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on Law and Economics |
| By: | Régis BLAZY (LaRGE Research Center, Université de Strasbourg); Nirjhar NIGAM (CEREFIGE and LARGE Research Centers, ICN Business School) |
| Abstract: | Our paper investigates a comprehensive sample of 574 English corporate insolvency cases, including direct liquidation cases. In contrast to other insolvency procedures, liquidations perform poorly on average and fail to produce satisfactory repayments to creditors. We run multinomial Logit regressions to explain the choice between liquidation and reorganization. We obtain three main results. First, we confirm that size matters: distressed firms owning low assets have higher chances of being liquidated immediately. Second, the presence of secured creditors decreases the risk of direct liquidation. This provides a clue that in England, the most-informed creditors adapt their strategies and turn away from the less-performing procedures. Third, we find that the likelihood of administration—which appears nowadays as the main alternative to direct liquidation—significantly depends on the proportion of fixed/current assets owned by the firms. |
| Keywords: | liquidation, reorganization, receivership, administration, corporate insolvency, England |
| JEL: | G33 G38 K20 K22 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2018-02&r=law |
| By: | Bhaskar, V.; Linacre, Robin; Machin, Stephen |
| Abstract: | The economic functioning of online drug markets using data scraped from online platforms is studied. Analysis of over 1.5 million online drugs sales shows online drugs markets tend to function without the significant moral hazard problems that, a priori, one might think would plague them. Only a small proportion of online drugs deals receive bad ratings from buyers, and online markets suffer less from problems of adulteration and low quality that are a common feature of street sales of illegal drugs. Furthermore, as with legal online markets, the market penalizes bad ratings, which subsequently lead to significant sales reductions and to market exit. The impact of the well-known seizure by law enforcement of the original Silk Road and the shutdown of Silk Road 2.0 are also studied, together with the exit scam of the market leader at the time, Evolution. There is no evidence that these exits deterred buyers or sellers from online drugs trading, as new platforms rapidly replaced those taken down, with the online market for drugs continuing to grow |
| Keywords: | dark web; drugs |
| JEL: | K42 |
| Date: | 2017–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:86585&r=law |
| By: | Simon Deakin |
| Abstract: | This paper considers the potential and limits of quantitative approaches to labour law research. It explores the methods used to construct and validate indicators of labour regulation (‘leximetrics’) and those used in the econometric analysis of the effects of labour law rules on employment, productivity and inequality. It is argued that while there is a risk of the misuse and misappropriation of legal indicators, they can provide new evidence on the nature and effects of labour law rules, and thereby contribute to labour law theory as well as to the resolution of some practical issues of regulatory policy. |
| Keywords: | Labour law, empirical legal studies, econometrics |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp495&r=law |
| By: | Perrotta Berlin, Maria; Qin, Bei; Spagnolo, Giancarlo |
| Abstract: | Fostering whistleblowing through leniency and asymmetric sanctions is regarded as a potentially powerful anti-corruption strategy in the light of its success in busting cartels. The US Department of Justice started a pilot program of this kind in 2016. It has been argued, however, that introduced in China in 1997, these policies did not help against corruption. We map the evolution of the Chinese anti-corruption legislation and aggregate enforcement data, documenting a large and stable fall in prosecuted cases after the 1997 reform. The fall is consistent with reduced corruption detection, but under specific assumptions also with improved deterrence. To resolve the ambiguity, we collect and analyze a random sample of case files from corruption trials. Results point indeed at a negative effect of the 1997 reform on corruption detection and deterrence, but plausibly linked to its poor design: contrary to what theory prescribes, it increased leniency also for bribe-taking bureaucrats that cooperate after being denounced, enhancing their ability to retaliate against whistleblowing bribe-givers. |
| Keywords: | Corruption; Leniency; Deterrence; China |
| JEL: | K14 N45 P37 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12634&r=law |
| By: | Michael, Bryane; Goo, Say-Hak |
| Abstract: | To what extent do corporate governance practices in one jurisdiction affect another? In this paper, we look at the way that Hong Kong’s and the Mainland’s corporate governance practices have co-evolved, along with offshore incorporations from both places. Drawing on empirical illustrations of the data using analytical techniques like differential equations and Fourier Spectral Analysis, we find a strong relationship across time between changes in corporate governance practices in both jurisdictions as well as offshore incorporations. Our data also support the idea of a theory-free equilibrium level of corporate governance (determined by market participants’ own behaviour rather than by a theory-laden econometric model). We show that lethargy likely explains the persistence of corporate governance practices in both places, with innovations in one place correlating with innovations in the other. Such work clearly implies that corporate governance improvements in one place can help encourage such improvements in other markets which have not adopted laws aimed at improving corporate governance. |
| Keywords: | Chinese corporate governance,Panama Papers,corporate governance spill-overs,Fourier spectral analysis |
| JEL: | G34 N25 M14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:173676&r=law |
| By: | Guido Friebel (Goethe University Frankfurt, CEPR and IZA); Miriam Manchin (University College of London); Mariapia Mendola (Università di Milano-Bicocca and IZA); Giovanni Prarolo (Università di Bologna) |
| 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: | 2018–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:432&r=law |
| By: | Jesse Bull (Department of Economics, Florida International University); Joel Watson (Department of Economics, UC San Diego) |
| Abstract: | We develop a model of statistical evidence with a sophisticated Bayesian fact-ï¬ nder. The context is litigation, where a litigant (defendant or plaintiff) may disclose hard evidence and a jury (the fact-finder) interprets it. In addition to hard evidence, the litigant has private unveriï¬ able information. We study the robustness of the parties' reasoning regarding the legal fundamentals and the litigant's strategic behavior. The litigant's choice of whether to disclose hard evidence entails two channels of information: the face-value signal of the hard evidence disclosure (relating to the probabilities that the hard evidence exists in different states of the world) and as a possible signal of the litigant's private information. Our results suggest that in some situations, a desire for robust reasoning about evidence would lead the court to restrict the admissibility of some relevant evidence. The modeling exercise provides support for the Federal Rules of Evidence Rules 403 and 404, along with general conclusions about evidence policy. |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:1801&r=law |
| By: | John Buchanan; Dominic H. Chai; Simon Deakin |
| Abstract: | Hedge fund activism has been identified in the USA as a driver of enduring corporate governance change and market perception. We investigate this claim in an empirical study to see whether activism produced similar results in Japan in four representative areas: management effectiveness, managerial decisions, labour management, and market perception. Experience from the USA would predict positive changes at Japanese target companies in these four areas. However, analysis of financial data shows that no enduring changes were apparent in the first three areas, and that market perception was consistently unfavourable. Our findings demonstrate that the same pressures need not produce the same results in different markets. Moreover, while the effects of the global financial crisis should not be ignored, we conclude that the country-level differences in corporate governance identified in the varieties of capitalism literature are robust, at least in the short term. |
| Keywords: | Corporate Governance, Japan, Institutions, Finance |
| JEL: | G23 K22 P52 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp494&r=law |
| By: | William R. Cline (Peterson Institute for International Economics) |
| Abstract: | The centerpiece of the Tax Cuts and Jobs Act (TCJA) of 2017 is the reduction in the corporate tax rate from 35 percent to 21 percent. The Joint Committee on Taxation has estimated the net revenue loss from the tax overhaul at $1 trillion over the next decade. The underlying premise of the legislation is that lower corporate taxes will spur growth, with trickle-down wage benefits that spread the resulting economic gains. This approach, however, risks increasing inequality in income distribution, potentially leaving those in the lower income groups worse off than before. Two factors contribute to this risk. First, the personal tax cuts expire after 2025 whereas the corporate tax cuts are permanent. Second, there will be a sizable loss of revenue, and compensating cuts in federal expenditures could wind up being concentrated on benefits received by lower-income groups. This Brief uses the estimates of the congressional Joint Committee on Taxation (JCT) to examine the distributional impact of the tax bill. It then considers the further changes that would occur if there were regressive expenditure cuts applied to make up for the revenue loss (as illustrated using the distributional profile of Medicaid spending). The broad result is that the direct effect of the legislation on income inequality is relatively minor, but the overall effect could be much more unequal if induced spending cuts were concentrated on programs oriented toward low-income groups. |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb18-3&r=law |
| By: | Ronen, Eyal; Dawar, Kamala |
| Abstract: | This paper identifies the legal and economic assessments applied to resolve WTO disputes requiring an assessment of the contribution of the measure to the objective pursued, along with identifying any reasonably available alternatives. It focuses on disputes encompassing an interpretation of GATT Article XX (b), Sanitary and PhytoSanitary Agreement (SPS) Article 5.6 and the Technical Barriers to Trade (TBT) Agreement Article 2.2. This narrow focus is because the WTO DSB has opined that there are no significant differences between the tests developed under Art. XX(b) of the GATT 1994 and Art. 5.6 of the SPS Agreement, nor that any aspect of the Art. XX(b) jurisprudence relating to the interpretation of the term "necessary" would be inapplicable to Art. 2.2 of the TBT Agreement. This provides an opportunity to compare the legal and economic assessments applied in disputes falling under these provisions. This paper identifies no significant differences between the legal tests relating to the interpretation of the term "necessary". A WTO Panel is under no obligation to quantify the measure's contribution to the objective pursued and 'a risk may be evaluated either in quantitative or qualitative terms'. However, the same cannot be said for the economic assessments determining whether the necessity of the contribution of the contested measure. After setting out the legal tests, the paper identifies those economic assessments undertaken to resolve disputes involving these three different GATT/WTO provisions. The paper finds that quantitative economic models are rarely employed in WTO dispute cases. The lack of coherent guidelines for assessing the economic dimensions of a dispute in a transparent and robust manner potentially undermines the effectiveness and the reputation of WTO Dispute Settlement Body (DSB) recommendations. |
| Keywords: | Dispute Settlement, SPS, Technical Barriers to Trade, WTO |
| JEL: | F13 F18 F53 K33 Q17 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:83834&r=law |
| By: | Andrew J. Bibler; Keith F. Teltser; Mark J. Tremblay |
| Abstract: | Tax enforcement can be prohibitively costly when market transactions and participants are difficult to observe. Evasion among market participants may reduce tax revenue and provide certain types of suppliers an undue competitive advantage. Whether efforts to fully enforce taxes are worthwhile depends on the rate of compliance in the absence of such efforts. In this paper, we show that an upper bound on pre-enforcement tax compliance can be obtained using market data on pre- and post-enforcement periods. To do this, we estimate the pass-through of tax enforcement agreements between the largest online short-term housing rental platform and state and local governments, which achieve full compliance at the point of sale. Using transaction-level data on Airbnb listings across a number of U.S. metropolitan areas, as well as variation in enforcement agreements across time, location, and tax rate, we estimate that taxes are paid on no more than 23 percent of Airbnb transactions prior to enforcement. We also provide insight on demand- and supply-side responses to taxation in online and sharing economy marketplaces, as well as the potential associated inefficiencies. |
| Keywords: | tax compliance, evasion, enforcement, short-term housing rentals, sharing economy, Airbnb |
| JEL: | H20 H22 H26 L10 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2018-06&r=law |
| By: | Patrick Rey (Toulouse School of Economics, University Toulouse Capitole); Thibaud Vergé (CREST; ENSAE) |
| Abstract: | We develop a general but tractable framework of multilateral vertical contracting between upstream and downstream ?firms, without any restriction on tariffs, and yet taking into account their impact on downstream competition. In equilibrium, tariffs are cost-based and replicate the outcome of a multi-brand oligopoly, a fi?nding in line with the analysis of a recent merger. To illustrate its versatility, we use this framework to analyze the effect of vertical restraints (resale price maintenance and retail price parity clauses) and of alternative business models (resale vs. agency). Finally, we extend the framework so as to endogenize the market structure. |
| Keywords: | Bilateral contracting; vertical relationships; agency; resale price maintenance;price parity clauses |
| JEL: | L13 L42 D43 K21 |
| Date: | 2017–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2017-44&r=law |
| By: | Ortega, Francesc (Queens College, CUNY); Edwards, Ryan (University of California, Berkeley); Hsin, Amy (Queens College, CUNY) |
| Abstract: | This study quantifies the economic effects of two major immigration reforms aimed at legalizing undocumented individuals that entered the United States as children and completed high school: Deferred Action for Childhood Arrivals (DACA) and the DREAM Act. The former offers only temporary legal status to eligible individuals; the latter provides a track to legal permanent residence. Our analysis is based on a general-equilibrium model that allows for shifts in participation between work, college and non-employment. The model is calibrated to account for productivity differences across workers of different skills and documentation status, and a rich pattern of complementarities across different types of workers. We estimate DACA increased GDP by almost 0.02% (about $3.5 billion), or $7,454 per legalized worker. Passing the DREAM Act would increase GDP by around 0.08% (or $15.2 billion), which amounts to an average of $15,371 for each legalized worker. The larger effects of the DREAM Act stem from the expected larger take-up and the increased incentive to attend college among DREAMers with a high school degree. We also find substantial wage increases for individuals obtaining legal status, particularly for individuals that increase their educational attainment. Because of the small size of the DREAMer population, legalization entails negligible effects on the wages of US-born workers. |
| Keywords: | immigration, DREAMers, legalization, undocumented |
| JEL: | D7 F22 H52 H75 J61 I22 I24 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11281&r=law |
| By: | Elham Erfanian (Regional Research Institute, West Virginia University); Alan R. Collins (Division of Resource Economics and Management, West Virginia University); Daniel Grossmam (Department of Economics, West Virginia University) |
| Abstract: | Opioid overdose is the leading cause of unintentional death in the U.S. Narcan TM (Naloxone) is a prescription medicine that can reverse overdose effects. This research investigates the effect of Naloxone access laws on overdose death rates using state and temporal variation in the enactment of these laws. We also explore possible spillover effects between Naloxone access laws and overdose death rates across states. Our analyses reveal that when broken down by access law provisions, there exists a mixture of positive and negative effects on overdose death rates depending upon the provision. The results indicate that Naloxone access provisions have regional impacts by influencing overdose death rates within the state enacted and have a spillover effect in neighboring states. The magnitude of spillover effects is larger than direct effects in the states. Looking across multiple provisions, our findings provide no statistical evidence that these laws reduce opioid death rates. |
| Keywords: | opioid overdose death, Naloxone access law, spatial spillovers |
| JEL: | I18 I12 C3 |
| Date: | 2018–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:rri:wpaper:2018wp03&r=law |