nep-law New Economics Papers
on Law and Economics
Issue of 2018‒01‒08
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. How Efficient is to Judge By Standards in a Civil Law Country? By Edson Antonio Sousa Pontes Pinto
  2. Criminals on the Field: A Study of College Football By Radek Janhuba; Kristyna Cechova
  3. The Deterrence Effect of Whistleblowing: An Event Study of Leaked Customer Information from Banks in Tax Havens By Niels Johannesen; Tim Stolper
  4. Challenges and Pitfalls in Cartel Policy and Fining By Boyer, Marcel; Faye, Anne Catherine; Kotchoni, Rachidi
  5. Comparative Analysis about Binding Preliminary Agreements between Brazil and United States Legal Systems By Marcela Carvalho Viegas
  6. Minimum Age Regulation and Child Labor: New Evidence from Brazil By Olivier Bargain; Delphine Boutin
  7. Following the Poppy Trail: Causes and Consequences of Mexican Drug Cartels By Tomás E. Murphy; Martín Rossi
  8. Salience and Online Sales: The Role of Brand Image Concerns By Markus Dertwinkel-Kalt; Mats Köster
  9. Prison Radicalization in Bangladesh Present Scenario and Threats By Md. Mostafizur Rahaman
  10. Do Bilateral Investment Treaties Attract Foreign Direct Investment? The Role of International Dispute Settlement Provisions By Michael Frenkel; Benedikt Walter
  11. Until Taxes Do Us Part: Tax Penalties or Bonuses and the Marriage Decision By Francesca Barigozzi; Helmuth Cremer; Kerstin Roeder

  1. By: Edson Antonio Sousa Pontes Pinto (Catholic University of Rondonia, Brazil)
    Abstract: In civil law countries, the law arises, as a general rule, from a political legislative source that, through popular legitimacy, create norms that make up the legal system, differently from the common law tradition, in which the binding precedents are acknowledged as a legal source. However, recently Brazil has structured a new system of precedents that imperatively binds all the Judiciary, in order to recognize, from here onwards, the normative force of the Brazilian s Superior Courts decisions, in a system very much alike the judge-made law. Albeit, due to this legal innovation, the question that remains is if this is the most efficient form of judicial decision-making, or if the application and interpretation of law by the Magistrates, in an independent and individual manner, is the best way to judge. For that reason, the present essay analyzed this new Brazilian’s Precedent System on an approach of Law and Economics, considering the proper institutes of this legal doctrine, and demonstrated that the efficiency gains in this new binding system, justifies its application even if it means, for part of the jurists, the reduction of Judges liberty to adjudicate.
    Keywords: Precedent, Civil Law, New Civil Procedure Code, Law and Economics, Biding Decision Making
    Date: 2017
  2. By: Radek Janhuba; Kristyna Cechova
    Abstract: Economists have found mixed evidence on what happens when the number of police increases. On the one hand, more law enforcers means a higher probability of detecting a crime, which is known as the monitoring effect. On the other hand, criminals incorporate the increase into their decision-making process and thus may commit fewer crimes, constituting the deterrence effect. This study analyzes the effects of an increase in the number of on-field college football officials, taking players as potential criminals and officials as law enforcers. Analyzing a novel play by play dataset from two seasons of college football, we report evidence of a monitoring e ect being present in the overall dataset. This effect is mainly driven by offensive penalties which are called in the area of jurisdiction of the added official. Decomposition of the effect provides evidence of the presence of the deterrence effect in cases of penalties with severe punishment or those committed by teams with moderate to high ability, suggesting that teams are able to strategically adapt their behavior following the addition of an official.
    Keywords: football; official; crime; deterrence
    JEL: H43 K14
    Date: 2017–12
  3. By: Niels Johannesen; Tim Stolper
    Abstract: We document that the first leak of customer information from a tax haven bank caused a sudden flight of deposits from tax havens and a sharp decrease in the market value of banks known to be assisting with tax evasion. The loss of market value was largest for the banks most strongly involved in tax evasion and zero for banks with no known ties to tax evasion. Subsequent leaks had qualitatively similar although smaller effects. Our findings suggest that whistleblowing in tax haven banks deters offshore tax evaders by increasing the perceived risk of committing and assisting with tax evasion.
    Keywords: whistleblowing, economic crime, tax evasion, tax havens
    JEL: G21 H26 K42
    Date: 2017
  4. By: Boyer, Marcel; Faye, Anne Catherine; Kotchoni, Rachidi
    Abstract: We analyze significant challenges and pitfalls faced by antitrust authorities in the implementation of competition policies particularly against naked cartels and propose measures principled in economic theory to circumvent these issues. We review leniency programs in different jurisdictions, the private versus public control of cartels, as well as the determination of cartel fines and other punishment instruments. Regarding cartel fines, we first discuss the sometimes-conflicting objectives of restitution and deterrence, then the economic-based versus legal- and proportional-based punishment. Moreover, we assess the proper modeling of cartel dynamics including the probability of detection and conviction, the relevant cartel duration, and the estimation of but-for prices and cartel overcharges.
    Keywords: Cartels; Fines; Competition Policy; Antitrust; Dynamics
    Date: 2017–10
  5. By: Marcela Carvalho Viegas (Duquesne University of Law, USA)
    Abstract: During the past decades the world became one globalized market in a way that every country, with few exceptions, established economic, social and political relations among then. Consequently, new legal bonds started uprising in reason of the contracts signed to support such international relations. A lot of problems would be avoided if all the countries had the same legal system and if the same laws regulated the contracts. This is not even imaginable. Within this scenario, this research had the purpose to analyze why preliminary agreements became a crucial tool when dealing with contracts that easily involve parties from different countries and different legal systems and that were made through a process much more complex than the idea of the two parties exchanging offers, acceptance and performance. Furthermore, this paper significantly examined and compared which kinds of preliminary agreement exist and which ones attract legal responsibilities (are binding) between different countries and different legal systems. This study focused specifically in the difference between Brazil s, a Civil Law country, and Unites States’, a Common Law country, legal systems.
    Keywords: legal systems, negotiation, contract, civil cod, preliminary agreement.
    Date: 2017
  6. 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 - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique)
    Date: 2017–11–07
  7. By: Tomás E. Murphy (Università Bocconi); Martín Rossi (Department of Economics, Universidad de San Andres)
    Abstract: We study the historical origins and consequences of Mexican cartels. We first trace the location of current cartels to the location of Chinese migration at the beginning of the XX century, and document that both events are strongly connected. We then use Chinese presence in 1930 as an instrument for cartel presence today. We find a positive link between cartel presence and good socioeconomic outcomes, such as lower marginalization rates, lower illiteracy rates, higher salaries, and better public services. We also report that municipalities with cartel presence have higher tax revenues and more political competition. Given that Chinese immigration at the end of the century was driven by elements largely exogenous to the drug trade, the link between cartel presence and good socioeconomic outcomes can be interpreted in a causal way. Previous research has shown that the presence of organized crime is associated with bad outcomes at the macro level (Pinotti, 2015) and has deep effects at individual level, making children more likely to be criminals in adulthood (Sviatschi, 2017a; 2017b). Our paper reconciles this previous literature with the fact that drug lords, the leaders of this particular form of organized crime, have great support in the local communities in which they operate.
    Keywords: drug trade, Chinese migration, Mexico, illegal markets, organized crime
    JEL: N36 O15
    Date: 2017–12
  8. By: Markus Dertwinkel-Kalt; Mats Köster
    Abstract: We provide a novel intuition for the observation that many brand manufacturers have restricted their retailers’ ability to resell brand products online. Our approach builds on models of salience according to which price disparities across distribution channels guide a consumer’s attention toward prices and lower her appreciation for quality. Thus, absent vertical restraints, one out of two distortions - a quality or a participation distortion - can arise in equilibrium. The quality distortion occurs if the manufacturer provides either an inefficiently low quality under price salience or an inefficiently high quality in order to prevent price salience. The participation distortion arises as offline sales might be entirely abandoned in order to prevent prices from becoming salient. Both distortions are ruled out if vertical restraints are imposed. As opposed to the current EU legislation that considers a range of vertical restraints as being hardcore restrictions of competition per se, we show that these constraints can be socially desirable if salience effects are taken into account.
    Keywords: salience, online sales, antitrust, vertical restraints, distribution channels
    JEL: D21 K21 L42
    Date: 2017
  9. By: Md. Mostafizur Rahaman (North South University, Dhaka, Bangladesh)
    Abstract: Prison radicalization is a global concern particularly in the moderate Muslim countries those are under threat for violent extremism by Islamist militant. Though the aim of prison is to protect society by confining offenders in facilities that are supposedly safe, humane and secure and to ensure that offenders are actively participating in programs that will assist them in becoming law abiding citizens when they return to their communities. But prison settings present both risks and opportunities with respect to violent extremist offenders. Poorly managed detention facilities of any types could become potent incubators of radicalization though it is not the only place where violent extremist radicalization occurs. Bangladesh is one of the countries which is facing threat by Islamist militant. The law enforcement situation, democratic practice, injustice and discrimination among the different classes are setting fuel to become people radicalize. The prison situation of Bangladesh is very worse and it may become a hub for recruitment and brain wash place for Islamist militant. The key objective of the study is to assess the realities of prison radicalization in Bangladesh and the effectiveness of deradicalization programs. Based on the objectives the study has designed on qualitative approach. The data was collected via using a semi structured questionnaire exploring the concept of radicalization, prison radicalization, process, key factors and ways to prevention from both from primary and secondary sources. The paper will give a real scenario of prison of Bangladesh, problems, management system of captured Islamist militants and interventions for deradicalization.
    Keywords: Bangladesh, Islam, Islamist, Prison, Radicalization, Violent extremism, law enforcement
    Date: 2017
  10. By: Michael Frenkel; Benedikt Walter
    Abstract: This paper studies the effect of the strength of Bilateral Investment Treaties (BITs) on FDI activity. We develop an index for the strength of international dispute settlement provisions included in BITs in order to examine the role the content of BITs plays in attracting FDI. To this end we make use of data from the UNCTAD’s International Investment Agreement Mapping Project and measure the provision strength of 1,676 BITs. Using panel data of bilateral and total inward FDI flows and stocks we study the effect of BITs on FDI. Our main finding indicates that stronger international dispute settlement provisions in BITs are indeed associated with positive effects on FDI activity.
    Keywords: Bilateral Investment Treaties (BITs), State-State Dispute Settlement (SSDS), Investor-State Dispute Settlement (ISDS), Foreign Direct Investment (FDI)
    JEL: F02 F21 F23 F53 K33
    Date: 2017–12–21
  11. By: Francesca Barigozzi; Helmuth Cremer; Kerstin 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. 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: J12 D82 H31
    Date: 2017

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