nep-law New Economics Papers
on Law and Economics
Issue of 2018‒04‒30
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. On Lawyer Compensation When Appeals Are Possible. By Christian At; Tim Friehe; Yannick Gabuthy
  2. Leniency, Asymmetric Punishment and Corruption: Evidence from China By Maria Perrotta Berlin; Bei Qin; Giancarlo Spagnolo
  3. Learning While Setting Precedents By Chen, Ying; Eraslan, Hulya
  4. Creditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence By Nuri Ersahin
  5. The Murder Epidemic: A Global Comparative Study By Asongu, Simplice; Acha-Anyi, Paul
  6. Towards EU Legislation on Human Rights Due Diligence: Case Study of the Garment and Textile Sector By Dziedzic, Angelica; Lelièvre, Céline; Povilonis, Jonathan; Alemanno, Alberto; Morrow, Paige
  7. The Pot Rush: Is Legalized Marijuana a Positive Local Amenity? By Zambiasi, Diego; Stillman, Steven
  8. Police Patrols and Crime By Blanes i Vidal, Jordi; Mastrobuoni, Giovanni
  9. The effect of abortion legalization on fertility, marriage and long-term outcomes for women By Libertad González Luna; Sergi Jiménez-Martín; Natalia Nollenberger; Judit Vall Castello
  10. The effects of official and unofficial information on tax compliance By Filomena Garcia; Luca David Opromolla; Andrea Vezzulli; Rafael Marques
  11. The Impacts of Paid Family Leave Benefits: Regression Kink Evidence from California Administrative Data By Bana, Sarah; Bedard, Kelly; Rossin-Slater, Maya

  1. By: Christian At; Tim Friehe; Yannick Gabuthy
    Abstract: This paper describes how plaintiff should compensate lawyers, who choose unobservable effort, when litigation may proceed from the trial to the appeals court. We find that, when it is very likely that the defendant will appeal, transfers made to the lawyer only after an appeals court’s ruling are key instruments in incentivizing both trial and appeal court effort. Indeed, the lawyer may not receive any transfer after the trial court’s ruling. In contrast, when reaching the appeals stage is unlikely, a favorable trial court ruling triggers a positive transfer to the lawyer and first-best appeals effort. In our setup, the lawyer may receive a lower transfer after winning in both the trial and the appeals court as compared to the scenario in which the first-instance court ruled against the plaintiff and the appeals court reversed that ruling.
    Keywords: Litigation, Appeals, Moral hazard, Optimal contract.
    JEL: D82 K41
    Date: 2018
  2. By: Maria Perrotta Berlin (SITE); Bei Qin (University of Hong Kong); Giancarlo Spagnolo (SITE-Stockholm School of Economics, EIEF, Tor Vergata & CEPR)
    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.
    Date: 2018–04–23
  3. By: Chen, Ying (Johns Hopkins University); Eraslan, Hulya (Rice University)
    Abstract: A decision maker (DM) must address a series of problems over time. Each period, a random case arises and the DM must make a yes-or-no decision, which we call a ruling. She is uncertain about the correct ruling until she conducts a costly investigation. A ruling establishes a precedent, which may be costly to violate in the future. We compare the DM's incentive to acquire information, the evolution of standards and the social welfare under two institutions: nonbinding precedent and binding precedent. Under nonbinding precedent, the DM is not required to follow previous rulings, but under binding precedent, she must follow previous rulings where applicable. We find that, compared to nonbinding precedent, the incentive for information acquisition is stronger under binding precedent in earlier periods when few precedents exist, but as more precedents are established over time, the incentive for information acquisition becomes weaker under binding precedent. Even though erroneous rulings may be perpetuated under binding precedent, social welfare can be higher because of the more intensive investigation conducted early on.
    JEL: D02 D23 D83
    Date: 2018–02
  4. By: Nuri Ersahin
    Abstract: I analyze the impact of stronger creditor rights on productivity using plant-level data from the U.S. Census Bureau. Following the adoption of anti-recharacterization laws that give lenders greater access to the collateral of firms in financial distress, total factor productivity of treated plants increases by 2.6 percent. This effect is mainly observed among plants belonging to financially constrained firms. Furthermore, treated plants invest in capital of younger vintage and newer technology, and become more capital-intensive. My results suggest that stronger creditor rights relax borrowing constraints and help firms adopt more efficient production technologies.
    Keywords: Creditor Rights; Technology Adoption; Productivity; Bankruptcy
    JEL: D24 G32 G33 K22
    Date: 2018–04
  5. By: Asongu, Simplice; Acha-Anyi, Paul
    Abstract: We build on literature from policy and academic circles to assess if Latin America is leading when it comes to persistence in homicides. The focus is on a global sample of 163 countries for the period 2010 to 2015. The empirical evidence is based on Generalised Method of Moments. The following main finding is established. The region with the highest evidence of persistence in homicides is sub-Saharan Africa (SSA), followed by Latin America, the Middle East and North Africa (MENA) and then by Europe & Central Asia (ECA). In order to increase room for policy implications, the dataset is decomposed into income levels, religious domination, landlockedness and legal origins. From the conditioning information set, the following factors account for persistence in global homicides: crime, political instability and weapons import positively affect homicides whereas the number of “security and police officers” has the opposite effect.
    Keywords: Homicides; Global evidence; Persistence; Latin America
    JEL: K42 P50
    Date: 2017–06
  6. By: Dziedzic, Angelica; Lelièvre, Céline; Povilonis, Jonathan; Alemanno, Alberto; Morrow, Paige
    Abstract: This study assesses the legal feasibility of a EU instrument that would impose mandatory human rights due diligence (“HRDD”) requirements on companies in the garment and textile sector. The proposal serves as an example of a sector-specific approach to HRDD requirements, and could be modified to develop similar proposals in other sectors. The study also illustrates the differences between a sector-specific and a cross-sectoral approach by highlighting the implications of each in the following areas: legal bases, personal scope, and requirements and enforcement.
    Keywords: business and human rights; EU law; corporations; corporate responsibility; human rights due diligence
    JEL: F23 G38 K20 L20 L24 M14 O16
    Date: 2017–06–01
  7. By: Zambiasi, Diego (University of the Basque Country); Stillman, Steven (Free University of Bozen/Bolzano)
    Abstract: This paper examines the amenity value of legalized marijuana by analyzing the impact of marijuana legalization on migration to Colorado. Colorado is the pioneering state in this area having legalized medical marijuana in 2000 and recreational marijuana in 2012. We test whether potential migrants to Colorado view legalized marijuana as a positive or negative local amenity. We use the synthetic control methodology to examine in- and out-migration to/from Colorado versus migration to/from counterfactual versions of Colorado that have not legalized marijuana. We find strong evidence that potential migrants view legalized marijuana as a positive amenity with in-migration significantly higher in Colorado compared with synthetic- Colorado after the writing of the Ogden memo in 2009 that effectively allowed state laws already in place to be activated, and additionally after marijuana was legalized in 2013 for recreational use. When we employ permutation methods to assess the statistical likelihood of our results given our sample, we find that Colorado is a clear and significant outlier. We find no evidence for changes in out-migration from Colorado suggesting that marijuana legalization did not change the equilibrium for individuals already living in the state.
    Keywords: marijuana legalization, interstate migration, synthetic controls
    JEL: I18 R23 K42 C22
    Date: 2018–03
  8. By: Blanes i Vidal, Jordi (London School of Economics); Mastrobuoni, Giovanni (Collegio Carlo Alberto)
    Abstract: An influential literature has used the aftermath of terrorist attacks to estimate large effects of police street deployment on crime. However, the elasticities obtained in these settings may not easily extrapolate to more standard circumstances. This paper exploits a natural experiment that aimed to increase police presence in more than 6,000 well-defined areas, by economically-realistic amounts and under relatively normal circumstances. Using data transmitted by GPS devices worn by police officers, we first document exogenous and discontinuous changes in patrolling intensity. We do not find that these increases in patrolling were accompanied by corresponding decreases in crime. The standard errors are small enough to reject relatively small elasticities. We discuss and empirically evaluate explanations for our findings.
    Keywords: police, crime, natural experiments, deterrence
    JEL: D29 K40
    Date: 2018–03
  9. By: Libertad González Luna; Sergi Jiménez-Martín; Natalia Nollenberger; Judit Vall Castello
    Abstract: We evaluate the short- and long-term effects for women of access to subsidized, legal abortion by exploiting the Spanish legalization of abortion in 1985. Using birth records and survey data, we find robust evidence that the legalization led to an immediate decrease in the number of births to women aged 21 and younger. This effect was driven by provinces with a higher supply of abortion services. In those regions, young women affected by the reform were also less likely to marry. Using data from the Labor Force Survey and exploiting the rollout of abortion clinics across provinces and over time, we find evidence that the affected cohorts of women, who were able to postpone fertility as a result of the legalization of abortion, achieved higher educational attainment and had higher life satisfaction 20 years after the reform. We do not find evidence of increases in the probability of being employed.
    Keywords: Abortion, fertility, education and labor market outcomes, satisfaction
    JEL: J12 J13 I21 C21
    Date: 2018–04
  10. By: Filomena Garcia (Indiana University, & UECE); Luca David Opromolla (Banco de Portugal, CEPR, CESifo, & UECE); Andrea Vezzulli (University of Insubria); Rafael Marques (ISEG-School of Economics and Management)
    Abstract: The administration of tax policy has shifted its focus from enforcement to complementary instruments aimed at creating a social norm of tax compliance. In this paper we provide an analysis of the effects of the dissemination of information regarding the past degree of tax evasion at the social level on the current individual tax compliance behavior. We build an experiment where, for given levels of audit probabilities, fines and tax rates, subjects have to declare their income after receiving either a communication of the official average tax evasion rate or a private message from a group of randomly matched peers about their tax behavior. We use the experimental data to estimate a dynamic econometric model of tax evasion. The econometric model extends the Allingham-Sandmo-Yitzhaki tax evasion model to include self-consistency and endogenous social interactions among taxpayers. We find four main results. First, tax compliance is very persistent. Second, the higher the official past tax evasion rate the higher the degree of persistence: evaders are more likely to evade again, and compliant individuals are more likely to comply again. Third, when all peers communicate to have evaded (complied) in the past, both evaders and compliant individuals are more likely to evade (comply). Fourth, while both treatments, and especially the unofficial information treatment, are associated, in the context of our experiment, with a significantly larger growth in evasion intensity, the aggregate effect depends on the characteristics of the population. In countries with inherently low levels of tax evasion, official information can have beneficial effects by consolidating the behavior of compliant individuals. However, in countries with inherently high levels of tax evasion, official information can have detrimental effects by intensifying the behavior of evaders. In both cases, the impact of official information is magnified in the presence of strong peer effects.
    Keywords: Tax morale, Information, Tax evasion, Experiment, Peer Effects
    JEL: H26 D63 C24 C92 Z13
    Date: 2018–04
  11. By: Bana, Sarah (University of California, Santa Barbara); Bedard, Kelly (University of California, Santa Barbara); Rossin-Slater, Maya (Stanford University)
    Abstract: Although the United States provides unpaid maternity and family leave to qualifying workers, it is the only OECD country without a national paid leave policy, making wage replacement a pivotal issue under debate. We use ten years of linked administrative data from California together with a regression kink (RK) design to estimate the causal impacts of benefits in the first state-level paid family leave program for women with earnings near the maximum benefit threshold. We find no evidence that a higher weekly benefit amount (WBA) increases leave duration or leads to adverse future labor market outcomes for mothers in this group. In contrast, we document consistent evidence that an increase in the WBA leads to a small increase in the share of quarters worked one to two years after the leave and a sizeable increase in the likelihood of making a future paid family leave claim across a variety of specifications.
    Keywords: paid family leave, regression kink design, leave duration, maternal labor supply, temporary disability insurance
    JEL: I18 J13 J16 J18
    Date: 2018–03

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