nep-law New Economics Papers
on Law and Economics
Issue of 2018‒01‒01
fourteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Until taxes do us part: tax penalties or bonuses and the marriage decision By Barigozzi, Francesca; Cremer, Helmuth; Roeder, Kerstin
  2. Tax avoidance and optimal income tax enforcement By Duccio Gamannossi degl’Innocenti; Matthew D. Rablen
  3. Five years after the Liikanen Report: What have we learned? By Götz, Martin; Krahnen, Jan Pieter; Tröger, Tobias
  5. Going beyond analysis of internal data to support customs modernization: A case study in Gabon By Joel CARIOLLE; Cyril CHALENDARD; Anne-Marie GEOURJON; Bertrand LAPORTE
  6. Motivating Whistleblowers By Jeffrey V. Butler; Danila Serra; Giancarlo Spagnolo
  7. The Rise of Economics in Competition Policy: A Canadian Perspective By Marcel Boyer; Thomas W. Ross; Ralph A. Winter
  8. Mapping employment dismissal law a leximetric investigation of EPL stringency and regulatory style By Freyens, Benoit Pierre.; Verkerke, J.H.
  9. Exploitative abuse and abuse of economic dependence: What can we learn from the industrial organization approach? By Bougette, Patrice; Budzinski, Oliver; Marty, Frédéric
  10. Penalising on the basis of the severity of the offence: A sophisticated revenue-based cartel penalty By Yannis Katsoulacos; Evgenia (E.) Motchenkova; David Ulph
  11. Population dynamics of tax avoidance with crowding effects By Lorenz, Johannes
  12. The Effects of Penalty Information on Tax Compliance: Evidence from a New Zealand Field Experiment By Gemmell, Norman; Ratto, Marisa
  13. Memory and Markets By Sergei Kovbasyuk; Giancarlo Spagnolo
  14. Minimum age regulation and child labor: New evidence from Brazil By Olivier Bargain; Delphine Boutin

  1. By: Barigozzi, Francesca; Cremer, Helmuth; Roeder, Kerstin
    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. Specifically, 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 effectively make the marriage decision more efficient; it may increase the number of efficient marriages that otherwise may not be concluded.
    Keywords: marriage penalty; marriage bonus; proposal game; signaling
    JEL: D82 H31 J12
    Date: 2017–11
  2. By: Duccio Gamannossi degl’Innocenti (Institute for Fiscal Studies); Matthew D. Rablen (Institute for Fiscal Studies and Sheffield University)
    Abstract: We examine the optimal auditing problem of a tax authority when taxpayers can choose both to evade and avoid. For a convex penalty function the incentive-compatibility constraints may bind for the richest taxpayer and at a positive level of both evasion and avoidance. The audit function is non-increasing in reported income, and is higher for progressive tax functions than for regressive tax functions. Higher marginal tax rates increase the incentives for non-compliance, overturning the well-known Yitzhaki paradox.
    Keywords: Tax avoidance, Tax evasion, Optimal auditing, Tax administration
    JEL: H26 K42 D82 H21
    Date: 2017–06–07
  3. By: Götz, Martin; Krahnen, Jan Pieter; Tröger, Tobias
    Abstract: The publication of the Liikanen Group's final report in October 2012 was surrounded by high expectations regarding the implementation of the reform plans through the proposed measures that reacted to the financial and sovereign debt crises. The recommendations mainly focused on introducing a mild version of banking separation and the creation of the preconditions for bail-in measures. In this article, we present an overview of the regulatory reforms, to which the financial sector has been subject over the past years in accordance with the concepts laid out in the Liikanen Report. It becomes clear from our assessment that more specific steps have yet to be taken before the agenda is accomplished. In particular, bail-in rules must be implemented more consistently. Beyond the question of the required minimum, the authors develop the notion of a maximum amount of liabilities subject to bail-in. The combination of both components leads to a three-layer structure of bank capital: a bail-in tranche, a deposit-insured bailout tranche, and an intermediate run-endangered mezzanine tranche. The size and treatment of the latter must be put to a political debate that weighs the costs and benefits of a further increase in financial stability beyond that achieved through loss-bearing of the bail-in tranche.
    Keywords: financial stability,banking separation,prohibition of proprietary trading,banking and treasury functions,bail-in,MREL,TLAC
    JEL: G18 G21 G28 K22 K23
    Date: 2017
  4. By: Shirlee Lichtman-Sadot (BGU)
    Keywords: Public Transportation, Accidents, Risky Behavior, Drunk Driving
    JEL: R41 R42 R51 R58 I12 K42
    Date: 2017
  5. By: Joel CARIOLLE (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Cyril CHALENDARD; Anne-Marie GEOURJON (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Bertrand LAPORTE (Centre d'Etudes et de Recherches sur le Développement International(CERDI))
    Abstract: Customs administrations in developing countries increasingly use risk-based techniques relying on data mining and statistical scoring. By demonstrating the value of using data analysis techniques to orient frontline controls so as to facilitate legal trade and combat fraud more effectively, these projects have helped promote a cultural change in these organizations. However, these risk management techniques may prove to be ineffective in assessing fraud risks based only on frauds detected by customs inspectors. In a context of moral hazard and low-performing customs administration, one way to address this weakness is to expand the approach by relying on other sources of information such as discrepancies in bilateral trade statistics. Several studies use these statistical discrepancies (mirror data) to identify fraudulent declarations and estimate their effects. By comparing Gabon's import customs data with discrepancies in its bilateral trade data, this paper stresses the usefulness of simultaneously analyzing customs fraud records and mirror trade statistics data. Such an analysis helps quantifying undetected fraud and therefore constitutes a valuable tool to target ex post audits. Then, based on the combination of these databases, the paper defines indicators to monitor the performance of customs controls.
    Keywords: Customs risk analysis, Performance of customs authorities, Customs fraud, Tax evasion, Administrative data, Mirror analysis.
    JEL: F13 D73 K42 H83 H26
    Date: 2017–12
  6. By: Jeffrey V. Butler (University of California Merced, Department of Economics); Danila Serra (Southern Methodist University, Department of Economics); Giancarlo Spagnolo (SITE-Stockholm School of Economics, EIEF, Tor Vergata & CEPR)
    Abstract: Law-breaking activities within an organization bene?ting the ?rm at the expense of the general public are widespread but di¢ cult to uncover, making whistleblowing by employees desirable. We employ a novel laboratory experiment to investigate if and how monetary incentives and expectations of social approval or disapproval, and their interactions, a¤ect the decision to blow the whistle. Experimental results show that: i) ?nancial rewards signi?cantly increase the likelihood of whistleblowing and do not substantially crowd out non-monetary motivations activated by expectations of social judgment; and ii) the possibility of social judgment decreases (increases) whistleblowing when the public is unaware (aware) of the negative externalities generated by fraud, suggesting that whistleblowers are at least partly motivated by a desire for social approval. Our ?ndings suggest that whistleblowers on corporate fraud should be ?nancially rewarded and should be shielded from public/media scrutiny when the social cost of the illegal activity is not visible or salient to the public. We also ?nd evidence of an interesting relationship between political orientation and social judgment: while left-leaning subjects react to the possibility of receiving social approval or disapproval as expected, right-leaning people are una¤ected by it.
    Keywords: Whistleblowing,fraud,rewards,social judgment,experiment.
    JEL: K42 C92 D04
    Date: 2017–12–12
  7. By: Marcel Boyer; Thomas W. Ross; Ralph A. Winter
    Abstract: Competition policy in Canada and elsewhere has changed remarkably over the last fifty years – in large measure due to advances in economics. In this article we trace the impact of developments in industrial organization on the three central areas of competition policy: cartels, single firm conduct and mergers. We focus on Canadian competition policy, but draw comparisons with developments in the United States and Europe. La politique de concurrence s’est remarquablement transformée au cours des derniers 50 ans au Canada, en grande partie à cause des avancées en science économique. Dans ce texte, nous retraçons l’impact des développements en organisation industrielle sur les trois zones centrales de la politique de concurrence : les cartels, la conduite de la firme, et les fusions. Nous mettons l’accent sur la politique de concurrence canadienne, mais en référant aux développements aux États-Unis et en Europe.
    JEL: L40 L41 K21
    Date: 2017–12–11
  8. By: Freyens, Benoit Pierre.; Verkerke, J.H.
    Keywords: dismissal, employment security, labour legislation, application, sources of law, data analysis, legal theory
    Date: 2017
  9. By: Bougette, Patrice; Budzinski, Oliver; Marty, Frédéric
    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
  10. By: Yannis Katsoulacos (Athens University of Economics and Business, Greece); Evgenia (E.) Motchenkova (Vrije Universiteit Amsterdam, The Netherlands, TILEC, The Netherlands; Tinbergen Institute, The Netherlands); David Ulph (University of St Andrews, Scotland)
    Abstract: In Katsoulacos et al. (2015) we examined the welfare properties of a number of monetary penalty regimes for tackling cartels, including revenue-based penalties, the most widely used regime. We showed that for a typical industry overcharge–based penalties welfare-dominate the others. However these penalties are subject to criticisms on the grounds of high implementation costs and lack of transparency/uncertainty. In this paper we propose a new sophisticated revenue-based penalty regime in which the penalty base is the revenue of the cartel but the penalty rate increases in a systematic way with the cartel overcharge. Thus, the proposed regime formalises how revenue can be used as the base while taking into account the severity of the offence. We show that this hybrid regime can replicate the desirable welfare properties of overcharge-based penalties while having relatively low levels of implementation costs and of uncertainty, concluding that the proposed penalty regime deserves very serious attention from Competition Authorities.
    Keywords: Antitrust Penalties; Antitrust Enforcement; Antitrust Law; Cartels
    JEL: L4 K21 D43
    Date: 2017–12–22
  11. By: Lorenz, Johannes
    Abstract: There are two ways for taxpayers to avoid paying taxes: legally, through tax optimization and illegally, through tax evasion. The government reacts by altering the law, and by conducting audits, respectively. These phenomena are modeled as a population game, a strategic interaction between all taxpayers: the more taxpayers optimize, the lower the optimization result as a consequence of the government tightening the tax law. The more taxpayers evade, the higher the risk of detection because of the tax agencies increasing the audit probability. If the government reacts to changed optimization behavior with too large a delay, an equilibrium tax law cannot be reached. Tax codes should be updated rapidly in order to avoid a permanent change of the tax law, which is costly both for the legislator and the taxpayers facing legal uncertainty.
    Keywords: tax avoidance,tax evasion,population games
    JEL: C73 H26 K34
    Date: 2017
  12. By: Gemmell, Norman; Ratto, Marisa
    Abstract: The ‘standard’ Allingham-Sandmo-Yitzhaki (ASY) model of tax evasion predicts effects on compliance which depend on the perceived probability of detection, tax rate and penalty for evasion. Compliance effects of detection probabilities and tax rates have been extensively tested empirically, but penalty effects are rarely tested explicitly. This paper examines the effects of late payment penalties on tax compliance based on an experiment involving New Zealand goods and service tax (GST) ‘late payers’. Firstly, based on an ASY-type model of tax late payments in which the probability of enforcement, rather than detection, is central, we develop a number of testable hypotheses. Secondly, based on a field experiment involving a specific compliance intervention, we examine how taxpayers respond when given different penalty information. The experiment also allows us to consider differences between taxpayers’ stated intentions to comply and subsequently observed compliance. Results suggest that differences in penalty information given to taxpayers and reductions in penalty rates both affect taxpayers stated intentions to comply (pay overdue tax and penalties) as predicted. However, subsequently observed responses generally appear unresponsive to penalties. Nevertheless, various individual taxpayer characteristics are identifiable that affect both compliance intentions and actual behaviour.
    Keywords: Tax evasion, Late payment penalties, Tax experiment, Goods and service tax,
    Date: 2017
  13. By: Sergei Kovbasyuk (Einaudi Institute for Economics and Finance); Giancarlo Spagnolo (SITE-Stockholm School of Economics, EIEF, Tor Vergata & CEPR)
    Abstract: In many environments, including credit and online markets, past records about participants are collected, published, and erased after some time. We study the effects of erasing past records on trade and welfare in a dynamic market where each seller's quality follows a Markov process and buyers leave feedback about sellers. When the average quality of sellers is low, unlimited records always lead to a market breakdown. Appropriately deleting records, instead, can sustain trade in the long run. Positive and negative records play very different roles, and welfare is maximized for short positive records and long but bounded negative records.
    Keywords: Limited records, rating systems, credit registers, privacy, data retention, online reputation mechanisms, market experimentation
    JEL: D82 D53 G20 G28 K35 L14 L15
    Date: 2017–12–07
  14. By: Olivier Bargain (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux 4); Delphine Boutin (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)
    Date: 2017–11–30

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