nep-law New Economics Papers
on Law and Economics
Issue of 2018‒02‒12
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Defendant Should Have the Last Word – Experimentally Manipulating Order and Provisional Assessment of the Facts in Criminal Procedure By Christoph Engel; Andreas Glöckner; Sinika Timme
  2. Do Alimony Regulations Matter inside Marriage? Evidence from the 2008 Reform of the German Maintenance Law By Schaubert, Marianna
  3. How to Protect Entitlements: An Experiment By Oren Bar-Gill; Christoph Engel
  4. Legal Systems and Blockchain Interactions By Hegadekatti, Kartik
  5. Weather and crime in South Africa By Bruederle, Anna; Peters, Jörg; Roberts, Gareth
  6. Permissible collateral and access to finance: Evidence from a quasi-natural experiment By Xu, Bing
  7. Liability, Information, and Anti-fraud Investment in a Layered Retail Payment Structure By Kyoung-Soo Yoon; Jooyong Jun
  8. Analysis of Contracts in Various Formats of Blockchain By Hegadekatti, Kartik
  9. Eclipse of the Public Corporation or Eclipse of the Public Markets? By Craig Doidge; Kathleen M. Kahle; G. Andrew Karolyi; René M. Stulz

  1. By: Christoph Engel (Max Planck Institute for Research on Collective Goods); Andreas Glöckner (Max Planck Institute for Research on Collective Goods); Sinika Timme (University of Göttingen)
    Abstract: From a normative perspective the order in which evidence is presented should not bias legal judgment. Yet psychological research on how individuals process conflicting evidence sug-gests that order could matter. The evidence shows that decision-makers dissolve ambiguity by forging coherence. This process could lead to a primacy effect: initial tentative interpretations bias the view on later conflicting evidence. Or the process could result in a recency effect: the evidence presented last casts decisive light on the case. In two studies (N1 = 221, N2 = 332) we test these competing hypotheses in a mock legal case. Legal orders sometimes even expect judges to provisionally assess the evidence. At least they have a hard time preventing this from happening. To test whether this creates or exacerbates bias, in the second dimensions, we explicitly demand experimental participants to express their leaning, after having seen half of the evidence. We consistently observe recency effects and no interactions with leanings. If the legal order wants to preempt false convictions, defendant should have the last word.
    Keywords: criminal procedure, presumption of innocence, recency, primacy
    JEL: C91 D01 D02 D91 K41
    Date: 2017–11
  2. By: Schaubert, Marianna
    Abstract: This study investigates how West German spouses have responded by adjusting their time allocation to the alimony reform introduced in 2008. This reform imposed financial self-responsibility after a finalized divorce. It weakened the relative bargaining position of the spouse with a claim for maintenance in the case of a potential divorce prior to the law change. Therefore, the present study helps to verify bargaining models by considering the 2008 policy change as a shift of spousal bargaining power. Estimating difference-in-differences models I find that, indeed, wives who face a potential low alimony loss might have increased their working hours as a result of the 2008 reform. To my knowledge, the present investigation is the first analysis of the behavioral response of individuals in longer marriages to the 2008 reform. Its approach to identifying those who have been (dis)advantaged by this reform is a new one, proposing a method that reflects the realities of alimony arrangements in Germany.
    Keywords: Alimony,Family,Bargaining,Institutional change,Labor supply,Time allocation
    JEL: D13 J12 J13 J22 K36
    Date: 2018
  3. By: Oren Bar-Gill (Harvard Law School); Christoph Engel (Max Planck Institute for Research on Collective Goods)
    Abstract: In a full-information, zero transactions costs world, the degree of protection afforded to an entitlement does not affect the likelihood of efficient trade. In reality, imperfect information is often inevitable. Specifically, a party will usually have incomplete information about fairness norms held by the other party – fairness norms that affect the other party’s willingness to pay (WTP) or willingness to accept (WTA). Importantly, these fairness norms may depend on how strongly the entitlement is protected. We experimentally test the effect of the degree of protection on the parties’ WTP and WTA and on the likelihood of efficient trade by varying the legal remedy for infringing upon the owner’s entitlement. We show that our participants can be divided into three groups corresponding to three different fairness norms: negative types whose WTP and WTA are decreasing in the strength of the legal remedy; positive types whose WTP and WTA are increasing in the strength of the legal remedy; and flat types whose WTP and WTA do not depend on the strength of the legal remedy. We find that type is role-dependent, such that a higher WTP and a lower WTA – the combination most conducive to efficient trade – is obtained with a weaker legal remedy.
    Keywords: property rule, liability rule, damages, compensation, Coase theorem, bargaining, fairness, equality, desert, entitlement, taking
    JEL: C78 C91 D12 D63 K11 K12
    Date: 2017–03
  4. By: Hegadekatti, Kartik
    Abstract: A large amount of money is spent globally in the litigation process. A significant chunk of litigations can actually be prevented from even arising if the policies, contracts and laws can be fully objectivised. Presently, the interpretation of law, contracts, policies etc. lead to a lot of confusion and ambiguities. This complicates the justice process. This paper deals with simplifying the legal procedures by using Blockchain Technology. Firstly I introduce the concept of Blockchains and Cryptocurrencies. Then we discuss the present legal services. The ways in which Blockchain technology can be applied to legal processes is identified. Civil and Common law systems are the most widespread in the world. The probable impact of Blockchain on law systems is evaluated. The paper concludes by summarizing the consequences and suitability of using Blockchain Technology in Law systems and Legal services.
    Keywords: blockchain, bitcoin, cryptocurrency, rsbc, nationcoins, K-Y Protocol
    JEL: K11 K12 K41 K42 L14 P37 P48
    Date: 2017–01–03
  5. By: Bruederle, Anna; Peters, Jörg; Roberts, Gareth
    Abstract: South Africa has one of the highest crime rates in the world, incurring high cost for society. The present paper examines the effect of weather shocks on various types of crime. Using a 12-year panel data set at monthly resolution on the police ward level, we demonstrate a short-term effect of warmer temperatures on violent crime and thereby offer support for the heat-aggression link as suggested by psychological research. Furthermore, we find evidence for a mid-term effect of weather on crime via agricultural income, which is in line with the economic theory of crime. Our findings have direct policy implications for the design of crime prevention strategies, in which weather forecasts could play an important role.
    Keywords: South Africa,weather,crime,income shocks
    JEL: C33 O55 Q54 R11
    Date: 2017
  6. By: Xu, Bing
    Abstract: By allowing large classes of movable assets to be used as collateral, the Property Law reform trans-formed the secured transactions in China. Difference-in-differences tests show firms operating with ex-ante more movable assets expand access to bank credit and prolong debt maturity. However, the reform does not seem to improve the efficiency of credit allocation, as debt capacity of ex-ante low quality firms expands the most following the reform. Credit expansion also does not lead to better firm performance. These findings are not driven by confounding factors such as improvements in creditor and property rights protection. Our results also cannot be explained by other important reforms which were introduced around the same time as the introduction of the Property Law. These include anti-tunneling and split-share reforms and amendments to the corporate tax structure in China. We conduct explicit robustness tests for these other reforms and amendments to the corporate tax structure in China. We conduct explicit robustness tests for these other reforms and hence contribute to the empirical literature on the reform process in China with new findings.
    JEL: G21 G28 G32 K22
    Date: 2018–01–31
  7. By: Kyoung-Soo Yoon (Department of Economics, Daegu University); Jooyong Jun (Economic Research Institute, The Bank of Korea)
    Abstract: Motivated by recently introduced retail payment schemes using information technology, often called "FinTech," we examine the effects of fraud liability regime and information accessibility on the incentive for the anti-fraud investment in a vertically separated payment scheme. When the payment service providers make their revenue from consumer fee, it is shown that the anti-fraud investment is made more by parties with liability, and the anti-fraud investment is socially sub-optimal. When the FinTech payment service provider (FPP) makes its revenue other than from counsumer fee, the FPP liability regime leads to greater anti-fraud investment and lower accident probability, compared to the case in raising revenue from consumer fees. The effect under the IPP liability regime, however, is inconclusive. Finally, under certain conditions, the FPP's information accessibility to the IPP's transaction data can enhance the anti-fraud investment and welfare.
    Keywords: Payment system, Fraud, Liability, FinTech
    JEL: G23 G28 D43 L22
    Date: 2016–08–18
  8. By: Hegadekatti, Kartik
    Abstract: One of the important features of Blockchain is that it allows the hosting and execution of contracts. Such a contract in the digital world is known as a Smart Contract. But the process and consequences of a contract vary radically from one format of Blockchain to another. One of the formats (and the most common at present) is the Unregulated Blockchain (like Bitcoin and Ethereum) with no government supervision whatsoever. Another format is the Controlled Blockchain which is managed and guaranteed by the Government. It is this difference that is vital in understanding the impacts and consequences of entering into and abiding by Smart Contracts. Firstly, the concept of cryptocurrencies (also referred to as cryptocoins in this paper) is explained. Then the concept of Regulated and Sovereign Backed Cryptocurrencies (RSBCs) is discussed. Later on, I explain how contracts vary between the two Blockchain formats. Finally, the paper concludes as to how smart contracts can be best executed and on which format of Blockchain.
    Keywords: blockchain, bitcoin, cryptocurrency, RSBC, nationcoins, K-Y Protocol
    JEL: D86 J52 K12 L14 L24 L33
    Date: 2016–12–27
  9. By: Craig Doidge; Kathleen M. Kahle; G. Andrew Karolyi; René M. Stulz
    Abstract: Since reaching a peak in 1997, the number of listed firms in the U.S. has fallen in every year but one. During this same period, public firms have been net purchasers of $3.6 trillion of equity (in 2015 dollars) rather than net issuers. The propensity to be listed is lower across all firm size groups, but more so among firms with less than 5,000 employees. Relative to other countries, the U.S. now has abnormally few listed firms. Because markets have become unattractive to small firms, existing listed firms are larger and older. We argue that the importance of intangible investment has grown but that public markets are not well-suited for young, R&D-intensive companies. Since there is abundant capital available to such firms without going public, they have little incentive to do so until they reach the point in their lifecycle where they focus more on payouts than on raising capital.
    JEL: G18 G24 G28 G32 G35 K22 L26
    Date: 2018–01

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