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on Law and Economics |
| By: | Bhuller, Manudeep (University of Oslo); Dahl, Gordon B. (University of California, San Diego); Loken, Katrine Vellesen (Norwegian School of Economics); 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: | K42 J24 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11645&r=law |
| By: | Sharon Belenzon; Honggi Lee; Andrea Patacconi |
| Abstract: | Limited liability is a key attribute of the corporate form and one of the most important institutional innovations of the nineteenth century. However, when the owner of a corporation is another corporation as in many corporate groups, an important justification for limited liability—to protect small, passive investors from unlimited losses—is severely weakened. Accordingly, countries differ considerably in their propensity to protect parent and sister companies from the liabilities incurred by other group affiliates, with some countries (e.g. Germany) viewing a subsidiary as an integral part of the group that controls it while others (e.g. Great Britain) emphasizing the legal rather than the economic substance. In this paper, we construct a novel country-level measure of enterprise liability, the propensity of courts to hold an entire group liable for the obligations of one of its subsidiaries. Using data from sixteen countries in Europe, the Americas, and Asia, we examine how enterprise liability affects firm boundaries, internal organization, and corporate group growth. We find that in countries where enterprise liability is weaker, groups tend to partition their assets more finely into distinct legally independent subsidiaries and grant their subsidiaries more autonomy. Groups also tend to grow faster. This paper highlights one underappreciated channel—risk compartmentalization through incorporation—through which legal systems affect economic outcomes. |
| JEL: | K0 K12 O43 P1 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24720&r=law |
| By: | Alemanno, Alberto |
| Abstract: | It is almost a truism to argue that data holds a great promise of transformative resources for social good, by helping to address a complex range of societal issues, ranging from saving lives in the aftermath of a natural disaster to predicting teen suicides. Yet it is not public authorities who hold this real-time data, but private entities, such as mobile network operators and business card companies, and - with even greater detail - tech firms such as Google through its globally-dominant search engine, and, in particular, social media platforms, such as Facebook and Twitter. Besides a few isolated and self-proclaimed ‘data philanthropy’ initiatives and other corporate data-sharing collaborations, data-rich companies have historically shown resistance to not only share this data for the public good, but also to identify its inherent social, non-commercial benefit. How to explain to citizens across the world that their own data - which has been aggressively harvested over time - can’t be used, and not even in emergency situations? Responding to this unsettling question entails a fascinating research journey for anyone interested in how the promises of big data could deliver for society as a whole. In the absence of a plausible solution, the number of societal problems that won’t be solved unless firms like Facebook, Google and Apple start coughing up more data-based evidence will increase exponentially, as well as societal rejection of their underlying business models. This article identifies the major challenges of unlocking private-held data to the benefit of society and sketches a research agenda for scholars interested in collaborative and regulatory solutions aimed at unlocking privately-held data for good. |
| Keywords: | Big data; data; data governance; data sharing; data risk; data invisible; risk governance; philanthropy; |
| JEL: | I18 K23 K32 K40 |
| Date: | 2018–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1280&r=law |
| By: | Bénabou, Roland; Falk, Armin; Tirole, Jean |
| Abstract: | By downplaying externalities, magnifying the cost of moral behavior, or suggesting not being pivotal, exculpatory narratives can allow individuals to maintain a positive image when in fact acting in a morally questionable way. Conversely, responsibilizing narratives can help sustain better social norms. We investigate when narratives emerge from a principal or the actor himself, how they are interpreted and transmitted by others, and when they spread virally. We then turn to how narratives compete with imperatives (general moral rules or precepts) as alternative modes of communication to persuade agents to behave in desirable ways. |
| Keywords: | consequentialism; deontology; imperatives; moral behavior; narratives; norms; organizations; prosocial behavior; rules |
| JEL: | D62 D64 D78 D83 D85 D9 H4 K42 L14 Z13 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13056&r=law |
| By: | Jay Pil Choi; Heiko Gerlach |
| Abstract: | This paper analyzes optimal cross-licensing arrangements between incumbent firms in the presence of potential entrants. The optimal cross-licensing royalty rate trades off incentives to sustain a collusive outcome vis-a-vis incentives to deter entry with the threat of patent litigation. We show that a positive cross-licensing royalty rate, which would otherwise relax competition and sustain a collusive outcome, dulls incentives to litigate against entrants. Our analysis can shed light on the puzzling practice of royalty free cross-licensing arrangements between competing firms in the same industry as such arrangements enhance incentives to litigate against any potential entrants and can be used as entry-deterrence mechanism. |
| Keywords: | cross-licensing arrangements, patent litigation, collusion, entry deterrence |
| JEL: | D43 L13 O30 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7151&r=law |
| By: | Fabian Gaessler; Bronwyn H. Hall; Dietmar Harhoff |
| Abstract: | A “patent box” is a term for the application of a lower corporate tax rate to the income derived from the ownership of patents. This tax subsidy instrument has been introduced in a number of countries since 2000. Using comprehensive data on patent filings at the European Patent Office, including information on ownership transfers pre- and post-grant, we investigate the impact of the introduction of a patent box on international patent transfers, on the choice of ownership location, and on invention in the relevant country. We find that the impact on transfers is small but present, especially when the tax instrument contains a development condition and for high value patents (those most likely to have generated income), but that invention itself is not affected. This calls into question whether the patent box is an effective instrument for encouraging innovation in a country, rather than simply facilitating the shifting of corporate income to low tax jurisdictions. |
| JEL: | H25 H32 K34 O34 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24843&r=law |
| By: | Jason M. Lindo; Dave E. Marcotte; Jane E. Palmer; Isaac D. Swensen |
| Abstract: | Since 2011, when the landmark “Dear Colleague” letter declared that the Department of Education (DoE) would use equal-access requirements of federal law to remediate sexual assault on college campuses, 458 investigations have been opened. This letter was withdrawn in 2017 and it remains uncertain how the DoE will handle the issue in the future. We examine the effects of the investigations arising from the 2011 policy change on university outcomes. We find that applications and enrollment increase in response to Title IX investigations, for both males and females. We find little evidence of effects on degree completion or donations. |
| JEL: | I1 I23 J16 J71 K42 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24852&r=law |
| By: | Weiye Cheny (Graduate School of Economics, Osaka University) |
| Abstract: | This paper investigates the optimal ex-ante price mechanism design of selling a single indivisible object in a market that comprises one public risky buyer and one regular risky buyer under unlimited or limited liability where resale is allowed. First, we propose an endogenous liquidation rule requiring that the public buyer acquires the object in the liquidation stage. Next, we design an optimal bankruptcy transfer to prevent the buyer's strategic default. On the basis of this liquidation rule, the optimal ex-ante price mechanism is designed to achieve the seller's upper bound revenue under unlimited and limited liability when resale cannot be prohibited prior to the liquidation stage. Comparing the two mechanisms, the results illustrate that the effect on the seller's behavior and that revenue over the liability and information change in each case. In other words, (i) when faced with limited liability buyers, the regular buyer will obtain the object in the initial market, whereas they will become the loser under the unlimited liability case; (ii) the seller's expected revenue under unlimited liability is weakly higher than that under limited liability; and (iii) when faced with the risky buyer, the seller prefers the buyer's resale behavior and is averse to the speculator only under the limited liability case. |
| Keywords: | Mechanism design Bankruptcy Endogenous bankruptcy recovery Resale |
| JEL: | D82 G33 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1824&r=law |
| By: | Alain Marciano (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier); Steve Medema |
| Abstract: | The University of Chicago occupies a central place in the history of law and economics. To this point, however, scant attention has been given in the literature to how the prospect of an economic analysis of law was received within the Law School at Chicago when the subject was in its infancy. In this paper we focus on the work of two prominent dissenters: Law professors Walter J. Blum and Harry Kalven, Jr. We show that, although immersed in economics and interacting with the main actors of the law and economics movement in the early 1950s, Blum and Kalven largely rejected economics as a possible and useful help for solving legal problems, both because of their concerns about the utility of economics in the legal realm and because of their sense that economics and law are grounded in fundamentally incompatible normative visions. |
| Keywords: | History of Economic Thought through 1925,History of Economic Ideas,History of Political Economy,accidents, Automobile, Tort Law,Economic analysis of law, Chicago, Blum, Kalven, Liability |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01836082&r=law |
| By: | Wesley Blundell; Gautam Gowrisankaran; Ashley Langer |
| Abstract: | The U.S. Environmental Protection Agency uses a dynamic approach to environmental enforcement for air pollution, with repeat offenders subject to high fines and designation as high priority violators (HPV). We estimate the benefits of dynamic monitoring and enforcement by developing and estimating a dynamic model of a plant and regulator, where plants decide when to invest in pollution abatement technologies. We use a fixed grid approach to estimate random coefficient specifications. Investment, fines, and HPV designation are very costly to most plants. Eliminating dynamic enforcement would have large adverse impacts on the number of high priority violators and pollutants emitted. |
| JEL: | Q53 Q58 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24810&r=law |
| By: | Alemanno, Alberto (HEC Paris) |
| Abstract: | The EU’s political system has never caught up with the impact European integration has had on citizens’ daily lives. EU citizens still vote in the European Parliament elections on different dates, according to different electoral laws, and in support of candidates selected by national parties and on the basis of domestic agendas. Yet this is set to change. With less than a year to go before the European Parliament elections, the EU political landscape is about to undergo a deep and historical shake-up. While populists are poised to disrupt the Parliament, a new wave of little-noticed transnational parties is emerging from the bottom-up. They both threaten established, mainstream political parties that have historically hold a monopoly of the European ‘project’. This paper traces their genesis, evolution and raison d'être before identifying their major features and political prospect. |
| Keywords: | Elections; Parties; Europe; trasnational parties; European Parliament; Spitzenkandidated; Trasnational list |
| JEL: | F00 H00 K00 |
| Date: | 2018–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1287&r=law |
| By: | Marsha J. Courchane (CRA International); Stephen L. Ross (University of Connecticut) |
| Abstract: | In this article, we present overviews of the research on discrimination in mortgage underwriting and pricing, the experiences of minority borrowers prior to and during the financial crisis and federal efforts to mitigate foreclosures during the crisis. We next discuss the history of legal cases alleging disparate treatment of minority borrowers, and recent cases alleging disparate impact in the wake of the Supreme Court’s “Inclusive Communities” decision. Using these discussions as a background, we discuss and examine mortgage regulations issued by the Consumer Finance Protection Bureau following the financial crisis, describe recent developments in the FinTech industry discussing their implications for fair lending policy and minority borrowers more generally, and finally draw conclusions and make recommendations for improving the mortgage market outcomes of minority borrowers and increasing minority borrowers’ access to credit. |
| Keywords: | Fair Housing Act, Mortgage Discrimination, HMDA, Risk-based Pricing, Financial Crisis, Mortgage Foreclosure, Subprime Lending, HAMP, Legal Settlements, Disparate Impact, Inclusive Communities, Consumer Finance Protection Bureau, FinTech |
| JEL: | G01 G21 G23 G28 J15 J16 K23 L85 R30 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2018-14&r=law |
| By: | Marsha J. Courchane (Charles River Associates); Stephen L. Ross (University of Connecticut) |
| Abstract: | In this article, we present overviews of the research on discrimination in mortgage underwriting and pricing, the experiences of minority borrowers prior to and during the financial crisis and federal efforts to mitigate foreclosures during the crisis. We next discuss the history of legal cases alleging disparate treatment of minority borrowers, and recent cases alleging disparate impact in the wake of the Supreme Court’s “Inclusive Communities” decision. Using these discussions as a background, we discuss and examine mortgage regulations issued by the Consumer Finance Protection Bureau following the financial crisis, describe recent developments in the FinTech industry discussing their implications for fair lending policy and minority borrowers more generally, and finally draw conclusions and make recommendations for improving the mortgage market outcomes of minority borrowers and increasing minority borrowers’ access to credit. |
| Keywords: | Fair Housing Act, mortgage discrimination, HMDA, risk-based pricing, financial crises, mortgage foreclosure, subprime lending, HAMP, legal settlements, disparate impact, inclusive communities, Consumer Finance Protection Bureau, FinTech |
| JEL: | G01 G21 G23 G28 J15 J16 K23 L85 R30 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2018-052&r=law |
| By: | Vértesy, László |
| Abstract: | The paper analyses and compares some constitutional examples, especially in the 29 NISPAcee countries, how the states settle the bases of the economy and public finance in their constitutions or fundamental laws. The main hypothesis can be formulated as, is there any correlation between the constitutional provisions (or other relevant law sources) and the performance of the economy (GDP growth), sound and sustainable fiscal policy (budgeting, government debt, taxation, audit), furthermore monetary policy (price and exchange rate stability); also after the amendments can any changes be identified or not. |
| Keywords: | law and economics, constitutional economics, fiscal policy, monetary policy, economics |
| JEL: | E30 K10 N14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88185&r=law |
| By: | Juan Felipe Mejía Mejía; Hermilson Velasquez Ceballos; Andres Felipe Sanchez Saldarriaga |
| Abstract: | Internal forced displacement, a phenomenon associated to internal conflict, poses important socio-economic challenges for the receiving areas. One of the most relevant aspects is related to crime, since the reception of forced displaced persons might increase inequality and the heterogeneity of population. This paper studies the relationship between internal forced displacement and crime. We use a panel of Colombian municipalities for the period 2003-2016. We include spatial patterns for the study of crime, allowing to capture the dynamics of this relationship across time and space. Our results provide evidence of a spatial correlation between crime and internal forced displacement. |
| Keywords: | Internal Forced Displacement, Internal Migrations, Crime, Spatial Panel |
| JEL: | K42 O15 R23 R59 |
| Date: | 2018–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000122:016450&r=law |
| By: | Daron Acemoglu; Alexander Wolitzky |
| Abstract: | We propose a model of the emergence of equality before the law. A society can support “effort” (“cooperation”, “pro-social behavior”) using the “carrot” of future cooperation or the “stick” of coercive punishment. Community enforcement relies only on the carrot and involves low coercion, low inequality, and low effort. A society in which the elite control the means of violence supplements the carrot with the stick, and involves high coercion, high inequality, and high effort. In this regime, elites are privileged: they are not subject to the same coercive punishments as non-elites. We show that it may be optimal—even from the viewpoint of the elite—to establish equality before the law, where all agents are subject to the same coercive punishments. The central mechanism is that equality before the law increases elites’ effort, which in turn encourages even higher effort from non-elites. Equality before the law combines high coercion and low inequality—in our baseline model, elites exert the same level of effort as non-elites. Factors that make the emergence of equality before the law more likely include limits on the extent of coercion, greater marginal returns to effort, increases in the size of the elite group, greater political power for non-elites, and under some additional conditions, lower economic inequality. |
| JEL: | C73 K10 P16 P51 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24681&r=law |
| By: | Joshua R. Bruce; John M. de Figueiredo; Brian S. Silverman |
| Abstract: | We examine how the U.S. Federal Government governs R&D contracts with private-sector firms. The government chooses between two contractual forms: grants and cooperative agreements. The latter provides the government substantially greater discretion over, and monitoring of, project progress. Using novel data on R&D contracts and on the geo-location and technical expertise of each government scientist over a 12-year period, we test implications from the organizational economics and contracting literatures. We find that cooperative agreements are more likely to be used for early-stage projects and those for which local government scientific personnel have relevant technical expertise; in turn, cooperative agreements yield greater innovative output as measured by patents, controlling for endogeneity of contract form. The results are consistent with multi-task agency and transaction-cost approaches that emphasize decision rights and monitoring. |
| JEL: | H11 H57 L14 L24 L33 O32 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24724&r=law |
| By: | Alma Cohen; Nadav Levy; Roy Sasson |
| Abstract: | When organizational structures and contractual arrangements face agents with a significant risk of termination in the short term, such agents may under-invest in projects whose results would be realized only in the long term. We use NBA data to study how risk of termination in the short term affects the decision of coaches. Because letting a rookie play produces long-term benefits on which coaches with a shorter investment horizon might place lower weight, we hypothesize that higher termination risk might lead to lower rookie participation. Consistent with this hypothesis, we find that, during the period of the NBA’s 1999 collective bargaining agreement (CBA) and controlling for the characteristics of rookies and their teams, higher termination risk was associated with lower rookie participation and that this association was driven by important games. We also find that the association does not exist for second-year players and that the identified association disappeared when the 2005 CBA gave team owners stronger incentives to monitor the performance of rookies and preclude their underuse. |
| JEL: | D20 J44 K00 L83 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24708&r=law |
| By: | Pohl, R. Vincent |
| Abstract: | Mortality due to opioid overdoses has been growing rapidly in the U.S., with some states experiencing much steeper increases than others. Legalizing medical cannabis could reduce opioid-related mortality if potential opioid users substitute towards cannabis as a safer alternative. I show, however, that a substantial reduction in opioid-related mortality associated with the implementation of medical cannabis laws can be explained by selection bias. States that legalized medical cannabis exhibit lower pre-existing mortality trends. Accordingly, the mitigating effect of medical cannabis laws on opioid-related mortality vanishes when I include state-specific time trends in state-year-level difference-in-differences regressions. |
| Keywords: | medical cannabis laws, opioid overdose mortality, difference-in-differences, group-specific time trends |
| JEL: | C23 I12 I18 K32 |
| Date: | 2018–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88219&r=law |