nep-law New Economics Papers
on Law and Economics
Issue of 2017‒12‒18
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Exploitative Abuse and Abuse of Economic Dependence: What can we Learn from the Industrial Organization Approach? By Patrice Bougette; Oliver Budzinski; Frédéric Marty
  2. Copying informal Institutions: The role of British colonial officers during the decolonization of British Africa By Valentin Seidler
  3. From Land Grants to Loan Farms: Property Rights and the Extent of Settlement in Dutch South Africa, 1652-1750 By Alan Dye; Sumner La Croix
  4. The Impact of Unemployment on Child Maltreatment in the United States By Daniel Brown; Elisabetta De Cao
  5. Human Smuggling and Intentions to Migrate: Global Evidence from a Supply Shock along Africa-to-Europe Migration Routes By Guido, Friebel; Miriam, Manchin; Mariapia, Mendola; Giovanni, Prarolo;
  6. A Collateral Tax Sanction: When Does it Mimic a Welfare-Improving Tag? By Yulia (Paramonova) Kuchumova
  7. The Changing Returns to Crime: Do Criminals Respond to Prices? By Draca, Mirko; Koutmeridis, Theodore; Machin, Stephen
  8. Rethinking corporate bankruptcy theory in the twenty-first century By Paterson, Sarah
  9. Quality discrimination in online multi-sided markets By Nestor Duch-Brown
  10. Barriers to European cross-border E-commerce By Alex Coad; Nestor Duch-Brown
  11. Large Investors, Regulatory Taking and Investor-State Dispute Settlement By Kai A. Konrad
  12. Intergenerational Effects of Improving Women's Property Rights: Evidence from India By Nayana Bose; Shreyasee Das
  13. Platforms to business relations in online platform ecosystems By Nestor Duch-Brown

  1. By: Patrice Bougette (Université Côte d'Azur; GREDEG CNRS); Oliver Budzinski (Technische Universität Ilmenau); Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: This article aims to provide a detailed analysis of the concept of economic dependence and exploitative abuse through their evolution in competition law and economics and in European case law. First, while the theoretical roots of these concepts may be found in economic theory, we show that the issue has long been ignored or only reluctantly considered in competition law enforcement, mainly because of a lack of available and reliable economic criteria. Second, although its primary objective was to measure market power in an oligopoly context, we examine how current empirical industrial organization methodology allows a sophisticated measure of the economic dependence among suppliers and distributors. Third, we discuss the possibility of relying on the industrial organization approach to address these issues.
    Keywords: exploitative abuse, abuse of economic dependence, competition law, European Commission, effects-based approach
    JEL: K21 L12 L40 L42
    Date: 2017–12
  2. By: Valentin Seidler (University of Warwick (Visiting Fellow 2016/17))
    Abstract: Institutional reforms in developing countries often involve copying institutions from developed countries. Such institutional copying is likely to fail, if formal institutions alone are copied without the informal institutions on which they rest in the originating country. This paper investigates the role of human actors in copying informal institutions. At independence, all British African colonies imported the same institution intended to safeguard the political neutrality of their civil services. While the necessary formal provisions were copied into the constitutions of all African colonies, the extent to which they were put into practice varies. The paper investigates the connection between the variation in the legal practice and the presence of British colonial officers after independence. A natural experiment around compensation payments to British officers explains the variation in the number of officers who remained in service after independence. Interviews with retired officers suggest that the extended presence of British personnel promoted the acceptance of imported British institutions among local colleagues.
    Keywords: JEL Classification:
    Date: 2017
  3. By: Alan Dye (Barnard College, Columbia University); Sumner La Croix (University of Hawai‘i-Mānoa)
    Abstract: This paper examines a paradox in the formation of property rights in land in the early settlement of the Dutch Cape Colony. In 1652, the Dutch East India Company (VOC) established an outpost at the Cape of Good Hope to serve VOC ships sailing between Europe and Asia. Over the next 75 years, the outpost expanded into a full-fledged VOC colony. As a thin but growing population expanded land claims to graze sheep and cattle. The VOC initially promoted settlement by extending well-specified and enforced land grants in restricted zones. But by 1714 it transitioned to accommodate rapidly expanding settlement with a more loosely specified form of property rights, the loan farm. We develop a profit-maximizing monopsony model to explain the VOC choice to transition from land grant to loan farm. We conclude that the decline in the population size and ability of the Khoikhoi, a first people who inhabited the Cape, to resist Dutch incursion was critical to the transition, as it lowered the government costs of enforcement and enabled the rapid expansion of the pastoral economy.
    Keywords: Cape Colony, sheep, cattle, property rights, loan farm, frontier, land tenure, VOC
    JEL: N47 N57 P48 Q24
    Date: 2017–12
  4. By: Daniel Brown; Elisabetta De Cao
    Abstract: Abstract In this paper, we show that unemployment increases child neglect in the United States during the period from 2004 to 2012. A one percentage point increase in the unemployment rate leads to a 20 percent increase in neglect. We identify this effect by instrumenting for the county-level unemployment rate with a Bartik instrument, which we create as the weighted average of the national-level unemployment rates across each of twenty industries, where the weights are the county-level fraction of the employed working-age population in each industry at the start of the sample period. An important mechanism behind this effect is that parents lack social and private safety nets. The effect on neglect is smaller in states that introduce longer extensions to unemployment benefits, and is greater in counties where an initially larger fraction of children are not covered by health insurance. We find no evidence that the effect is driven by alcohol consumption or divorce.
    Keywords: child abuse and neglect, unemployment rate, recession, safety net, unemployment insurance
    JEL: I10 J12 J13 J65 K42
    Date: 2017–09–25
  5. By: Guido, Friebel; Miriam, Manchin; Mariapia, Mendola; Giovanni, Prarolo;
    Abstract: Africa-to-Europe irregular migration depends heavily on human smuggling services. The demise of the Gaddafi regime in 2011 marked the end of a bilateral agreement between Italy and Libya and opened the Central Mediterranean Route for irregular border crossing. How did this remarkable increase in human smuggling services affect migration intentions in the rest of the region? This paper isolates a causal impact by exploiting the spatial dimension of the smuggling network and its change over time, which produced a heterogeneous decrease in bilateral migration distances between countries in Africa and Europe. We use this source of variation and a novel dataset of bilateral distances along irregular land and sea routes, combined with cross-country survey data on individual intentions to move from Africa to Europe between 2010 and 2012. Netting out pair- and country-by-time-specific fixed effects, we find a large negative effect of distance along smuggling routes on individual migration intentions. Shorter distances increase the willingness to migrate especially for youth, (medium) skilled individuals and those with a network abroad. The effect is stronger in origin countries not too far from Libya and with weak rule of law.
    Keywords: International Migration, Human Smuggling, Illegal Migration, Libyan Civil War
    JEL: K23 K42
    Date: 2017–12–06
  6. By: Yulia (Paramonova) Kuchumova (National Research University Higher School of Economics)
    Abstract: The suspension of a driver's license, the revocation of a passport or a professional license are used by the tax authorities as sanctions for failure to comply with tax obligations and are referred to as collateral tax sanctions. In this paper, I propose a new rationale for why it may be bene cial to use collateral tax sanctions for the purpose of tax enforcement. By affecting consumption and providing enforcement targeted to a group, collateral tax sanctions may allow the government to impose punishment correlated with an individual's earning potential. Such punishment also makes the effective tax rates correlated with an individuals' earning potential and therefore leads to a more effective redistribution of income. I show that the use of collateral tax sanctions could increase the CES social welfare function when the skill distribution of the targeted group rst-order stochastically dominates the skill distribution of the other group and the social welfare function is sufficiently concave.
    Keywords: collateral sanction, tax enforcement, ability, tag
    JEL: Z
    Date: 2017
  7. By: Draca, Mirko (University of Warwick and Centre for Economic Performance, London School of Economics); Koutmeridis, Theodore (University of Glasgow); Machin, Stephen (University College London and Centre for Economic Performance, London School of Economics)
    Abstract: In economic models of crime individuals respond to changes in the potential value of criminal opportunities. We analyse this issue by estimating crime-price elasticities from detailed data on criminal incidents in London between 2002 and 2012. The unique data feature we exploit is a detailed classification of what goods were stolen in reported theft, robbery and burglary incidents. We first consider a panel of consumer goods covering the majority of market goods stolen in the crime incidents and find evidence of significant positive price elasticities. We then study a particular group of crimes that have risen sharply recently as world prices for them have risen, namely commodity related goods (jewellery, fuel and metal crimes), finding sizable elasticities when we instrument local UK prices by exogenous shifts in global commodity prices. Finally, we show that changes in the prices of loot from crime have played a role in explaining recent crime trends.
    Keywords: : Crime; Goods Prices; Metal Crime; Commodity Prices JEL Classification: K42
    Date: 2017
  8. By: Paterson, Sarah
    Abstract: Adopting a comparative UK/US approach, this article argues for the need to rethink corporate bankruptcy theory in the light of developments in the finance market. It argues that these developments have produced an effective mechanism, in large cases, for selecting between companies which will be worth more if they continue to trade and companies which ought to be allowed to fail, such that corporate bankruptcy law need no longer concern itself with steering creditor choice away from a sale of the business and assets and towards a restructuring. Moreover, it suggests that whilst the automatic stay remains a central tenet of corporate bankruptcy law where the market decides that the business and assets should be sold, in cases where the market sees more value if a company continues to trade, corporate bankruptcy law may operate very well without a stay as a resolution procedure for deadlocked negotiations. The article identifies that in many large restructuring cases the only liabilities which are implicated are financial liabilities, and queries the extent to which the distributional concerns of the progressive movement, and US federal bankruptcy law, apply where losses are shared amongst sophisticated financial institutions. It ends with an explanation of why the analysis is limited to large cases, an indication of areas for further research and a note of caution for the future.
    Keywords: corporate law; law and economics; law and finance; legal theory
    JEL: F3 G3
    Date: 2016
  9. By: Nestor Duch-Brown (European Commission – JRC)
    Abstract: The aim of this paper is to explain evidence of unfair practices by online platforms towards business users, particularly SME's. First, using survey data, we show that sellers operating with four different categories of platforms multi-home (marketplaces, app stores, social networks and online advertising). Hence, the appropriate competitive framework is the "competitive bottleneck" model. Second, we develop an empirical model of platform competition adding an additional dimension: service quality. The results indicate that the costs of providing quality to sellers are higher than the costs of providing quality to buyers. These differences may reflect different needs or preferences across groups. While buyers would require simple functionalities sellers would need more sophisticated services. When sellers' multi-home, platforms care more about buyers than sellers and while buyers will get an efficient level of quality, quality to sellers will be "degraded". We argue that this service quality degradation explain unfair trading practices simply because platforms are not willing to invest to take care of sellers.
    Keywords: digital single market, data economy, online platforms, multi-sided markets
    JEL: D23 K11 K12 L86
    Date: 2017–12
  10. By: Alex Coad (European Commission – JRC); Nestor Duch-Brown (European Commission – JRC)
    Abstract: We analyse survey data to investigate the main barriers to European cross-border e-commerce. We investigate the determinants of selling online, as well as the frequency and determinants of cross-border e-commerce, and the role of barriers. Large firms, which are part of a group, are more likely to sell online. Firms generally make most of their online sales to their home country, although EU firms are more likely to engage in cross-border online trade with EU countries than non-EU countries. Firms report that they are facing a variety of barriers to e-commerce. Regulatory barriers are negatively associated with online sales. There is weak evidence that firms which use their own websites are more vulnerable to financial, market and information barriers. Firms that use a large platform experience fewer financial and market barriers. On the positive side, we find that small and young firms do not seem to be more vulnerable to barriers than large or more experienced firms.
    Keywords: digital single market, e-commerce, cross-border trade
    JEL: D23 K11 K12 L86
    Date: 2017–11
  11. By: Kai A. Konrad
    Abstract: This paper offers an economic analysis of an international investorstate dispute settlement regime (ISDS) in markets with large investors. It identifies a reason for strategic overinvestment by the domestic industry, leading to permissive regulation in the absence of ISDS. An "ideal" investor-state dispute settlement arrangement (e¢ ciency- oriented, transaction-cost free, with untouchable, fully reliable, and unbiased judges) has positive and negative effects in this framework. It generates an equal level playing field for domestic and foreign investors, but it magnifies an existing overinvestment problem and may reduce world welfare. The results explain anecdotal evidence according to which ISDS that protects foreign investors is liked by the domestic industry and disliked by other interest groups in the host country.
    Keywords: Investment arbitration, settlement courts, time-consistent regulation, strategic investment
    JEL: K11 F21 F55
    Date: 2016–11
  12. By: Nayana Bose (Department of Economics, Scripps College, Claremont); Shreyasee Das (Department of Economics, University of Wisconsin - Whitewater)
    Abstract: This paper analyzes the intergenerational effects following the positive changes in women’s inheritance rights. The amendment to the Hindu Succession Act, the law governing inheritance for Hindus, empowered unmarried daughters at the time of the reform to have equal rights to inherit ancestral property as their brothers. We employ a difference-in-differences strategy and exploit the state level variation in a woman’s exposure to the reform. Using the Indian Human Development Survey data for rural India, we find that the property rights reform significantly increased women’s education. We find a significant decrease in her sons’ education, the effect is magnified in households where fathers are less educated than mothers. We further explore the role of birth order and the gender composition of children to assess the intergenerational impact of this more gender equal inheritance law. Regardless of the child’s gender, our results show a significant decrease in educational attainment for younger children.
    Keywords: Property Rights, Hindu Inheritance Law, Education, Intergenerational Transfers, India
    JEL: D13 I25 J16 K36 O12
    Date: 2017–11
  13. By: Nestor Duch-Brown (European Commission – JRC)
    Abstract: This report presents evidence on the relationship between online platforms and businesses using these platforms to reach consumers or conduct their operations. First, we review the literature on vertical relationships both from a classic approach and from a multi-sided market perspective. Second, we use survey data to explain the factors behind firms’ choice of online channel. Third, we explore the results of a survey passed to firms using platforms to understand their concerns about the behaviour of some of these online gatekeepers. Finally, we offer some conclusions.
    Keywords: digital single market, data economy, online platforms, multi-sided markets
    JEL: D23 K11 K12 L86
    Date: 2017–12

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