaser of a home under the terms of a contract for deed does not hold title or build equity on the property, despite being responsible for all expenses. In addition, corporate sellers of contracts for deed have been shown to include many undesirable elements, such as high interest rates and inflated purchase prices. {{p}} Based on our analysis, corporate contract for deed sales increased from 2008 to 2013 and have plateaued or declined since that time in four major southeastern cities. These properties tended to be located in majority-African-American neighborhoods with less access to financial services. However, a much larger yet unknown number of contracts for deed involve a small-scale seller, such as a private individual or local firm. The terms of these contracts vary, with roughly equal numbers of seemingly low-risk contracts and contracts with extremely high interest rates and unfair forfeiture clauses.
    Keywords: contract for deed; land contract; informal homeownership; household wealth
    JEL: K12 R21 R31
    Date: 2017–06–01

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