nep-law New Economics Papers
on Law and Economics
Issue of 2018‒11‒12
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. A Recent Development in Civil Enforcement of Competition Law in Ireland: Section 14B Court Orders By Gorecki, Paul
  2. Deviant or Wrong? The Effects of Norm Information on the Efficacy of Punishment By Cristina Bicchieri; Eugen Dimant; Erte Xiao;
  3. Drink, death and driving: do BAC limit reductions improve road safety? By Benjamin Cooper; Markus Gehrsitz; Stuart McIntyre
  4. Italian “Homicide Road Law”: Evidence of a Puzzle? By Marcello Basili; Filippo Belloc
  5. Consumers as Tax Auditors By Naritomi, Joana
  6. Labor market conditions and charges of discrimination: Is there a link? By Karl David Boulware; Kenneth N. Kuttner
  7. What Can DNA Exonerations Tell Us about Racial Differences in Wrongful Conviction Rates? By Bjerk, David J.; Helland, Eric
  8. Finance, Intangibles and the privatization of knowledge By Ugo Pagano
  9. Determinants of International Arms Control Ratification By Brender, Agnes
  10. Money laundering, Tax havens, Transparency and Board of Directors of Banks By Godspower-Akpomiemie, Euphemia; Ojah, Kalu
  11. Information and Bargaining through Agents: Experimental Evidence from Mexico's Labor Courts By Sadka, Joyce; Seira, Enrique; Woodruff, Christopher
  12. Incarceration, Recidivism and Employment By Bhuller, Manudeep; Dahl, Gordon; Løken, Katrine; Mogstad, Magne

  1. By: Gorecki, Paul
    Abstract: A new more effective civil enforcement tool – a Section 14B Court Order – was introduced in 2012 to enhance Ireland’s competition law. Breaching such an order is contempt of court. Fines can be imposed by the courts for contempt, but not for civil breaches of competition law. Notwithstanding the advantages of Section 14B Court Orders, since 2012 the Competition and Consumer Protection Commission, Ireland’s competition agency, has only used such orders on only one occasion – in 2012. There have, however, been a number of other cases where the evidence, albeit limited, suggests that such orders would have been a credible option.
    Keywords: Competition policy Ireland; civil enforcement; Section14B Orders; Competition (Amendment) Act 2012; civil fines.
    JEL: K21 K41 K42
    Date: 2018–10–23
  2. By: Cristina Bicchieri; Eugen Dimant (Philosophy, Politics and Economics, University of Pennsylvania); Erte Xiao;
    Abstract: A stream of research examining the effect of punishment on conformity indicates that punishment can backfire and lead to suboptimal social outcomes. We examine whether this effect originates from a lack of perceived legitimacy of rule enforcement, enabling agents to justify selfish behavior to themselves. We address the question of punishment legitimacy by shedding light upon the importance of social norms and their interplay with punishment. Often people are presented with incomplete norm information: either about what most others do (empirical) or what most others deem appropriate (normative). We show that neither punishment nor empirical/normative information in isolation result in prosocial behavior. In turn, we find that prosociality is significantly increased when normative information and punishment are combined, but only when compliance is relatively cheap. When compliance is more expensive, we find that the combination of punishment and empirical information about others’ conformity can have detrimental effects on prosocial behavior. We attribute this outcome to the differential ability to distort one’s own beliefs about applicable norms. Our results have important implications for researchers and practitioners alike.
    Keywords: Conformity, Experiments, Punishment, Social Norms, Trust Game
    JEL: C91 D03 D73 H26
    Date: 2018–10
  3. By: Benjamin Cooper (Department of Economics, University of Strathclyde); Markus Gehrsitz (Department of Economics, University of Strathclyde); Stuart McIntyre (Department of Economics, University of Strathclyde)
    Abstract: This study exploits a natural experiment in Scotland where the legal blood alcohol content (BAC) limit was reduced from 0.8mg to 0.5mg per 100ml of blood while staying constant in all other parts of the UK. Using a difference{in{differences design, we find that this change in the BAC level had no impact on either traffic accident or fatality rates
    Keywords: Road traffic fatalities, traffic accidents, diference-in-differences, blood alcohol
    JEL: I12 I18 K42
    Date: 2018–09
  4. By: Marcello Basili; Filippo Belloc
    Abstract: We analyse the effectiveness of Law 41/2016 (the so-called “homicide road law”), introduced in Italy in 2016 with the aim of reducing dangerous driving on Italian roads, through a system of escalating sanctioning, where the severity of the punishment is based on the type of injury caused by the road accident. We first explore theoretically the two-sided effect of Law 41/2016, in terms of general and marginal deterrence. Then, we exploit micro-data on the entire universe of road accidents in Italy in the period before and after Law 41/2016 and measure its effectiveness in reducing the number of fatal outcomes. The estimation results unveil that, after the introduction of Law 41/2016, both the extensive and the intensive margin of deaths in road accidents was not reduced, while, if anything, a weakly significant increase is observed in the extensive margin. The study may contribute to the optimal design of driving regulation both in Italy and in other countries.
    Keywords: Homicide Road Law, Vertical Deterrence, Marginal Deterrence, Escalating Penalties, Hybrid Sanctions
    JEL: K42
    Date: 2018–06
  5. By: Naritomi, Joana
    Abstract: Access to third-party information trails is widely believed to be critical to the development of modern tax systems, but there is limited direct evidence of the effects of changes in information trails. This paper investigates the enforcement effect of an increased availability of third-party information, and sheds light on how governments can harness this information despite collusion opportunities. I exploit unique administrative data on firms and consumers from an anti-tax evasion program in Sao Paulo, Brazil (Nota Fiscal Paulista) that created monetary rewards for consumers to ensure that firms report final sales transactions, and establishes an online verification system that aids consumers in whistle-blowing firms. Using variation in intensity of exposure to the policy, I estimate that firms' reported revenue increased by at least 21% over four years. Heterogeneous effects across firms shed light on mechanisms: the results are consistent with fixed costs to conceal collusive deals and positive shifts in detection probability from whistle-blower threats. I also investigate the effect of whistle-blowers directly: firms report 7% more receipts and 3% more revenue after receiving the first consumer complaint. To study the role of the value of rewards in improving enforcement, I show evidence consistent with the possibility that lottery incentives amplify consumer responses due to behavioral biases, which would make it more costly for firms to try to match government incentives in a collusive deal. Finally, I find that although firms significantly adjusted reported expenses, there was an increase in tax revenue net of rewards of 9.3%.
    JEL: D83 H25 H26 K34 O17
    Date: 2018–10
  6. By: Karl David Boulware (Department of Economics, Wesleyan University); Kenneth N. Kuttner (Department of Economics, Williams College)
    Abstract: This paper’s goal is to determine whether the degree of labor market tightness affects the frequency of discrimination charges. State-level panel data on enforcement and litigation actions from the U.S. Equal Employment Opportunity Commission, along with disaggregated labor market statistics, allow us to assess the effects of labor market conditions on discrimination based on race or ethnicity, and how these effects vary across states and over time. Our findings have implications for how macroeconomic policies might be used to promote equal opportunity in the labor market.
    Keywords: labor market conditions, discrimination, EEOC, macroeconomic policy
    JEL: J15 J63 J71 E61 Z13
    Date: 2018–10
  7. By: Bjerk, David J. (Claremont McKenna College); Helland, Eric (Claremont McKenna College)
    Abstract: We examine the extent to which DNA exonerations can reveal whether wrongful conviction rates differ across races. We show that under a wide-range of assumptions regarding possible explicit or implicit racial biases in the DNA exoneration process (including no bias), our results suggest the wrongful conviction rate for rape is substantially and significantly higher among black convicts than white convicts. By contrast, we show that only if one believes that the DNA exoneration process very strongly favors innocent members of one race over the other could one conclude that there exist significant racial differences in wrongful conviction rates for murder.
    Keywords: DNA evidence, wrongful convictions, justice, discrimination
    JEL: K4
    Date: 2018–09
  8. By: Ugo Pagano
    Abstract: The paper examines different types of financial organization in a framework of incomplete law, under which the rights and the duties of the individuals are not completely specified. It focuses on the relationship between finance and specificity arguing that, while financial structure influences the degree of specificity of the assets, the degree of specificity of the assets influences the financial structure of firm. Because of these two-way relation, multiple possible equilibria exist and their selection is influenced by the nature the underlying assets. For this reason, the spectacular increase of intangibles is likely to have increased the role of equity finance relatively to traditional forms of banking, which are usually guaranteed by assets that, unlike most intangibles, have thick markets and fairly stable market values. The excessive financialization of the global economy mirrors the abnormal growth of intangibles and, in particular, of the assets related to the privatization of knowledge. International regulations should also tackle the negative effects of overenclosing the knowledge commons.
    Keywords: Finance, Intangibles, Intellectual Property, Organizational Equuilibria
    JEL: G30 P51 K10 E02
    Date: 2018–04
  9. By: Brender, Agnes
    Abstract: The paper analyses the determinants of ratification of international treaties concerning arms control. It theorizes that the ratification of an arms control treaty serves as a signal of a country’s intention to avoid arms races and wars. I argue that fast growing countries have a special incentive to send that signal in order to avoid aggression from declining powers. Also, democracies are hypothesised to support the underlying humanitarian norms of arms control treaties and therefore ratify arms control agreements more often. The theory is tested by panel ordered logit regression of the number of treaties ratified by a country and with panel logit estimation of treaty ratification. The data cover 186 countries over the period of 1975-2010. Results support the theory and suggest that especially treaties where compliance can be considered as cheap are ratified more often.
    Keywords: Arms control,International Treaties,International Humanitarian Law
    JEL: F53 K33 H56
    Date: 2018
  10. By: Godspower-Akpomiemie, Euphemia; Ojah, Kalu
    Abstract: Among other characteristics, money laundering notably occurs across national borders and primarily through banks, and mainly because banks, which are both legitimate and ‘ubiquitous’ financial services institutions, engage primarily in financial intermediation. We ask, are the levers of control over banks’ involvement in money laundering and other financial crimes, more effective when pulled from the outside by government agencies or is there a less arm’s-length role for banks’ board of directors, by way of appropriately nuanced corporate governance? To answer this question, we first attempt to understand money laundering, its antecedents, its support mechanisms, and then how it may be tamed; with emphasis on the potential productive role of banks’ boards. At a general and/or high level, we recommend that the intervention of banks’ boards must focus (i.e., insist) on: (i) the primacy of transparency and upholding of both real and perceived reputational capital of the bank, and (ii) ascertaining that their banks’ relations with corresponding banks distributed across several national borders or association with banks domiciled in notorious tax havens, are demonstrably above board.
    Keywords: Money laundering, Tax haven, Banks, Board of director, Emerging economies
    JEL: G2 G21 G34 K4
    Date: 2018–03–27
  11. By: Sadka, Joyce; Seira, Enrique; Woodruff, Christopher
    Abstract: While observers agree that courts function poorly in developing countries, a lack of data has limited our understanding of the causes of malfunction. We combine data from admin- istrative records on severance cases filed in the Mexico City Labor Court with interventions that provide information to parties in randomly selected cases on predicted case outcomes and conciliation services. We first use the data to document a set of stylized facts about the func- tioning of the court. The interventions nearly double the overall settlement rate, but only when the plaintiff herself is present to receive the information directly. Administrative records from six months after the treatment indicate that the treatment effects remain unchanged over that period, even though an additional one in three cases in the control group settle in that period. The post-treatment results indicate that lawyers do not convey the information provided in the intervention to their clients. A simple analytic framework rationalizes the experimental results. Analysis of settlements induced by the interventions suggests that the provision of information is welfare-improving for the plaintiffs. The experimental results replicate over two phases conducted in different sub-courts, showing robustness.
    Keywords: firingdisputes; laborcourts; overconfidence; Settlement; statisticalinformation
    JEL: J52 J83 K31 K41 K42
    Date: 2018–10
  12. By: Bhuller, Manudeep; Dahl, Gordon; Løken, Katrine; Mogstad, Magne
    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: 2018–10

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