nep-law New Economics Papers
on Law and Economics
Issue of 2018‒07‒23
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Speed of Justice By Florence Kondylis; Mattea Stein
  2. Assessing Autonomous Algorithmic Collusion: Q-Learning Under Sequential Pricing By Timo Klein
  3. Crime and Durable Goods By Sebastian Galiani; Laura Jaitman; Federico Weinschelbaum
  4. Dealing with corporate crises in a timely way. Notes on the optimal design of an «Early warning and composition system» By Elisa Brodi
  5. Medical marijuana laws and mental health in the United States By Kalbfuß, Jörg; Odermatt, Reto; Stutzer, Alois
  6. Group Size Effect and Over-Punishment in the Case of Third Party Enforcement of Social Norms By Kenju Kamei
  7. Incarceration, Recidivism and Employment. By Bhuller, Manudeep; Dahl, Gordon D.; Løken, Katrine V.; Mogstad, Magne
  8. The Perceived Impact of Government Regulation in Reducing Online Privacy Concern By Bruno Skrinjaric; Jelena Budak; Edo Rajh
  9. Foreign-Law Bonds: Can They Reduce Sovereign Borrowing Costs? By Chamon, Marcos; Schumacher, Julian; Trebesch, Christoph
  10. Institutional convergence in Europe By Schönfelder, Nina; Wagner, Helmut
  11. Nothing is Certain Except Death and Taxes : The Lack of Policy Uncertainty from Expiring "Temporary" Taxes By Andrew C. Chang
  12. Effects of contract governance on public private partnership (PPP) performance By Chandan Kumar
  13. Women Officers, Gender Violence and Human Capital: Evidence from Women's Justice Centers in Peru By Guadalupe Kavanaugh; Maria Sviatschi; Iva Trako

  1. By: Florence Kondylis (The World Bank - The World Bank - The World Bank); Mattea Stein (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: Can changing the rules of the game affect government performance? We study the impact of a simple procedural reform on efficiency and quality of adjudication in Senegal. The reform gave judges the duty and powers to conclude pre-trial proceedings within a four-month deadline. We combine a staggered rollout across the six civil and commercial chambers of the court of Dakar and three years of high-frequency caseload data to construct an event study. We find a reduction in procedural formalism, as the length of the pre-trial stage decreases by 42.9 days (0.29 SD) and the number of case-level pre-trial hearings is reduced, while judges are more likely to impose deadlines. The effect is similar for small and large cases, while fast and slow judges are equally likely to apply the reform. The evidence suggests that these efficiency gains have no adverse impact on quality, while we document positive firm-level effects.
    Keywords: Legal procedure, Civil law, Bureaucracy, Economic development,Firms
    Date: 2018–03
  2. By: Timo Klein (University of Amsterdam)
    Abstract: A novel debate within competition policy and regulation circles is whether autonomous machine learning algorithms are able to tacitly collude on prices. Using a general framework, we show how autonomous Q-learning -- a simple but well-established machine learning algorithm -- is able to achieve supracompetitive profits in a stylized oligopoly environment with sequential price competition. This occurs without any communication or explicit instructions to collude, suggesting tacit collusion. The intuition is that the algorithm is able to learn and exploit the dynamics of Edgeworth price cycles, where periodic price increases reset a gradual downward spiral of price competition. The general framework used can guide future research into the capacity of various algorithms to collude in environments that are less stylized or more case-specific.
    Keywords: pricing algorithms; algorithmic collusion; machine learning; Q-learning; sequential pricing
    JEL: K21 L13 L49
    Date: 2018–06–21
  3. By: Sebastian Galiani; Laura Jaitman; Federico Weinschelbaum
    Abstract: We develop a theoretical model to study how changes in the durability of the goods affects prices of stolen goods, the incentives to steal and the equilibrium crime rate. When studying the production of durable goods, we find that the presence of crime affects consumer and producer surplus and thus their behaviour, market equilibrium, and, in turn, the social optimum. Lower durability of goods reduces the incentive to steal those goods, thus reducing crime. When crime is included in the standard framework of durable goods, the socially optimal durability level is lower. When considering different stealing technologies, perfect competition either over-produces durability or produces zero (minimum) durability. The monopolist under-produces durability. The model has a clear policy implication: the durability of goods, and the market structure for those goods, can be an effective instrument to reduce crime. In particular, making the durability of a good contingent upon that good being stolen is likely to increase welfare. We also study the incentives to develop and use this optimal technology.
    Keywords: Crime, theft, durability, perfect competition, monopoly, externality, social optimum
    JEL: K00 K42 D40 D62
    Date: 2018–07–05
  4. By: Elisa Brodi (Bank of Italy)
    Abstract: Since the 2005 Bankruptcy Law reform, policymakers have set the goal to detect and manage corporate crises at an early stage, in order to both improve the chances of a company restoring its economic-financial equilibrium and of limiting the dispersion of its values. However, the tools developed over the years have not fully achieved the desired outcomes. We start by surveying the economic benefits stemming from timely action. Then, by using a law and economics approach, we map the disincentives to taking action that affect debtors and creditors, looking separately at the phases of detection and management. On the basis of our findings, the paper discusses the characteristics of effective regulatory strategies, taking into account recent changes in the law. We argue in favour of both strengthening the governance of distressed companies and fine-tuning the existing restructuring and liquidation tools. These objectives are also pursued, to some extent, by the Enabling Bill for the Bankruptcy Law. We highlight the critical issues related to the new «early warning and composition proceedings», especially where they commence automatically if some economic and financial thresholds are breached.
    Keywords: corporate crisis, governance, credit, public policy evaluation
    JEL: D78 G33 K12 K22
    Date: 2018–06
  5. By: Kalbfuß, Jörg; Odermatt, Reto; Stutzer, Alois
    Abstract: The consequences of legal access to medical marijuana for individual welfare are a matter of controversy. We contribute to the ongoing discussion by evaluating the impact of the staggered introduction and extension of medical marijuana laws across US states on self-reported mental health. Our main analysis is based on BRFSS survey data from more than six million respondents between 1993 and 2015. On average, we find that medical marijuana laws lead to a reduction in the self-reported number of days with mental health problems. Reductions are largest for individuals with high propensities to consume marijuana for medical purposes and people who are likely to suffer from chronic pain. Moreover, the introduction of prescription drug monitoring programs lead to a reduction in bad mental health days only in states that allow medical marijuana.
    Keywords: medical marijuana laws; cannabis regulation; mental health; chronic pain; prescription drug monitoring
    JEL: H75 I12 I18 I31 K42
    Date: 2018–05–01
  6. By: Kenju Kamei (Durham University Business School)
    Abstract: One of the important topics in public choice is how people’s free-riding behavior could differ by group size in collective action dilemmas. This paper experimentally studies how the strength of third party punishment in a prisoner’s dilemma could differ by the number of third parties in a group. Our data indicate that as the number of third party punishers increases in a group, the average punishment intensity per third party punisher decreases. However, the decrease rate is very mild and therefore the size of total punishment in a group substantially increases with an increase in group size. As a result, third party punishment becomes a sufficient deterrent against a player selecting defection in the prisoner’s dilemma when the number of third party punishers is sufficiently large. Nevertheless, when there are too many third party punishers in a group, a defector’s expected payoff is far lower than that of a cooperator due to strong aggregate punishment, while some cooperators are even hurt through punishment. Therefore, the group incurs a huge efficiency loss. Such over-punishment results from third party punishers’ conditional punishment behaviors: their punishment intensity is positively correlated with their beliefs on the peers’ punitive actions. Some possible ways to coordinate punishment among peers even when group size is very large, thus enabling the efficiency loss to be mitigated, are also discussed in the paper.
    Keywords: experiment, cooperation, third party punishment, dilemma, group size effect
    JEL: C92 D72 D78 H41
    Date: 2018–04
  7. By: Bhuller, Manudeep (University of Oslo); Dahl, Gordon D. (University of California San Diego); Løken, Katrine V. (Dept. of Economics, Norwegian School of Economics and Business Administration); Mogstad, Magne (University of Chicago)
    Abstract: Understanding whether, and in what situations, time spent in prison is criminogenic or preventive has proven challenging due to data availability and correlated unobservables. This paper overcomes these challenges in the context of Norway’s criminal justice system, offering new insights into how incarceration affects subsequent crime and employment. We construct a panel dataset containing the criminal behavior and labor market outcomes of the entire population, and exploit the random assignment of criminal cases to judges who differ systematically in their stringency in sentencing defendants to prison. Using judge stringency as an instrumental variable, we find that imprisonment discourages further criminal behavior, and that the reduction extends beyond incapacitation. Incarceration decreases the probability an individual will reoffend within 5 years by 29 percentage points, and reduces the number of offenses over this same period by 11 criminal charges. In comparison, OLS shows positive associations between incarceration and subsequent criminal behavior. This Sharp contrast suggests the high rates of recidivism among ex-convicts is due to selection, and not a consequence of the experience of being in prison. Exploring factors that may explain the preventive effect of incarceration, we find the decline in crime is driven by individuals who were not working prior to incarceration. Among these individuals, imprisonment increases participation in programs directed at improving employability and reducing recidivism, and ultimately, raises employment and earnings while discouraging further criminal behavior. For previously employed individuals, while there is no effect on recidivism, there is a lasting negative effect on employment. Contrary to the widely embraced ‘nothing works’ doctrine, these findings demonstrate that time spent in prison with a focus on rehabilitation can indeed be preventive for a large segment of the criminal population.
    Keywords: Crime; employment; incarceration; recidivism
    JEL: J24 K42
    Date: 2018–06–20
  8. By: Bruno Skrinjaric (The Institute of Economics, Zagreb); Jelena Budak (The Institute of Economics, Zagreb); Edo Rajh (The Institute of Economics, Zagreb)
    Abstract: This paper examines the impact of regulation as an antecedent of online privacy concern. The aim is to investigate if and how perceived effectiveness of government regulation affects internet users’ concern for their privacy in the online environment. Existing research shows that perceived effectiveness and enforcement of regulatory policies reduce online privacy concern; however, it does not explain what factors influence this relationship. This research fills the gap by analyzing different perceptions of the existing country legislation and government effort to protect online privacy in the context of socio-demographic characteristics of respondents, computer anxiety, individual desire to maintain control of personal information, as well as intensity and diversity of online activities. The empirical analysis is conducted on a large sample of internet users in Croatia. The dependent variable in the regression model is online privacy concern and the model is tested with OLS and ordered probit estimation. The results confirm that perceived effectiveness of government regulation reduces online privacy concern whereas computer anxiety has a major positive impact on online privacy concern. These findings might be useful for national policy-makers and for business strategies in the context of the GDPR regulation coming in force in 2018.
    Keywords: regulation, data protection, online privacy concern, Croatia
    JEL: D1 K2
    Date: 2018–06
  9. By: Chamon, Marcos; Schumacher, Julian; Trebesch, Christoph
    Abstract: Governments often issue bonds in foreign jurisdictions, which can provide additional legal protection vis-à-vis domestic bonds. This paper studies the effect of this jurisdiction choice on bond prices. We test whether foreign-law bonds trade at a premium compared to domestic-law bonds. We use the euro area 2006-2013 as a unique testing ground, controlling for currency risk, liquidity risk, and term structure. Foreign-law bonds indeed carry significantly lower yields in distress periods, and this effect rises as the risk of a sovereign default increases. These results indicate that, in times of crisis, governments can borrow at lower rates under foreign law.
    Keywords: Sovereign Debt; Creditor Rights; Seniority; Law and Finance
    JEL: F34 G12 K22
    Date: 2018–06
  10. By: Schönfelder, Nina; Wagner, Helmut
    Abstract: This paper applies the statistical concepts of σ-convergence and unconditional β-convergence to institutional development within several country groups hierarchized to the degree of European integration (e.g., euro area). Two sets of indicators are employed to measure institutional development: first, the Worldwide Governance Indicators, and second, the product market regulation indicator of the OECD and the Doing Business distance to frontier indicator of the World Bank. The authors can clearly confirm institutional β-convergence within the EU and its aspirants, which is mainly driven by the new Member States and acceding, candidate, and potential candidate countries. However, euro-area countries converge only in the area of product market and business regulation- not in the area of governance. In fact, the authors show evidence for β-divergence in rule of law within the first twelve euro-area members. Concerning σ-convergence, the results are less clear. Only the EU including the EU aspirants reduced the cross-country variance in all aspects of institutional development.
    Keywords: institutional convergence,governance,product market regulation,business regulation,European integration
    JEL: E02 K20 L50
    Date: 2018
  11. By: Andrew C. Chang
    Abstract: What is the policy uncertainty surrounding expiring taxes? How uncertain are the approvals of routine extensions of temporary tax policies? To answer these questions, I use event studies to measure cumulative abnormal returns (CARs) for firms that claimed the U.S. research and development (R&D) tax credit from 1996-2015. In 1996, the U.S. R&D tax credit was statutorily temporary but was routinely extended ten times until 2015, when it was made permanent. I take the event dates as both when these ten extensions of the R&D tax credit were introduced into committee and when the extensions were signed by the U.S. president into law. On average, I find no statistically significant CARs on these dates, which suggests that the market anticipated these extensions to become law. My results support the fact that a routine extension of a temporary tax policy is not a generator of policy uncertainty and, therefore, that a routine extension of temporary tax policy is not a fiscal shock.
    Keywords: Cumulative abnormal returns ; Excess returns ; Event study ; Fiscal policy ; R&D ; Research and Development ; Sunset provision ; Tax extension ; Temporary tax ; Uncertainty shocks ; User cost of capital
    JEL: E62 G12 G14 G17 H25 H39 K34 O31
    Date: 2018–06–22
  12. By: Chandan Kumar (Indira Gandhi Institute of Development Research)
    Abstract: Using the basic instruments of governance as highlighted in the transaction cost economics literature, this paper empirically examines the impact of differences in contract attributes on project outcomes. The hypothesis is to test whether better incentive structure and stricter administrative controls lead to more efficient project outcomes. It compares two sets of contracts (called as toll and annuity) from Indian PPP road projects which are designed for the same task and implemented under the similar conditions, but have some differences in the contract governance attributes. It carries out this exercise using data from more than 150 projects. The empirical findings highlight how instruments of governance influence the degree of efficiency in achieving the desired results. For instance, the annuity model, that has tighter budget constraint (i.e. better incentive structure) than the toll model, performs better in terms of minimizing cost and time overruns. Moreover, the results demonstrate that changes in administrative controls also influence outcomes. Stricter the control, better is the efficiency in the desired outcomes. The empirical findings could be useful to the policymakers for designing better contracts for the road as well as other infrastructure related sectors.
    Keywords: Contracts, Transaction Cost Economics, Road sector, Public Private Partnership, India
    JEL: K12 D23 R42 L33 C20
    Date: 2018–03
  13. By: Guadalupe Kavanaugh (RUTGERS - Rutgers, The State University of New Jersey [New Brunswick]); Maria Sviatschi (Princeton University); Iva Trako (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Many developing countries have unequal access to justice, especially for women. What are the implications for gender-based violence, intra-household bargaining and investments in children? This paper provides quasi-experimental evidence on all-women's justice centers (WJCs) a community based approach aimed at reducing violence against women in Peru. WJCs are specialized institutions that mostly employ female officers and whose main purpose is to reduce gender-based violence by providing police and legal services. We examine the gradual rollout of these centers and using complaint police data we find that as victims trust women officers more, they increase the reporting of gender-specific crimes by 40%. We also find evidence that this led to the deterrence of gender-based violence: using administrative non-reported data from health providers and district attorney offices, we find a 10% reduction in domestic violence, female deaths due to aggression, femicides and mental health problems with no effects for men and non-gender specific crimes. We argue that these results are driven by an increase in women representation in law and enforcement at the WJCs. Moreover, we find inter-generational effects: WJCs substantially increase human capital investments in children, increasing enrollment, attendance, test scores, while decreasing child labor. These results are consistent with a bargaining model in which the threat point is determined by women representation in law and enforcement. In sum, the evidence in this paper implies that providing access to justice for women is not only important for addressing gender-based violence, but also generates inter-generational benefits.
    Keywords: gender-based violence,access to justice,children,household bargaining
    Date: 2018–06

This nep-law issue is ©2018 by Eve-Angeline Lambert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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