nep-law New Economics Papers
on Law and Economics
Issue of 2017‒12‒11
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The internet effects on sex crime and murder: Evidence from the broadband internet expansion in Germany By Nolte, André
  2. Electricity (De)Regulation and Innovation. By Marianna Marino; Pierpaolo Parrotta; Giacomo Vallettaz
  3. Is There a Relationship between Shareholder Protection and Stock Market Development? By Simon Deakin; Prabirjit Sarkar; Mathias Siems
  4. Analysis of Merger Control in A Network Products Market By Tsuyoshi Toshimitsu
  5. Illegal Behavior in the Public Administration By NESE, Annamaria; TROISI, Roberta
  6. Younger Federal District Court Judges Favor Presidential Power By Tom Campbell; Nathaniel T. Wilcox
  7. Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design By Giuseppina Gianfreda; Giovanna Vallanti
  8. Who Benefits from Bans on Employer Credit Checks? By Leora Friedberg; Richard M. Hynes; Nathaniel Pattison
  9. An Overview of Sports Betting Regulation in the United States By Brad R. Humphreys
  10. One man’s trash is another man’s treasure: A comparative analysis of property rights in solid waste By Giuseppe Danese
  11. Who Falls Prey to the Wolf of Wall Street? Investor Participation in Market Manipulation By Christian Leuz; Steffen Meyer; Maximilian Muhn; Eugene Soltes; Andreas Hackethal
  12. Consumption Smoothing and Debtor Protections By Nathaniel Pattison

  1. By: Nolte, André
    Abstract: This paper studies the effects of the introduction of a new mass medium on criminal activity in Germany. The paper asks the question of whether highspeed internet leads to higher/lower sex crime offences and murder. I use unique German data on criminal offences and broadband internet measured at the municipality level to shed light on the question. In order to address endogeneity in broadband internet availability, I follow Falck et al. (2014) and exploit technical peculiarities at the regional level that determine the roll-out of high-speed internet. In contrast to findings for Norway (Bhuller et al., 2013), this paper documents a substitution effect of internet and child sex abuse and no effect on rape incidences. The effects on murder increase under the instrumental variable approach however remain insignificant. Overall, the estimated net effects might stem from indirect effects related to differences in reporting crime, a matching effect, and a direct effect of higher and more intensive exposure to extreme and violent media consumption. After investigating the potential channel, I do find some evidence in favor of a reporting effect suggesting that the direct consumption effect is even stronger. Further investigation of the development of illegal pornographic material suggests that the direct consumption channel does play a significant role in explaining the substitution effect.
    Keywords: Crime,Broadband Internet,Media
    JEL: K42 H40 L96 C26
    Date: 2017
  2. By: Marianna Marino; Pierpaolo Parrotta; Giacomo Vallettaz
    Abstract: In this paper we study the effect of deregulation on innovation in the electricity sector using a sample composed of 31 OECD countries. Exploiting sharp reductions in the level of product market regulation, explicitly linked to changes in the legal framework, we perform a difference-in-difference analysis by matching data retrieved from the OECD International Regulation, OECD Patent Grants, and UN World Development Indicators databases. Our main findings suggest that a decrease in regulation intensity following a significant reform has a negative impact on patents (granted by the European Patent Office), and that this impact is mainly due to the degree of market contestability. Consistent with the results of Aghion et al. [1], we also find evidence of an inverted U-shaped relationship between regulation and innovation. This may imply that the effect of deregulation on innovation depends on the strength of the deregulatory process.
    Keywords: Regulation, patents, innovation, electricity.
    JEL: K23 L51 L94 O31
    Date: 2017
  3. By: Simon Deakin; Prabirjit Sarkar; Mathias Siems
    Abstract: We use recently created datasets measuring legal change over time in a sample of 28 developed and emerging economies to test whether the strengthening of shareholder rights in the course of the mid-1990s and 2000s promoted stock market development in those countries. We find only weak and equivocal evidence of a positive effect of shareholder protection on market capitalisation, the value of stock trading, and the turnover ratio, and a negative impact on the number of listed companies. There is stronger evidence of reverse causality, in the sense of stock market development at country level generating changes in shareholder protection law. We conclude, firstly, that legal reforms were at least in part an endogenous response to stock market development and not simply a reaction to the generation of global standards; but, secondly, that the laws passed in response to the demand for shareholder empowerment did not consistently have the expected impact on financial markets, and may have had some negative and perverse results.
    Keywords: corporate governance, shareholder protection, financial development, stock market development
    JEL: G33 G34 K22 O16
    Date: 2017–09
  4. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University)
    Abstract: Using a horizontally differentiated three-firm model, we consider horizontal merger and antitrust policy in a network products market, where we observe network externalities and compatibilities (interconnectivities) between products and services. In particular, if the degree of network compatibilities in the case of a merger is sufficiently larger than that of product substitutability, consumer surplus is larger than in the premerger case. Thus, the proposed merger is allowed by antitrust authorities based on the positive effect on consumer surplus. In this case, the merger is Pareto improving.
    Keywords: horizontal merger; antitrust policy; network externality; compatibility; consumer surplus standard; horizontally differentiated Cournot competition
    JEL: D43 K21 L12 L15 L41
    Date: 2017–11
  5. By: NESE, Annamaria (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); TROISI, Roberta (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: This analysis addresses the corruption of Italian mayors, and it is carried out by analyzing the sentences of the Italian Supreme Court in the last decade. The research questions are as follows: Is corruption effectively prosecuted and punished in Italy? Are there signs of social stigma or reputational damage for corrupt politicians? To this aim, we focus on i) justice efficiency and ii) social tolerance of corruption. The results reported here reveal that the probability of re-election increases in small urban areas, when the mayor is a strong leader and when he colludes with entrepreneurs external to the council, thus reinforcing the hypotheses that people vote for corrupt leaders because they receive favors from those leaders or because they perceive that those leaders are efficient in delivering public goods. The judicial system works well against organized crime, probably because of the special proceedings against "mafiosi"; however, it is more inefficient when a mayor colludes with his staff: evidently, higher efficiency may be pursued through the implementation of a stricter legal institutional framework.
    Keywords: Corruption; Public management
    JEL: C35 D02 D23 I38
    Date: 2017–10–19
  6. By: Tom Campbell (Fowler School of Law, Chapman University); Nathaniel T. Wilcox (Economics Science Institute, Argyros School of Business and Economics, Chapman University)
    Abstract: From 1960 to 2015, Federal District Court opinions involving challenges to Executive Branch authority show that U.S. Federal District Court judges (trial judges) support such authority less as they age, with a sharp decline beginning near age 57. We argue that District judges know that elevation to the Federal Circuit Court of Appeals becomes increasingly improbable, and hence have less reason to ‘cooperate’ with the Executive, with advancing age. Political variables (and other variables) introduced as extra regressors do not reverse our main results. When there are contemporaneous vacancies on their Circuit courts, District judges in the eleven State Circuits (but not the District of Columbia circuit) are also more likely to favor the Executive.
    Keywords: Judicial Behavior
    JEL: K40
    Date: 2017
  7. By: Giuseppina Gianfreda (Università della Tuscia); Giovanna Vallanti (LUISS "Guido Carli")
    Abstract: Compliance with labour law has costs and benefits which may depend on the institutional environment in which firms operate. Although several studies have documented a negative effect of informality on firms productivity and growth it is a fact that firms may resort to undeclared employment to escape excessive tax or regulatory burden. We argue that firms may respond to strict employment protection legislation through accrued informality thus (partially) offsetting the negative effect of informality on productivity. We exploit the Italian dismissal legislation imposing higher firing costs for firms with more than 15 workers and show that informality reduces the turnover of formal jobs for firms above the 15 workers threshold; furthermore, while the overall effect of informality on firms productivity is negative, the differential effect for firms above the threshold as compared to smaller firms is positive and significant.
    JEL: D02 D22 D24
    Date: 2017–12
  8. By: Leora Friedberg (University of Virginia); Richard M. Hynes (University of Virginia School of Law); Nathaniel Pattison (Southern Methodist University)
    Abstract: Eleven states limit employers’ use of credit reports, and prominent politicians have proposed a national ban. This paper evaluates the success of these credit check bans in helping financially distressed individuals find employment. In the Survey of Income and Program Participation (SIPP), we identify those likely to directly benefit from credit check bans – unemployed individuals with recent financial trouble. Exploiting the staggered passage of state bans, we find that banning credit checks increases the likelihood of finding a job by twenty-five percent among people who have had trouble meeting their expenses. We find a small and statistically insignificant change in job-finding rates among people who have not had recent financial trouble and a statistically insignificant impact on minorities overall.
    Keywords: Credit Reports, Unemployment, Labor Market
    JEL: G28 J64 J70 M50 K31
    Date: 2017–11
  9. By: Brad R. Humphreys (West Virginia University, Department of Economics)
    Abstract: The United States employs an ad hoc, unconventional method of regulating sports betting, banning it almost everywhere while granting a monopoly to firms in a single state, Nevada. This approach encourages illegal sports betting markets, ignores negative externalities, and generates welfare losses among the large population of responsible recreational gamblers. I review the current state of sports betting regulation in the U.S. and assess its economic viability in advance of the Supreme Court of the United States decision on the landmark Christie v. National Collegiate Athletic Association case.
    Keywords: sports betting, PASPA, UIEGA
    JEL: K23 L83
    Date: 2017–11
  10. By: Giuseppe Danese (Católica Porto Business School – CEGE – Universidade Católica Portuguesa)
    Abstract: Previous literature has studied waste picking as an economic, social and environmental phenomenon of great importance in countries characterized by ineffective waste collection and recycling programs. The legal foundations of waste picking have, however, received little scholarly attention. Surveys conducted with waste pickers from 5 cities (Bogotá, Pune, Belo Horizonte, Durban, Nakuru) find that existing, and often hostile, regulations and competition from new entrants are key concerns for the waste pickers. In this paper, I argue that any system of legal rules that tries to exclude the waste pickers from the waste value chain results in high transaction costs and risks further aggravating existing social injustices. Several inclusive property right regimes are conceivable, from waste picker ownership of waste to a res nullius (nobody’s property) regime complemented by a right of first possession. Res nullius creates incentives for the stakeholders of waste to specialize in different segments of the collection and recycling chain. Possible drawbacks of this regime are dissipating rents because of open access to waste.
    Keywords: property rights, solid waste, waste pickers, informal economy, res nullius
    JEL: K11 Q53 O17
    Date: 2017–11
  11. By: Christian Leuz; Steffen Meyer; Maximilian Muhn; Eugene Soltes; Andreas Hackethal
    Abstract: Manipulative communications touting stocks are common in capital markets around the world. Although the price distortions created by so-called “pump-and-dump” schemes are well known, little is known about the investors in these frauds. By examining 421 “pump-and-dump” schemes between 2002 and 2015 and a proprietary set of trading records for over 110,000 individual investors from a major German bank, we provide evidence on the participation rate, magnitude of the investments, losses, and the characteristics of the individuals who invest in such schemes. Our evidence suggests that participation is quite common and involves sizable losses, with nearly 6% of active investors participating in at least one “pump-and-dump” and an average loss of nearly 30%. Moreover, we identify several distinct types of investors, some of which should not be viewed as falling prey to these frauds. We also show that portfolio composition and past trading behavior can better explain participation in touted stocks than demographics. Our analysis offers insights into the challenges associated with designing effective investor protection against market manipulation.
    JEL: D14 D18 G11 G14 G18 G28 K22 K42 M48
    Date: 2017–11
  12. By: Nathaniel Pattison (Southern Methodist University)
    Abstract: Protections for debtors are a significant source of consumption insurance. This paper evaluates the insurance created by laws that protect defaulting debtors’ assets. First, I show that households are not fully insured; consumption declines by 3-5% upon default. Second, I estimate the effect of changes in asset protection on the default rate, repayment in default, and interest rates. While additional protection does smooth consumption, the default distortion generates a substantial interest rate cost. Within a sufficient statistics formula, the estimates imply that less asset protection would significantly increase welfare.
    Keywords: Social Insurance, Household Finance, Bankruptcy, Debt Collection, Borrowing
    JEL: K35 D14 H10
    Date: 2017–12

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