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on Law and Economics |
| By: | Kenta Sekiguchi (Bank of Japan); Makoto Chiba (Bank of Japan); Mikari Kashima (Bank of Japan) |
| Abstract: | Distributed ledger technology (DLT) is attracting wide attention because of the benefits it provides such as fault tolerance and cost reductions. When introducing DLT in securities transactions, its relationship with the Act on Book-Entry Transfer of Corporate Bonds and Shares, which regulates the transfer of paperless securities, should be examined to ensure the stability of securities settlement. The Bank of Japan's Institute for Monetary and Economic Studies commissioned a series of workshops on the use of DLT in securities settlement and released a report on the findings in 2017 (available in Japanese only). The report presents possible interpretations of current law, which stipulates a multi-layered settlement structure, considering the fault tolerance characteristics of DLT, which enables network participants to share information. Furthermore, the report considers the future shape of the securities settlement system with DLT if legal reforms are taken into account. |
| Keywords: | distributed ledger technology; securities settlement; book-entry transfer securities; Act on Book-Entry Transfer of Corporate Bonds and Shares; multi-layered structure |
| JEL: | K22 |
| Date: | 2018–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojlab:lab18e02&r=law |
| By: | Gérard Mondello (Groupe de Recherche en Droit, Economie et Gestion); Evens Salies (Observatoire français des conjonctures économiques) |
| Abstract: | This article extends the unilateral accident standard model to allow for Cournot competition. Assuming risk-neutrality for the regulator and injurers, it analyzes three liability regimes: strict liability, negligence rule, and strict liability with administrative authorization or permits systems. Under competition the equivalence between negligence rule and strict liability no longer holds, and negligence insures a better level of social care. However, enforcing both a permit system and strict liability restores equivalence between liability regimes. Furthermore, whatever the current regime, competition leads to lower the global safety level of industry. Indeed, the stronger firm may benefit from safety rents, which they may use to increase production rather than maintaining a high level of safety. |
| Keywords: | Cournot competition; Permit system; Strict liability; Current regime; Industry |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/1jki13i7298a9knanhskpugh3&r=law |
| By: | Pietro A. Bianchi; Antonio Marra; Donato Masciandaro; Nicola Pecchiari |
| Abstract: | We examine the corporate consequences of having board directors connected with the organized crime. Given that in principle such as connections can trigger both pros and cons, the question is genuinely empirical: using an original data base of Italian corporations (108,332 observations for the period 2006-2013) we offer two results. On the one side, we find that firms with at least one director, whose criminal record displays potential involvement with criminal organizations (i.e., tainted director), show lower levels of cash holdings and lower profitability. Two alternative explanations can be offered: the firms are likely to use financial policies to lower cash holdings, thereby reducing the risk of being expropriated by tainted directors; the firms are completely captured by such as directors, that use the corporations for money laundering purposes, and therefore manage the cash holdings in order to minimize the risk of detection. On the other side, the firm profitability is inversely associated with the presence of tainted directors, suggesting that the tainted directors can use firm resources for their own private benefits, which harms the firm profitability. Results from this study are informative to regulators, policy makers and politicians, interested in preventing the pollution of criminal organizations in the legal economy. |
| Keywords: | Corporate Governance, Organized Crime, Firm Performance |
| JEL: | G30 G34 G38 K42 K49 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp1759&r=law |
| By: | Sebastian Galiani; Ivan Lopez Cruz; Gustavo Torrens |
| Abstract: | How to make police deployment strategies more efficient is becoming the crucial research agenda for the economics of crime and law enforcement. We contribute to this agenda developing the first general equilibrium model designed to study how the geographic distribution of police protection affects the decision to pursue illegal activities, the intensity and location of crime, residential choices, housing prices, and the welfare of different socioeconomic groups. The target is to explore the positive and normative long-run effects of different ways of spatially allocating police forces in an urban area. We find that, when the police protect some neighborhoods (concentrated protection), the city becomes segregated, while when the police are evenly deployed across the city (dispersed protection), an integrated city emerges. Unequal societies face a difficult dilemma in that concentrated protection maximizes aggregate welfare but exacerbates social disparities. Taxes and subsidies can be employed to offset the disadvantages of police concentration. Private security makes an integrated city less likely to occur in equilibrium. Even under dispersed public protection, rich agents may use private security to endogenously isolate themselves in closed neighborhoods. |
| Keywords: | Policy deployment, Crime, Spatial equilibrium, Inequality |
| JEL: | K42 R12 |
| Date: | 2018–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:col:000518:016343&r=law |
| By: | Vicente Cardoso; Marcelo Resende |
| Abstract: | The paper investigates the effect of police presence on homicides at the municipality level in Brazil during the January 2010 to December 2014 period. For this purpose, occasional and illegal police strikes are considered as relevant shocks in a quasi-natural experiment. After controlling for different variables that explain heterogeneity across municipalities, it is possible to identify a sizeable effect accruing from police strikes on the occurrence of homicides. Despite a conservative analysis that involves temporal and spatial aggregation of variables, the evidence indicates that police strikes lead, on average, to a 16% increase in the homicide rate if one considers a broader sample of 3597 municipalities. The focus of the analysis for a large and heterogeneous country also partially may mitigate concerns for external validity that had been raised in the context of previous studies in the related literature. |
| Keywords: | police strikes, crime |
| JEL: | C23 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7064&r=law |
| By: | Lucia dalla Pellegrina; Giorgio Di Maio; Donato Masciandaro; Margherita Saraceno |
| Abstract: | This paper examines the economy's vulnerability to money laundering in a given region. Assuming that criminals are rational investors who take into account risks and returns of both legal and illegal investments, we define vulnerability as a function of well-identified drivers. Proxies of these variables are used to empirically investigate the relationship between the institutional/economic characteristics of Italian provinces and their vulnerability to money laundering in the 2008-2013 period. We focus on the impact of the reporting of suspicious transactions to the Financial Intelligence Unit, by using instrumental variables to address endogeneity in the relationship between the number of reports made and our measure of vulnerability. Results highlight positive effects of the institutional policies adopted to fight money laundering, especially as far as the reporting of suspicious transactions is concerned. Further dimensions of local vulnerability are outlined: time-invariant heterogeneity across provinces, showing that certain areas are more systematically vulnerable because of persistent local features that cannot be individually identified; and idiosyncratic vulnerability, which pinpoints the fact that some provinces have been periodically subject to abnormally intense money-laundering activity. |
| Keywords: | Money laundering; vulnerability; suspicious transaction reporting |
| JEL: | K14 K20 K42 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp1766&r=law |
| By: | Duccio Gamannossi degl'Innocenti; Matthew D. Rablen |
| Abstract: | We relate tax evasion behavior to a substantial literature on self and social comparison in judgements. Tax payers engage in tax evasion as a means to boost their expected consumption relative to others in their “local” social network, and relative to past consumption. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpayers evade more. The indirect revenue effects from auditing are shown to be ordinally equivalent to a related Bonacich centrality. We generate networks corresponding closely to the observed structure of social networks observed empirically. In particular, our networks contain celebrity taxpayers, whose consumption is widely observed, and who are systematically of higher wealth. In this context we show that, if the tax authority can observe the social network, it is able to raise its audit revenue by around six percent. |
| Keywords: | tax evasion, social networks, network centrality, optimal auditing, social comparison, self comparison, habit, indirect effects, relative consumption |
| JEL: | H26 D85 K42 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7063&r=law |
| By: | Johannesson, Louise (Research Institute of Industrial Economics (IFN)) |
| Abstract: | The dispute settlement mechanism (DSM) is today the most active dispute resolution forum in the world. However, its success has also led to increased processing time of disputes, which, in turn, increases the cost of using the World Trade Organization (WTO) as a way to resolve trade conflicts. I investigate whether the DSM can be improved by introducing a permanent panel of judges, to replace the current ad hoc system of appointing new judges for each dispute. I find mixed results, but one aspect that could speed up the process is that permanent judges develop established work relations and working methods. |
| Keywords: | WTO; Dispute settlement; WTO panel; Trade disputes; Delays |
| JEL: | F13 K41 |
| Date: | 2018–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1219&r=law |
| By: | Daron Acemoglu; Ali Cheema; Asim I. Khwaja; James A. Robinson |
| Abstract: | Lack of trust in state institutions, often due to poor service provision, is a pervasive problem in many developing countries. If this increases reliance on non-state actors for crucial services, the resulting self-reinforcing cycle can further weaken the state. This paper examines whether such a cycle can be disrupted. We focus on dispute resolution in rural Punjab, Pakistan. We find that providing information about reduced delays in state courts leads to citizens reporting higher willingness to use state courts and to greater fund allocations to the state in two lab-in-the-field games designed to measure trust in state and non-state actors in a high-stakes setting. More interestingly, we find indirect effects on non-state actors. After receiving state positive information, respondents report lower likelihood of using non-state institutions and reduce funds allocated to them in field games. Furthermore, we find similar direct and indirect effects on a battery of questions concerning people’s beliefs about these actors, including a decreased allegiance to the non-state actor. We rationalize these results with a model of motivated reasoning whereby reduced usage of non-state institutions makes people less likely to hold positive views about them. These results indicate that, despite substantial distrust of the state in Pakistan, credible new information can change beliefs and behavior. The feedback loop between state ineffectiveness and the legitimacy of non-state actors may be reversible. |
| JEL: | C91 C93 D02 D73 D74 D83 K40 O17 P16 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24611&r=law |
| By: | Schmid, Günther (WZB - Social Science Research Center Berlin) |
| Abstract: | This paper argues that inclusive growth appears to be the only suitable strategy for realising the right to decent work (RDW) in the digital economy. This reasoning is in blunt opposition to the current mood of giving up this right in favour of an unconditional basic income (UBI). The study starts by briefly expanding the basic argument and by defining the principles of inclusive versus exclusive growth (1); a comprehensive overview of German labour market policy and labour law reforms since the beginning of this millennium assesses to what extent Germany is pursuing these principles, accompanied by selective evidence of their consequences for the German labour market performance (2); a stylised and descriptive overview of the inclusive impact of these reforms in quantitative and qualitative terms follows, with an essay reflecting the concept of the inclusive labour contract (3). |
| Keywords: | labour market policy, labour law, human right law, inclusion, institutions, growth, non-standard work, Germany |
| JEL: | J41 J48 K31 O43 R11 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izapps:pp139&r=law |
| By: | Dewit, Gerda (National University of Ireland, Maynooth); Görg, Holger (Kiel Institute for the World Economy); Temouri, Yama (Aston University) |
| Abstract: | We examine the determinants of the decision to relocate activities abroad for firms located in OECD countries. We argue that particular firm-specific features play a crucial role for the link between employment protection and relocation. Stricter employment protection laws over time in the current production location discourage firms' relocation abroad. While larger, more productive firms and firms with higher labour intensities have, ceteris paribus, higher propensities to relocate, they also face higher exit barriers if the country from which they consider relocating has strict employment protection laws. Our predictions are supported empirically, using firm level panel data for 28 OECD countries over the period 1997-2007. |
| Keywords: | employment protection, relocation, multinational enterprises |
| JEL: | F23 L23 J88 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11500&r=law |
| By: | Marko Köthenbürger; Federica Liberini; Michael Stimmelmayr |
| Abstract: | Patent box regimes have become increasingly popular as an instrument to attract taxable income from intellectual property (IP). This paper assesses the quantitative impact of patent box regimes on profit shifting by multinational enterprises (MNEs). We proxy the ability to access the tax benefit of the patent box by historical IP ownership. On average, affiliates belonging to MNEs with historical IP ownership report, after the introduction of a patent box, 8.5 percent higher profit compared to their counterparts with no IP ownership. Patent boxes do not only lure reported profit. The pre-tax profit change is a net effect and thus also accounts for reversed internal debt shifting out of the country and productivity changes. The overall behavioral adjustments might lower corporate tax revenues. Further, the design of the patent box and the existence of a tax haven affiliate within an MNE turn out to be critical for the amount of profits shifted. |
| Keywords: | corporate tax avoidance, patent box, multinational enterprise, profit shifting |
| JEL: | H25 H26 F23 C21 C23 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7061&r=law |
| By: | Prüfer, Jens (Tilburg University, Center For Economic Research); Prüfer, Patricia (Tilburg University, Center For Economic Research) |
| Abstract: | To which extent can data science methods – such as machine learning, text analysis, or sentiment analysis – push the research frontier in the social sciences? This essay briefly describes the most prominent data science techniques that lend themselves to analyses of institutional and organizational governance structures. We elaborate on several examples applying data science to analyze legal, political, and social institutions and sketch how specific data science techniques can be used to study important research questions that could not (to the same extent) be studied without these techniques. We conclude by comparing the main strengths and limitations of computational social science with traditional empirical research methods and its relation to theory. |
| Keywords: | data science; maching learning; institutions; text analysis |
| JEL: | C50 C53 C87 D02 K0 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:6d04f0fe-0bcd-4cf4-86f6-f2e0a86fa575&r=law |
| By: | Billington, Stephen D.; Hanna, Alan J. |
| Abstract: | Patent studies inform our understanding of innovation. Any study of patenting involves classifying patent data according to a chosen taxonomy. The literature has produced numerous taxonomies, which means patents are being classified differently across studies. This potential inconsistency is compounded by a lack of documentation provided on existing taxonomies, making them diffcult to replicate. Because of this, we develop a new patent taxonomy using machine learning techniques, and propose a new methodology to automate patent classification. We contrast existing taxonomies with our own upon a widely used patent dataset. In a regression analysis of patent classes upon patent characteristics, we show that classification bias exists: the size, statistical significance, and direction of association of coefficients depend upon how a patent dataset has been classified. We recommend investigators adopt our approach to ensure future studies are comparable and replicable. |
| Keywords: | Innovation,Invention,Machine Learning,Patents,Patent Classification,Taxonomy,Economic History |
| JEL: | K11 N24 N74 O31 O33 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:qucehw:201806&r=law |