nep-law New Economics Papers
on Law and Economics
Issue of 2018‒07‒16
nineteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Mapping the Geometry of Law using Document Embeddings By Ash, Elliott; Chen, Daniel L.
  2. Cognitive Ability and Corruption: Rule of Law (still) Matters By Mohammad Reza Farzanegan
  3. High on Crime? Exploring the Effects of Marijuana Dispensary Laws on Crime in California Counties By Hunt, Priscillia E; Pacula, Rosalie Liccardo; Weinberger, Gabriel
  4. The Trafficking in Human Beings Crime in Romania By Nicoleta-Elena Buzatu
  5. Fighting Mobile Crime By Rosario Crino; Giovanni Immordino; Gülen Karakoç-Palminteri; Salvatore Piccolo
  6. Is the EU Disinformation Review Compliant with EU Law? Complaint to the European Ombudsman About the EU Anti-Fake News Initiative By Alemanno, Alberto; Brogi, Justine; Fischer-Zernin, Maxime; Morrow, Paige
  7. A Legal Effect of European Union's Business Law Policy: Single Member Companies in Turkish Law By Salih Tayfun ?nce
  8. The Tort Law and the Nucleolus for Generalized Joint Liability Problems By Takayuki Oishi; Gerard van der Laan; René van den Brink
  9. Crime, Broken Families, and Punishment By Bezin, Emeline; Verdier, Thierry; Zenou, Yves
  11. Voluntary disclosure schemes for offshore tax evasion By Matthew D. Rablen; Matthew Gould
  12. Optimal Leniency and the Organization Design of Group Delinquency By Giovanni Immordino; Gülen Karakoç-Palminteri; Salvatore Piccolo; Paolo Roberti
  13. Anticorruption National System: Model Whistleblowers Direct Citizen Action Against Corruption in Mexico By Medel-Ramírez, Carlos
  14. Clash of norms: Judicial leniency on defendant birthdays By Chen, Daniel L.; Philippe, Arnaud
  15. How to Counter Fake News? A Taxonomy of Anti-Fake News Approaches By Alemanno, Alberto
  16. Legal and Political Agreements for Sharing International Rivers with Water Shortage By Takayuki Oishi
  17. Financial Market Misconduct and Public Enforcement: The Case of Libor Manipulation By Priyank Gandhi; Benjamin Golez; Jens Carsten Jackwerth; Alberto Plazzi
  19. Economic Crimes in the Shortage Economy By Hana Lipovská; Libor ?ídek; Lucie Coufalová

  1. By: Ash, Elliott; Chen, Daniel L.
    Abstract: Recent work in natural language processing represents language objects (words and documents) as dense vectors that encode the relations between those objects. This paper explores the application of these methods to legal language, with the goal of understanding judicial reasoning and the relations between judges. In an application to federal appellate courts, we show that these vectors encode information that distinguishes courts, time, and legal topics. The vectors do not reveal spatial distinctions in terms of political party or law school attended, but they do highlight generational differences across judges. We conclude the paper by outlining a range of promising future applications of these methods.
    Date: 2018–07
  2. By: Mohammad Reza Farzanegan (University of Marburg)
    Abstract: This study shows that the “longer time horizon” argument proposed by Potrafke (2012) with regard to the negative effect of a higher national average cognitive ability on corruption holds only in countries with a relatively high quality of rule of law.
    Keywords: corruption, intelligence, cognitive, rule of law
    Date: 2018
  3. By: Hunt, Priscillia E (RAND); Pacula, Rosalie Liccardo (RAND); Weinberger, Gabriel (Pardee RAND Graduate School)
    Abstract: Regulated marijuana markets are more common today than outright prohibitions across the U.S. states. Advocates for policies that would legalize marijuana recreational markets frequently argue that such laws will eliminate crime associated with the black markets, which many argue is the only link between marijuana use and crime. Law enforcement, however, has consistently argued that marijuana medical dispensaries (regulated retail sale and a common method of medical marijuana distribution), create crime in neighborhoods with these store-fronts. This study offers new insight into the question by exploiting newly collected longitudinal data on local marijuana ordinances within California and thoroughly examining the extent to which counties that permit dispensaries experience changes in violent, property and marijuana use crimes using difference-in-difference methods. The results suggest no relationship between county laws that legally permit dispensaries and reported violent crime. We find a negative and significant relationship between dispensary allowances and property crime rates, although event studies indicate these effects may be a result of pre-existing trends. These results are consistent with some recent studies suggesting that dispensaries help reduce crime by reducing vacant buildings and putting more security in these areas. We also find a positive association between dispensary allowances and DUI arrests, suggesting marijuana use increases in conjunction with impaired driving in counties that adopt these ordinances, but these results are also not corroborated by an event study analysis.
    Keywords: crime, marijuana markets, local ordinances
    JEL: K14 K42 H75
    Date: 2018–05
  4. By: Nicoleta-Elena Buzatu (†Dimitrie Cantemir†Christian University)
    Abstract: The study below is meant to focus on the trafficking in human beings crime in Romania, especially analysis of the trafficking infraction provided in the Romanian Criminal Code. Romania is one of the transit states, but mostly one of the main source countries for trafficking in human beings in Europe. Currently, the trafficking in human beings phenomenon, as for the drug trafficking, the arms trafficking, corruption, tax evasion, represent one of the most extended ways of displaying the criminality, that, in a very short time span, recorded unimaginable and unacceptable proportions for the society we live in. The trafficking in human beings phenomenon is defined through the illegal migration. The Romanian legal response to the trafficking in human beings phenomenon was a gradual one, by ratification certain international provisions, but also through enacting a special law and legal measures that can be applied regarding the field in the talk.
    Keywords: crime, human trafficking, organized crime, Romanian Criminal Code
    Date: 2018–05
  5. By: Rosario Crino (Università Cattolica del Sacro Cuore di Milano, CEPR and CESifo.); Giovanni Immordino (Università di Napoli Federico II and CSEF); Gülen Karakoç-Palminteri (Università di Milano Bicocca); Salvatore Piccolo (Università di Bergamo and CSEF)
    Abstract: We develop a model in which two countries choose their enforcement levels non- cooperatively, in order to deter native and foreign individuals from committing crime in their territory. We assume that crime is mobile, both ex ante (migration) and ex post (fleeing), and that criminals who hide abroad after having committed a crime in a country must be extradited back. We show that, when extradition is not too costly, countries overinvest in enforcement compared to the cooperative outcome: insourcing foreign criminals is more costly than paying the extradition cost. By contrast, when extradition is sufficiently costly, a large enforcement may induce criminals to flee the country in which they have perpetrated a crime. Surprisingly, the fear of extraditing criminals enables countries to coordinate on the e¢ cient (cooperative) outcome.
    Keywords: Crime, Enforcement, Extradition, Fleeing, Migration
    JEL: K14 K42
    Date: 2018–06–27
  6. By: Alemanno, Alberto; Brogi, Justine; Fischer-Zernin, Maxime; Morrow, Paige
    Abstract: The EU’s approach to fake news, as epitomised by the European External Action (EEAS) Service East Stratcom Disinformation Review, violates the rights to freedom of expression and due process of those accused of distributing disinformation. The EU Disinformation Review is a publication of the European External Action Service (the European Union’s diplomatic service) to target fake news and online disinformation. Following our request for access to documents, EEAS conceded that the EU Disinformation Review uses an “ad hoc” methodology for conducting its fact-checks, which makes it an outlier in the international fact-checking community led by the International Fact-Checking Network (IFCN). Despite being a well-intentioned initiative to respond to the challenges posed by pro-Kremlin disinformation, the EU should ensure the respect of fundamental rights when engaging in fact-checking. The EU Disinformation Review seeks to control the right to freedom of expression by labelling publishers as “disinforming outlets” and their content as “disinformation,” creating a chilling effect on the work of journalists that is central to democracy. The right to freedom of expression is expressed in Article 11.1 of the Charter of Fundamental Rights of the European Union (2000/C 364/01) and Article 10 of the European Convention on Human Rights. The labelling of publishers as “disinformation outlets” is contrary to principle of the freedom of press established by the European Court of Human Rights: “[a] general requirement for journalists systematically and formally to distance themselves from the content of a quotation that might insult or provoke others or damage their reputation is not reconcilable with the press’ role of providing information on current events, opinion and ideas.” In addition, the methodology used by EEAS in the EU Disinformation Review is “ad hoc,” which constitutes a violation of the fundamental right to good administration in Article 41 of the European Charter of Fundamental Rights. Specifically, the ad hoc design and operation of the EU Disinformation Review fails to ensure the review acts “impartially, fairly and within a reasonable time.” First, publications are not provided with the right to be heard or proper notice. The EU Disinformation Review’s homepage offers an opportunity to contact the Task Force report a suspected mistake in a fact-check but the page is only available in English, in violation of the principle of multilingualism, and no notice if given to outlets accused of being “disinforming outlets” before or after fact-checks of their content are published. Second, the EEAS does not fulfil its duty to motivate. EEAS is given a broad margin of discretion to identify disinformation, but fails to do so according to a consistent methodology. Therefore, EEAS cannot justify, on the basis of objective criteria, its choice of which content to review and how to determine its truth or falsehood. To comply with EU law and ensure the respect of fundamental rights, the EEAS should develop and make public (1) a methodology for selecting partnerships and reviewing fact-checks in line with international standards and (2) a notice and response mechanism for journalists, publishers and citizens whose content is being reviewed. If EEAS is unable to comply with the above, the EU Disinformation Review should be shut down.
    Keywords: Fake news; EU Law; European Ombudsman; Access to Information; Transparency
    JEL: K00 K10 K20 K30 K39
    Date: 2018–03–28
  7. By: Salih Tayfun ?nce (Istanbul Fatih Sultan Mehmet Vakif University Faculty of Law)
    Abstract: The concept of single-member company has been studied in the doctrine by lawyers and economists for more than hundred years. Single-member companies have become widespread by virtue of the European Union?s legal instructions and mostly subsequent acceleration of states? legislation efforts in order to allow foundation of single-member companies pursuant to their national laws. The dangers which single-member companies may generate are matters of discussion as well as the possible benefits of single-member companies to the national and international markets. Authorization of a single-member company foundation is one of the most important changes that were brought by Turkish Commercial Code with its entry into force in 1 July 2012. It is understandable from analysis of company foundation statistics provided by official authorities that incorporation of a company by a single member is widely embraced by market players. Presently, the European Union labours with a directive proposal which aims formation of new and more practical single-member company type. The outcome of these economic policy borne legal efforts will have significant effects on Turkey as a current member of the European Customs Union and a candidate country for the European Union, and foreign investors who plan to invest in Turkey.
    Keywords: Single-member Company, One-man Company, Limited Liability Company, Joint Stock Company, Turkish Business Law, European Union Business Law, Commercial Law, Company Law.
    JEL: K20 K22 M20
    Date: 2017–10
  8. By: Takayuki Oishi; Gerard van der Laan (VU University Amsterdam); René van den Brink (VU University Amsterdam)
    Abstract: We analyze a legal compensation scheme axiomatically under the situation where causation of the cumulative injury appears in multiple sequences of wrongful acts caused by tortfeasors. This situation is a generalization of joint liability problems on tort law, and it is described by a rooted-tree graph. We show that there is a unique compensation scheme that satisfies three axioms, one about lower bounds of individual compensations, one about upper bounds of individual compensations, and one about case-system consistency. These axioms are derived from legal observations on tort law. The unique compensation scheme satisfying the three axioms yields the Nucleolus of an associated liability game.
    Keywords: Tort law; Rooted-tree graph; Axiomatization; Nucleolus
    JEL: C71 D63 K13 K49
    Date: 2018–03
  9. By: Bezin, Emeline; Verdier, Thierry; Zenou, Yves
    Abstract: We develop a two-period overlapping generations model in which both the structure of the family and the decision to commit crime are endogenous and a culture of honesty is transmitted intergenerationally by families and peers. Having a father at home might be crucial to prevent susceptible boys from becoming criminals, as this facilitates the transmission of the honesty trait against criminal behavior. By "destroying" biparental families and putting fathers in prison, we show that more intense crime repression can backfire because it increases the possibility that criminals' sons become criminals themselves. Consistent with sociological disorganization theories of crime, the model also explains the emergence and persistence of urban ghettos characterized by a large proportion of broken families and high crime rates. This is because for children who come from these broken families, negative community experiences (peer effects) further encourage their criminal participation. Finally, we discuss the efficiency of location and family policies on long-term crime rates.
    Keywords: crime; neighborhood segregation; Social interactions
    JEL: J15 K42 Z13
    Date: 2018–06
  10. By: Mihaela TOFAN (Alexandru Ioan Cuza University of Iasi)
    Abstract: When the state representatives realise that the fiscal liabilities are too hard to comply with and the taxpayers are very temped to avoid the payments, alternative solutions might be used. In order to move on with their daily activities, the taxpayers need to ease tax burden and a solution to rebalance the general budgetary collect/spend mechanism is to consider an amnesty regulation. Some legally stated fiscal liabilities are to be cancelled, in order to facilitate the continuity of the activity of the taxpayers and to insure further payments to the budget, despite the present diminish of the budgetary incomes. The recent Romanian fiscal amnesty is analyzed, starting with its motivations, the applicable procedures and the possible misinterpretations. The fiscal authority role and actions are presented, in comparison with the action of the beneficiaries of the law. Also, the results amnesty generated and the influence on the taxpayers? activity are analyzed, through the relevant case law already generated on the topic. The negative influence of the tax amnesty is pointed out as a result of the research.
    Keywords: contributions, fiscal amnesty, tax regulation.
    JEL: K22 K31 K34
    Date: 2017–10
  11. By: Matthew D. Rablen (Institute for Fiscal Studies and Sheffield University); Matthew Gould (Institute for Fiscal Studies)
    Abstract: Tax authorities worldwide are implementing voluntary disclosure schemes to recover tax on offshore investments. Such schemes are typically designed retrospectively following the bulk acquisition of information on offshore holdings, such as the recent ?Paradise? and ?Panama? papers. They offer an opportunity for affected taxpayers to make a voluntary disclosure, with reduced fine rates for truthful disclosure. We characterize the taxpayer/tax authority game with and without a scheme and show that a scheme increases net expected tax revenue, decreases illegal offshore investment, increases onshore investment, and could either increase or decrease total offshore investment (legal plus illegal).
    Keywords: voluntary disclosure, offshore tax evasion, tax amnesty, third-party information
    JEL: H26 D85
    Date: 2018–03–05
  12. By: Giovanni Immordino (Università di Napoli Federico II and CSEF); Gülen Karakoç-Palminteri (Università di Milano Bicocca); Salvatore Piccolo (Università di Bergamo and CSEF); Paolo Roberti (Università di Bergamo)
    Abstract: We study a simple law enforcement model in which the organizational structure of criminal organizations is endogenous and determined jointly with the amnesty granted to criminals who ip and blow the whistle (leniency program). We allow criminals to choose between a horizontal (partnership) and a vertical structure and study how this choice affects the optimal leniency chosen by a benevolent Legislator whose objective is to minimize crime. We show that when soldiers in vertical organizations have valuable information about the boss, the policy mainly targets vertical hierarchies, leaving horizontal structures proliferate in number. By contrast, when soldiers are poorly informed about their heads, the Legislator implements a policy that completely eradicates partnerships. When the two types of organization coexist, partnerships emerge only for intermediate levels of trust between criminals, while organizations take a vertical structure for low or high levels of trust among felons.
    Keywords: Criminal Organizations, Leniency, Organizational Structure, Partnerships, Vertical Hierarchies
    JEL: K14 K42 D73 D78
    Date: 2018–06–27
  13. By: Medel-Ramírez, Carlos
    Abstract: The phenomenon of corruption is a cancer that affects our country and that it is necessary to eradicate; This dilutes the opportunities for economic and social development, privileging the single conjunction of particular interests, political actors in non-legal agreements for their own benefit, which lead to acts of corruption. Recent studies indicate that the level of corruption present in a political system is directly related to the type of institutional structure that defines it (Boehm and Lambsdorff, 2009), as well as the ineffectiveness of the control organisms (Casar, 2015; Cárdenas, 2010, Rojas, 2010, Carbonell, 2009, Restrepo, 2004), which requires citizen action to combat corruption (Sandoval, 2010, Villanueva, 2006). This work, focuses our attention on the federal public administration, presenting as a proposal to empower the citizen action in the fight against corruption and in the National Anticorruption System; the figure of Whistleblowers or generator of citizen alert, based on two fundamental principles: i) recognizing the citizen's obligation to report acts of corruption and ii) the granting by the authority of witness protection. These two actions will result in two important results: i) Consolidate the citizen's complaint to inform society about acts of corruption and ii) and the exercise of freedom of information so that society is able to be informed about acts of corruption. These actions will allow promoting and consolidating a culture of reporting acts of corruption that may constitute a crime as a fundamental pillar in the National Anticorruption System in Mexico.
    Keywords: Anticorruption, Control of corruption, Perception of corruption, Whistleblowers, National Anticorruption System
    JEL: H11 K42
    Date: 2018–04–10
  14. By: Chen, Daniel L.; Philippe, Arnaud
    Abstract: We document judicial leniency on defendant birthdays across 5 million decisions. French sentences are 1% fewer and 3% shorter. U.S. federal sentences are 33% shorter in the day component of sentences (the month component remains unaffected). New Orleans sentences are 15% shorter overall. No leniency appears on the days before or after a defendant’s birthday. Federal judges using deterrence language in opinions, are unaffected, isolating the judicial as opposed to defendant channel. The effect is doubled when judge and defendant share the same race. Our courtroom setting rules out many models of social preferences with reciprocity motives.
    Date: 2018
  15. By: Alemanno, Alberto
    Abstract: Fake news is a symptom of deeper structural problems in our societies and media environments. To counter it, policymakers need to take into account the underlying, self-reinforcing mechanisms that make this old phenomenon so pervasive today. Only by taking a step back can we examine the vulnerabilities these fake news narratives exploit. This article provides a first taxonomy of anti-fake news approaches. It argues that proposed anti-fake news laws focus on the trees rather than the forest. As such, they will not only remain irrelevant but also aggravate the root causes fueling the fake news phenomenon.
    Keywords: Fake new; disinformation; misinformation; media; behavioural; better regulation; digital agenda
    JEL: K30 K32
    Date: 2018–03–18
  16. By: Takayuki Oishi
    Abstract: We develop normative investigation of sharing international rivers. First, we pro- pose the model of water problems in the situation where a river áows through several states with the possibility of water shortage. We derive claims problems from the water problems. We axiomatize the family of convex combinations of the propor- tional and the equal awards rules for water claims problems. Using a unique claim vector constrained by geographic factors of a watercourse and the majority voting rule, we demonstrate how to determine the legal and political agreement of water problems.
    Keywords: international river; claims problems; axiomatization; proportional rules; equal awards rules; median voter theorem
    JEL: D63 K32
    Date: 2018–05
  17. By: Priyank Gandhi (Mendoza College of Business and University of Notre Dame); Benjamin Golez (University of Notre Dame); Jens Carsten Jackwerth (University of Konstanz); Alberto Plazzi (USI Lugano and Swiss Finance Institute)
    Abstract: Using comprehensive data on London Interbank Offer Rate (Libor) submissions from 2001 through 2012, we document systematic evidence consistent with banks manipulating Libor to profit from Libor related positions and, to a degree, to signal their creditworthiness during the distressed times for banks. The evidence is initially stronger for banks that were eventually sanctioned by the regulators and disappears for all banks post-2010 in the aftermath of Libor investigations. Our findings suggest that public enforcement, with the threat of large penalties and the loss of reputation, can be effective in deterring financial market misconduct.
    Keywords: Libor, manipulation, financial market misconduct, enforcement
    JEL: G11 G12 K42
    Date: 2017–12
  18. By: Kasem Cenaj (Vlora Regional Directory of Custom)
    Abstract: In order to reach fair conclusions, I had to set out some definitions given by the International Conventions. This area is relatively new and unobtrusively studied by academics, military, Albanian lawmakers, who have been unequally confronted with the Greeks in this agreement because they have human capacities at the world's best levels, institutes and institutions of the sea. The method used to relate this study is that of comparison and deduction. To reach the goal, the study was conducted around the answers to these questions:1.How do legal regimes operate in sea?2.How are resolved marine disagreements? 3.Does the Albania-Greece deal matter??4.How was it done in similar cases?5.Is this agreement in accordance with the UN Conventions?6.What is lacking in this agreement?Only after the above answers, the relevant conclusions and recommendations have been reached.
    Keywords: Maritime border, maritime agreement, convention, territorial waters, continental shelf.
    JEL: K30 K33 K39
    Date: 2017–10
  19. By: Hana Lipovská (Faculty of Economics and Administration, Masaryk University); Libor ?ídek (Masaryk University); Lucie Coufalová (Masaryk University)
    Abstract: Rational agents react on the incentives in the market economy as well as in the centrally planned economy. Economic laws are persistent regardless the economic system. Legislative system changes the outcome of the game between economic agents and managers. Base on the original survey among former managers as well as on the legislative sources from the 1970?s and 1980?s the taxonomy of economic reactions on the shortage economy was made. We distinguish plan manipulation in order to ensure payment bonuses; bribery in order to gain the short-supplied inputs and reserves? creation for the purpose of the fulfilling the plan. It was shown, that if the rational agent wanted to obey the higher law, he was forced to ignore lower legislation.
    Keywords: Economic Crimes, Legal Cases, Shortage Economy, Socialist Enterprises, State Development Plan
    JEL: K22 P21 P37
    Date: 2017–10

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