nep-law New Economics Papers
on Law and Economics
Issue of 2017‒11‒05
fifteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Whistle-Blower Protection: Theory and Experimental Evidence By Lydia Mechtenberg; Gerd Mühlheusser; Andreas Roider
  2. Alcohol Policies and Crime Rates in Russian Regions By Marina Kolosnitsyna; Natalia Khorkina; Anton Volkov
  3. Signing Statements and Presidentializing Legislative History By John M. de Figueiredo; Edward H. Stiglitz
  4. The Political Cost of Being Soft on Crime: Evidence from a Natural Experiment By Francesco Drago; Roberto Galbiati; Francesco Sobbrio
  5. Understanding the Time to Court Case Resolution: A Competing Risks Analysis Using Belgian Data By Samantha Bielen; Peter Grajzl; Wim Marneffe
  6. Does Corruption Ease the Burden of Regulation? National and Subnational Evidence By Breen, Michael; Gillanders, Robert
  7. Until taxes do us part: tax penalties or bonuses and the marriage decision By F. Barigozzi; H. Cremer; K. Roeder
  8. Do improved property rights decrease violence against women in India? By Amaral, S.
  9. Nitpicky Insurers and the Law of Contracts By Jean-Marc Bourgeon; Pierre Picard
  10. Structure of P2P lending and investor protection: Analyses based on an international comparison of legal arrangements By Atsushi Samitsu
  11. An Economic Model of Patent Exhaustion By Olena Ivus; Edwin L.-C. Lai; Ted Sichelman
  12. Social Influence and the Consumer Bankruptcy Decision By Jonathan D. Fisher
  13. Abuse of Dominance and Antitrust Enforcement in the German Electricity Market By Tomaso Duso; Florian Szücs; Veit Böckers
  14. The Opportunities and Challenges Overview: Implementing Performance Based Standards Regulation for High Capacity Passenger Vehicle in Malaysia By Osmin, Muhamad Shaharudin; Md. Diah, Jezan; Mohd. Sharif, Sariwati
  15. How much does others’ protection matter? Employment protection and well-being By Lücke, Christine

  1. By: Lydia Mechtenberg; Gerd Mühlheusser; Andreas Roider
    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
  2. By: Marina Kolosnitsyna (National Research University Higher School of Economics); Natalia Khorkina (National Research University Higher School of Economics); Anton Volkov (National Research University Higher School of Economics)
    Abstract: In economic theory, alcohol consumption is considered as an addictive and sometimes irrational behaviour. Such behaviour often leads to undesirable external effects: increasing crime rates, traffic and occupational accidents, fires, and domestic violence. That is why most countries facing high levels of alcohol intake apply special measures to reduce consumption and, as a result, the external effects. Recently, the same measures have also been put in place in Russia, including price rises and time restrictions on retail alcohol sales. This paper investigates the influence of these measures on crime indicators. The empirical study is based on an econometric analysis of panel data from Russian regions, 2003-2015. The results confirm the effectiveness of time restrictions on alcohol sales with regard to juvenile and adult crime. However, the increase of vodka prices due to increasing excise tax reduces juvenile crime but does not influence crime rates among adults
    Keywords: alcohol; alcohol policies; crime; Russia.
    JEL: H23 I18
    Date: 2017
  3. By: John M. de Figueiredo; Edward H. Stiglitz
    Abstract: Presidents often attach statements to the bills they sign into law, purporting to celebrate, construe, or object to provisions in the statute. Though long a feature of U.S. lawmaking, the President has avowedly attempted to use these signing statements as tool of strategic influence over judicial decisionmaking since the 1980s—as a way of creating “presidential legislative history” to supplement and, at times, supplant the traditional congressional legislative history conventionally used by the courts to interpret statutes. In this Article, we examine a novel dataset of judicial opinion citations to presidential signing statements to conduct the most comprehensive empirical examination of how courts have received presidential legislative history to date. Three main findings emerge from this analysis. First, contrary to the pervasive (and legitimate) fears in the literature on signing statements, courts rarely cite signing statements in their decisions. Second, in the aggregate, when courts cite signing statements, they cite them in predictably partisan ways, with judges citing Presidents’ signing statements from their own political parties more often than those of the opposing parties. This effect, however, is driven entirely by the behavior of Republican-appointed appellate jurists. Third, courts predominately employ signing statements to buttress aligned statutory text and conventional sources of legislative history, and seemingly never rely on them to override contrary plain statutory text or even unified traditional legislative history. This suggests that signing statements have low rank among interpretative tools and courts primarily use them to complement rather than substitute for congressional legislative history. In this sense, Presidents have largely failed to establish an alternative corpus of valid interpretive material.
    JEL: H70 K00
    Date: 2017–10
  4. By: Francesco Drago; Roberto Galbiati; Francesco Sobbrio
    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, voting, natural experiment, crime, recidivism
    JEL: D72 K42
    Date: 2017
  5. By: Samantha Bielen; Peter Grajzl; Wim Marneffe
    Abstract: Court delays are a frequent concern, yet what explains court case duration remains incompletely understood. We study the time to court case resolution by drawing on a detailed case-level dataset of civil suits filed at a major Belgian court. We utilize the competing risks regression framework to address the typically neglected heterogeneity in the modes of court case resolution and examine the role of a wide range of both time-invariant and time-varying covariates. Controlling for judge fixed effects, we find substantial disparities in the effect of party and case characteristics on the time to settlement versus trial judgment. Exploiting the de facto random assignment of cases to serving judges within the court's chambers, we further find that judge characteristics matter for time to trial judgment, but not for time to settlement. Modeling heterogeneity in the modes of court case resolution is therefore central to understanding of court case durations.
    Keywords: court delays, competing risks, trial judgment, settlement, Belgium
    JEL: K41 K12 P48
    Date: 2017
  6. By: Breen, Michael; Gillanders, Robert
    Abstract: Does corruption ease the burden of regulation? We test this question using survey data on business managers’ experience of dealing with regulation and corruption. We find that there is substantial within-country variation in the burden of regulation and that corruption is associated with worse regulatory outcomes across a range of indicators at the country and subnational level. Our results, which hold over a number of specifications, are inconsistent with the hypothesis that corruption greases the wheels of commerce by easing the burden of regulation on the average firm in poor regulatory environments. Rather, our results suggest that corruption increases the burden and imposes large costs on businesses
    Keywords: Corruption, regulation, governance, entrepreneurship, business regulation
    JEL: D73 K20 L51 R50
    Date: 2017–10
  7. By: F. Barigozzi; H. Cremer; K. Roeder
    Abstract: The tax regimes applied to couples in many countries including the US, France, and Germany imply either a marriage penalty or a marriage bonus. We study how they affect the decision to get married by considering two potential spouses who play a marriage proposal game. At the end of the game they may get married, live together without formal marriage, or split up. In this signaling game, proposing (or getting married) is costly but can indicate strong love. The striking property we obtain is that a marriage bonus may actually reduce the probability that a couple gets married. If the bonus is sufficiently large, the signaling mechanism breaks down, and only a pooling equilibrium in which fewer couples get married remains. Similarly, a marriage penalty may increase the marriage probability. Speciffically, the penalty may lead to a separating equilibrium with efficiency enhancing information transmission, which was otherwise not possible. Our results also imply that marriage decisions in the laissez-faire are not necessarily privately optimal. In some cases a bonus or a penalty may effiectively make the marriage decision more efficient; it may increase the number of efficient marriages that otherwise may not be concluded.
    JEL: J12 D82 H31
    Date: 2017–10
  8. By: Amaral, S.
    Abstract: This paper uses the staggered implementation of a legal change in inheritance law in India to estimate the effect of women's improved access to inheritance on violence against women. I find that the aggregate rate of violence against women ( including female suicides) fell. This fall is due to changes in police-reported violence as well as in female mortality. The law did not change male mortality or other forms of non-gender based crime. Further, at the individual level I find that spouses eligible for inheritance are 17 percent less likely to be victims of domestic violence. These findings are explained by an improvement in marriage market negotiations and this led to women marrying partners that consume less alcohol.
    Date: 2017–10–24
  9. By: Jean-Marc Bourgeon; Pierre Picard
    Abstract: The standard economic analysis of the insured-insurer relationship under moral hazard postulates a simplistic setup that hardly explains the many features of an insurance contract. We extend this setup to include the situation that the insured was facing at the time of the accident and the circumstances of the loss. We show that if this information is costlessly observable, then it should be included in the contract to improve the risk sharing-incentive trade-off under moral hazard. However, in practice the insurer observes the circumstances of the loss only in particular cases - most of the time by performing a costly audit - and almost never the situation the insured was facing at the time of the accident. The resulting incompleteness of the contract opens the door to controversies and disputes that may lead to judicial procedures. We show how the law of insurance contracts should allow insurers to incentivize policyholders to exert an adequate level of effort, and, at the same time, to limit their propencity to nitpick.
    Keywords: insurance, moral hazard, incomplete contracts
    JEL: D82 D86 G22
    Date: 2017
  10. By: Atsushi Samitsu (Bank of Japan)
    Abstract: P2P lending is direct lending between lenders and borrowers online without using traditional financial intermediaries such as banks. There has been a rapid increase in the amount of outstanding loans in P2P lending in recent years, mainly in the UK, the US, and China, since a major P2P lending platform in the UK was launched in 2005. In this paper, the structure of P2P lending and its characteristics are analysed using banks as a reference point. This paper also highlights the fact that the legal arrangements in P2P lending vary from country to country and those differences could affect the degree of investor protection. Samitsu (2017) explains that under the current legal arrangement in Japan, investors assume the credit risk of P2P lending platforms, and proposes utilising schemes such as specific purpose companies and specific trust companies to strengthen investor protection.
    Keywords: P2P lending; Financial intermediation; Banks; Systemic risk; Investor protection; FinTech
    JEL: K22
    Date: 2017–10–23
  11. By: Olena Ivus; Edwin L.-C. Lai; Ted Sichelman
    Abstract: The doctrine of “patent exhaustion†implies that the authorized sale of patented goods “exhausts†the patent rights in the goods sold and precludes additional license fees from downstream buyers. This paper offers the first formal economic model of domestic patent exhaustion that incorporates transaction costs in consumer licensing, and examines how a shift in patent policy from absolute to presumptive exhaustion, in which the patent owner can opt- out of exhaustion via contract, affects social welfare. The results show that when transaction costs are low, presumptive exhaustion is socially optimal, because it allows welfare-enhancing price discrimination via downstream licensing. Conversely, when transaction costs are high, the regime of presumptive patent exhaustion leads to a greater loss of static efficiency, because transaction cost frictions offset the benefits of price discrimination, but dynamic benefits in promoting ex ante investment in product quality may outweigh any static inefficiencies.
    Keywords: intellectual property, patent exhaustion, first sale doctrine, patent licensing
    JEL: F10 O31
    Date: 2017
  12. By: Jonathan D. Fisher
    Abstract: I examine the influence of neighbors on the consumer bankruptcy decision using administrative bankruptcy records linked the 2000 Decennial Census. Two empirical strategies remove unobserved common factors that affect identification. The first strategy uses small geographical areas to isolate neighborhood effects, and the second strategy identifies the effect using past bankruptcy filers who moved states. The findings from both strategies reinforce each other and confirm the role of social influence on the bankruptcy decision. Having a past bankruptcy filer move into the block from a different state increases the likelihood of filing by 10 percent.
    Keywords: Personal bankruptcy; program participation; social influence;
    JEL: D12 K35
    Date: 2017–01
  13. By: Tomaso Duso; Florian Szücs; Veit Böckers
    Abstract: In 2008, the European Commission investigated E.ON, a large and vertically integrated electricity company, for the alleged abuse of a joint dominant position by strategically withholding generation capacity. The case was settled after E.ON agreed to divest 5,000 MW generation capacity as well as its extra-high voltage network. We analyze the effect of these divestitures on German wholesale electricity prices. Our identification strategy is based on the observation that energy suppliers have more market power during peak periods when demand is high. Therefore, a decrease in market power should lead to convergence between peak and off-peak prices. Using daily electricity prices for the 2006 - 2012 period and controlling for cost and demand drivers, we find economically and statistically significant convergence effects after the implementation of the Commission’s decision. Furthermore, the price reductions appear to be mostly due to the divestiture of gas and coal plants, which is consistent with merit-order considerations. Placebo regressions support a causal interpretation of our results.
    Keywords: electricity, wholesale prices, EU Commission, abuse of dominance, ex post evaluation, E.ON
    JEL: K21 L41 L94
    Date: 2017
  14. By: Osmin, Muhamad Shaharudin; Md. Diah, Jezan; Mohd. Sharif, Sariwati
    Abstract: Road accidents involving heavy commercial passenger vehicle (HCPV) in Malaysia have always been in the spotlight and various efforts have been taken with much attention given on operational issues. At present, the weight and dimensions of HCPV in Malaysia generally regulated under prescriptive standards regulations which do not provide clear safety outcomes and often limits the flexibility about how to achieve it. This paper provides an overview of opportunities and challenges of implementing Performance Based Standards (PBS) regulation for HCPV vehicle in Malaysia based on the Australian PBS regulation implementation for heavy vehicle. It was found that Tail Swing, Braking Efficiency and Maximum Stable Inclination Angle under the existing regulation have or partly met the PBS approach. The opportunities for implementing PBS regulation were explained in terms of the possibility adopting PBS approaches in the existing regulation and second, the institutional readiness to develop and implement it. However, challenges were expected, for example increase in cost of vehicle’s assessment. Implementing PBS regulation for HCPV in Malaysia will provide various benefits such as increase productivity, efficiency and most importantly safety.
    Keywords: High capacity passenger vehicle, prescriptive standard regulations, performance based standards regulation, opportunities, challenges
    JEL: K23 R48
    Date: 2017–09–08
  15. By: Lücke, Christine
    Abstract: Workers’ well-being depends crucially on the legal framework and its statutes regulating the level of protection. While it seems obvious that a worker’s level of satisfaction is directly affected by the level of protection she receives, this paper argues that the level of protection other workers receive constitutes in integral part as well.
    JEL: J28 J48 J42
    Date: 2017

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