nep-law New Economics Papers
on Law and Economics
Issue of 2017‒07‒30
fourteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Self-control and crime revisited: Disentangling the effect of self-control on risk taking and antisocial behavior By Friehe, Tim; Schildberg-Hörisch, Hannah
  2. The Medieval Roots of Inclusive Institutions: From the Norman Conquest of England to the Great Reform Act By Charles Angelucci; Simone Meraglia; Nico Voigtländer
  3. Predicting norm enforcement: The individual and joint predictive power of economic preferences, personality, and self-control By Friehe, Tim; Schildberg-Hörisch, Hannah
  4. Marginal Deterrence at Work By Rosario Crino; Giovanni Immordino; Gülen Karakoç-Palminteri; Salvatore Piccolo
  5. Restricting or Abolishing Cash: An Effective Instrument for Fighting the Shadow Economy, Crime and Terrorism? By Schneider, Friedrich
  6. Mediation in the case of disrespecting measures concerning the custody of the minor By Nicoleta-Elena Buzatu
  7. Going after the Addiction, Not the Addicted: The Impact of Drug Decriminalization in Portugal By Félix, Sónia; Portugal, Pedro; Tavares, Ana
  8. Simple Statistical Screens to Detect Bid Rigging By Imhof, David
  9. The Efficiency of Bankruptcy Proceedings in Oman By Saleh Albarashdi
  10. Do Environmental Regulations Effect FDI Decisions? The Pollution Haven Hypothesis Revisited By Yoon, Haeyeon; Heshmati, Almas
  11. Capital Structure Under Collusion By Ferrés, Daniel; Ormazabal, Gaizka; Povel, Paul; Sertsios, Giorgio
  12. Differential Effects of Self-defense Policy Across Race By Michael Spanbauer
  13. Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics By Rasul, Imran
  14. Not in My Backyard? Not So Fast. The Effect of Marijuana Legalization on Neighborhood Crime By Brinkman, Jeffrey; Mok-Lamme, David

  1. By: Friehe, Tim; Schildberg-Hörisch, Hannah
    Abstract: Low self-control is considered a fundamental cause of crime. The aim of our study is to provide causal evidence on the link between self-control and criminal behavior. We test whether individuals with lower self-control behave in a more antisocial manner and are less risk-averse and thus are, according to both the General Theory of Crime and the economic literature on criminal behavior, more likely to engage in criminal activities. In order to exogenously vary the level of self-control in a laboratory experiment, we use a wellestablished experimental manipulation, a so-called depletion task. We find that subjects with low self-control take more risk. The effect of self-control on antisocial behavior is small and not significant. In sum, our findings are consistent with the proposition that low selfcontrol is a facilitator of crime to the extent that individuals with lower levels of self-control are less effectively deterred by probabilistic sanctions.
    Keywords: self-control,risk taking,antisocial behavior,criminal behavior,ego-depletion,experiment
    JEL: C91 D03 K42
    Date: 2017
  2. By: Charles Angelucci; Simone Meraglia; Nico Voigtländer
    Abstract: The representation of merchant interests in parliaments played a crucial role in constraining monarchs’ power and expanding the protection of property rights. We study the process that led to the inclusion of merchant representatives in the English Parliament, using a novel comprehensive dataset for 550 medieval English towns (boroughs). Our analysis begins with the Norman Conquest in 1066 – an event of enormous political change that resulted in largely homogeneous formal institutions across England. From this starting point, we document a two-step process: First, monitoring issues and asymmetric information led to inefficiencies in the king’s tax collection, especially with the onset of the Commercial Revolution in the 12th century. This gave rise to mutually beneficial agreements (Farm Grants), whereby medieval merchant towns obtained the right of self-administered tax collection and law enforcement. Second, we show that Farm Grants were stepping stones towards representation in the English Parliament after its creation in 1295: local autonomy meant that subsequently, extra-ordinary taxation (e.g., to finance wars) had to be negotiated with towns – and the efficient institution to do so was Parliament. We show that royal boroughs with trade-favoring geography were much more likely to be represented in Parliament, and that this relationship worked through Farm Grants. We also show that medieval self-governance had important long-term consequences and interacted with nationwide institutional changes. Boroughs with medieval Farm Grants had persistently more inclusive local elections of public officials and MPs, they raised troops to support the parliamentarians during the CivilWar in 1642, and they supported the Great Reform Act of 1832, which resulted in the extension of the franchise.
    JEL: D02 D73 N43 P14 P16
    Date: 2017–07
  3. By: Friehe, Tim; Schildberg-Hörisch, Hannah
    Abstract: This paper explores the individual and joint predictive power of concepts from economics, psychology, and criminology for individual norm enforcement behavior. More specifically, we consider economic preferences (patience and attitudes towards risk), personality traits from psychology (Big Five and locus of control), and a self-control scale from criminology. Using survey data, we show that the various concepts complement each other in predicting self-reported norm enforcement behavior. The most significant predictors stem from all three disciplines: stronger risk aversion, conscientiousness and neuroticism as well as higher levels of self-control increase an individual's willingness to enforce norms. Taking a broader perspective, our results illustrate that integrating concepts from different disciplines may enhance our understanding of heterogeneity in individual behavior.
    Keywords: norm enforcement,economic preferences,personality traits,self-control
    JEL: K42 D81 D90 C21
    Date: 2017
  4. By: Rosario Crino (Università Cattolica del Sacro Cuore di Milano, CEPR and CESifo.); Giovanni Immordino (Università di Napoli Federico II and CSEF); Gülen Karakoç-Palminteri (Università di Milano Bicocca); Salvatore Piccolo (Università di Bergamo and CSEF)
    Abstract: We test the rational economic model of marginal deterrence of law enforcement --- i.e., the need for graduating the penalty to the severity of the crime. We combine individual-level data on sentence length for a representative sample of US inmates with proxies for maximum punishment and monitoring costs across US states over 50 years. Consistent with the theory of marginal deterrence, we show that an increase in maximum penalty or a decrease in monitoring cost are associated with longer sentences. We also provide evidence that steeper sanctions are associated with less severe crimes, consistent with marginal deterrence being effective. Overall, these findings favor the marginal deterrence framework over competing theories of justice.
    Keywords: Marginal Deterrence, Enforcement Policies, Individual-Level Data, Death Penalty
    JEL: K14 K40
    Date: 2017–07–24
  5. By: Schneider, Friedrich
    Abstract: This paper has four goals: First, the use of cash as a possible driving factor of the shadow economy is investigated. Second, the use of cash in crime, here especially in corruption, is also econometrically investigated. The influence is somewhat larger than on the shadow economy, but it is certainly not a decisive factor for bribery activities. Some figures about organized crime are also shown; the importance of cash is diminishing. Third, some remarks about terrorism are made and here a cash limit doesn’t prevent terrorism. Fourth, some remarks are made about the restriction or abolishment of cash on civil liberties, with the result that this will extremely limit them. The conclusion of this paper is that cash has a minor influence on the shadow economy, crime and terrorism, but potentially a major influence on civil liberties.
    Keywords: cash,cash limit,shadow economy,crime,corruption,transnational crime organizations,financial proceeds,money laundering,illegal cross-border flows,tax fraud figures
    Date: 2017
  6. By: Nicoleta-Elena Buzatu (\)
    Abstract: In criminal cases relating to offences for which, according to the law, the withdrawal of the preliminary complaint removes the criminal liability, mediation may be the best solution for the parties to reach an out-of-court-settlement. The defendant or the injured party, if interested in solving the situation faster or recovering the injury, will initiate the criminal mediation proceeding by addressing a mediator. Failure to comply with measures regarding child custody presupposes that a minor child is retained by one parent, without the consent of the other one, or repeatedly prevents a parent from getting in touch with the child. The Criminal Code stipulates that this kind of offences is initiated upon the complaint of the injured person - for which mediation agreement completely removes criminal liability. In this case mediation can take place at any time during the criminal proceedings, including the appeal stage.
    Keywords: mediation, preliminary complaint, mediation agreement, criminal liability, minor
    JEL: K14 K40
    Date: 2017–05
  7. By: Félix, Sónia (Banco de Portugal); Portugal, Pedro (Banco de Portugal); Tavares, Ana (Universidade Nova de Lisboa)
    Abstract: This paper investigates the impact of drug decriminalization in Portugal using the Synthetic Control Method. The applied econometric methodology compares Portuguese drug-related variables with the ones extracted from a convex combination of similar European countries. The results suggest that a policy change implemented in Portugal contributed to a decrease in the number of heroine and cocaine seizures, a decrease in the number of offenses and drug-related deaths, and a decrease in the number of clients entering treatment. Moreover, the policy change contributed to a reduction in the incidence of drug addicts among HIV individuals.
    Keywords: drug decriminalization policy, illicit drugs, synthetic control method
    JEL: C21 D04 K42
    Date: 2017–07
  8. By: Imhof, David
    Abstract: The paper applies simple statistical screens to a bid-rigging cartel in Switzerland, and shows how well the screens detect it by capturing the impact of collusion on the discrete distribution of the bids. In case of bid rigging, the support for the distribution of the bids decreases involving a lower variance, illustrated by the coefficient of variance and the kurtosis statistic. Furthermore, when firms rig bids without side-payment, the difference between the first and the second lowest bids increases whereas the difference between the losing bids decreases, involving a negatively skewed distribution of the bids, highlighted by the relative distance and the skewness statistic. Finally, the collusive interaction screen shows that the behaviour of firms changed radically between the cartel and post-cartel periods. Therefore, the simple statistical screens proposed in this paper purpose to screen large dataset and to detect bidrigging cartels by using only information on bids.
    Keywords: bid rigging detection; screening methods; variance screen; cover bidding screen; structural and behavioural screens
    JEL: C00 C40 D22 D40 K40 L40
    Date: 2017–07–17
  9. By: Saleh Albarashdi (Sultan Qaboos University)
    Abstract: Unlike the case in the US, England and France, at present, Oman does not have a separate bankruptcy law and in dealing with the bankruptcy of traders both the Omani Commercial Code of 1990 and Omani Commercial Companies Law of 1974 incorporate some articles. Currently, the formal available bankruptcy regimes for traders under financial distress are bankruptcy proceedings, preventive composition with creditors and liquidation procedures. Unless a debtor is able to propose a composition or scheme acceptable to its creditors, the debtor will be declared bankrupt and, as a result, the debtor company will be liquidated. This paper will focus merely on bankruptcy proceedings, so it is beyond its scope to deal with preventive composition with creditors? procedures and liquidation procedures. It will approach a number of issues/ questions, which include, but not limited to,: who can request the initiation of such procedures; declaration of bankruptcy and its effects on debtors, on creditors and on pre-existing contracts; the liability of directors of bankrupt companies and setting-off arrangement on bankruptcy. It is worth noting that a reference will be made to both the UK and the US insolvency/ bankruptcy laws in order to learn from the experience of both jurisdictions.
    Keywords: Bankruptcy, directors liability, setting off arrangement.
    Date: 2017–07
  10. By: Yoon, Haeyeon (Sogang University); Heshmati, Almas (Jönköping University, Sogang University)
    Abstract: In an attempt to verify the pollution haven hypothesis, this study investigates the impact of environmental regulations on foreign direct investment (FDI). We use Korean outward FDI data covering the manufacturing sector for 2009-15. The study not only considers the stringency but also the enforcement of environmental regulations when measuring the degree of the host country's environmental regulations. Since the pollution haven's effects indicate moving the polluting production stages from the home country to other (host) countries, we distinguish between investments in the 'production' part from that in the non-production part using location information about the host country. The main results of the estimation of a FDI model show that the stricter the regulations in host countries in Asia the lower the FDI both intensively and extensively to those countries. This supports the prevalence of the effects of pollution havens. However, before we separate the FDI into the production part, the effect of environmental regulations on FDI is hindered by the FDI in the non-production part. The results indicate that environmental regulations are determinants of FDI in the production part, while environmental regulations do not have a significant effect on FDI decisions when the entire FDI is considered.
    Keywords: pollution haven hypothesis, environmental regulation, foreign direct investment
    JEL: F23 K32 L51 Q56
    Date: 2017–07
  11. By: Ferrés, Daniel; Ormazabal, Gaizka; Povel, Paul; Sertsios, Giorgio
    Abstract: We study the financial leverage of firms that collude by forming a cartel. We find that cartel firms have lower leverage ratios during collusion periods, consistent with the idea that reductions in leverage help increase cartel stability. Cartel firms have a surprisingly large economic footprint (they represent more than 20% of the total market capitalization in the U.S.), so understanding their decisions is relevant. Our findings show that anti-competitive behavior has a significant effect on capital structure choices. They also shed new light on the relation between profitability and financial leverage.
    Keywords: Capital Structure; cartels; Collusion; Financial Leverage; Financial Policies; Trigger Strategies
    JEL: G32 L12
    Date: 2017–07
  12. By: Michael Spanbauer (Department of Economics, Tulane University)
    Abstract: Self-defense policy reduces the expected cost of using lethal force as a method of self-defense. I use detailed police records to examine whether this policy had differential effects on people of different races. I find that a change in policy leads to an average of 2.75 (p
    Keywords: Crime; homicide; Stand Your Ground; public policy; discrimination
    JEL: K42 Z18
    Date: 2017–07
  13. By: Rasul, Imran
    Abstract: Quantifying the market size for cannabis is important given vigorous policy debates about how to intervene in this market. We develop a new approach to measuring the size of the cannabis market using forensic economics. The key insight is that cannabis consumption often requires the use of complementary legal inputs: roll-your-own tobacco and rolling papers. The forensic approach specifies how legal and illegal inputs are combined in the production of hand-rolled cigarettes and cannabis joints. These input relationships, along with market adding-up conditions, can then be used to infer the size of the cannabis market. We prove proof-of-concept that this approach can be readily calibrated using: (i) point-of-sales data on the legal inputs of roll-your-own tobacco and rolling papers; (ii) input parameter estimates drawn from a wide-ranging interdisciplinary evidence base. We then implement the approach using data from 2008-9. For those years, the forensic estimates for the UK cannabis market are near double those derived from standard demand-side approaches. We make precise what drives the measurement gap between methods by establishing: (i) the parameter adjustments needed in demand-side approaches to match the forensic measure; (ii) the changes in methodology to the forensic approach needed to match the demand-side estimate. Our analysis develops an agenda on measurement and data collection that allows for credible cost-benefit analysis of policy interventions in illicit drug markets.
    JEL: C80 K42
    Date: 2017–07
  14. By: Brinkman, Jeffrey (Federal Reserve Bank of Philadelphia); Mok-Lamme, David (Federal Reserve Bank of Philadelphia)
    Abstract: This paper studies the effects of marijuana legalization on neighborhood crime using unique geospatial data from Denver, Colorado. We construct a highly local panel data set that includes changes in the location of marijuana dispensaries and changes in neighborhood crime. To account for endogenous retail dispensary locations, we use a novel identification strategy that exploits exogenous changes in demand across different locations. The change in geographic demand arises from the increased importance of access to external markets caused by a change in state and local policy. The results imply that retail dispensaries lead to reduced crime in the neighborhoods where they are located. Reductions in crime are highly localized, with no evidence of benefits for adjacent neighborhoods. The spatial extent of these effects are consistent with a policing or security response, and analysis of detailed crime categories provides indirect evidence that the reduction in crime arises from a disruption of illicit markets.
    Keywords: legalization; drugs; crime; policy evaluation
    JEL: H73 I18 R50
    Date: 2017–07–18

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