nep-law New Economics Papers
on Law and Economics
Issue of 2018‒11‒26
eight papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Puzzling Long-Term Relationship Between De Jure and De Facto Judicial Independence By Bernd Hayo; Stefan Voigt
  2. Why Does Education Reduce Crime? By Bell, Brian; Costa, Rui; Machin, Stephen
  3. Pricing algorithms in oligopoly: theory and antitrust implications By Jacques THEPOT
  4. Cartel Sentencing in Ireland: Criminal Standards of Proof, But Civil Sanctions By Gorecki, Paul
  5. Shaming for Tax Enforcement: Evidence from a New Policy By Dwenger, Nadja; Treber, Lukas
  6. The Concepts Of Fundamental Laws And Constitution In The 18th Century Russia By Sergey Polskoy
  7. Stress on the Sidewalk: Mental health costs of close proximity crime By Panka Bencsik
  8. Future European Alliance - Europe as a Flexible Democracy By Bruno S. Frey; Armin Steuernagel; Jonas Friedrich

  1. By: Bernd Hayo (University of Marburg); Stefan Voigt (University of Hamburg, Institute of Law & Economics)
    Abstract: We study the long-term and dynamic relationship between de jure and de facto judicial independence using a large panel dataset covering 50 countries over a period of 50 years. Our analysis shows a negative relationship between these variables, a sharp contrast to the prevailing theoretical view in the literature. However, the magnitude of the relationship is small. The negative association between the two variables is driven by OECD countries, whereas a positive one can be found for non-OECD countries. We discover no evidence of reverse causality running from de facto to de jure judicial independence.
    Keywords: Judicial independence, de facto, de jure, long-term panel data analysis, cointegration, Granger causality
    JEL: D72 D78 K42
    Date: 2018
  2. By: Bell, Brian; Costa, Rui; Machin, Stephen
    Abstract: Prior research shows reduced criminality to be a beneficial consequence of education policies that raise the school leaving age. This paper studies how crime reductions occurred in a sequence of state-level dropout age reforms enacted between 1980 and 2010 in the United States. These reforms changed the shape of crime-age profiles, reflecting both a temporary incapacitation effect and a more sustained, longer run crime reducing effect. In contrast to the previous research looking at earlier US education reforms, crime reduction does not arise solely as a result of education improvements, and so the observed longer run effect is interpreted as dynamic incapacitation. Additional evidence based on longitudinal data combined with an education reform from a different setting in Australia corroborates the finding of dynamic incapacitation underpinning education policy-induced crime reduction.
    Keywords: Compulsory schooling laws; Crime age profiles; School dropout
    JEL: I2 K42
    Date: 2018–09
  3. By: Jacques THEPOT (LaRGE Research Center, Université de Strasbourg)
    Abstract: Pricing algorithms are computerized procedures that a seller may use to adapt instantaneously its price to market conditions, including to prices quoted by its rivals. These algorithms are related to the extensive use of web-collectors which contribute in many industries to identifying the best price. In such settings, price competition operates between algorithms, no longer between executives of brick and mortar companies. In this context, the question is to know whether economic efficiency is achieved as implicit forms of collusion may arise between the sellers. This paper is aimed at discussing this conceptual issue in a price-setting homogeneous product oligopoly with decreasing returns to scale where algorithms implement downward and upward matching policies. Using fixed point argument akin to general equilibrium theory, we find a multiplicity of equilibria with prices located between collusion and Cournot, if matching is allowed upward and downward. When matching operates only for price undercutting, this multiplicity is extended up to a bottom value of the market price, close to the competitive price. This bypasses the Bertrand-Edgeworth paradox. As a result, pricing algorithms may contribute to the stability of the market and also to welfare improvement.
    Keywords: oligopoly, antitrust law, cost structure.
    JEL: K21 L13 L41
    Date: 2018
  4. By: Gorecki, Paul
    Abstract: On 20 June 2018 the Court of Appeal in Ireland’s first bid-rigging case determined that the €7,500 fine imposed by the lower court on a corporate officer was unduly lenient. It was increased to €45,000. The €10,000 fine on the undertaking was not varied. The effect of the Court’s judgment, if followed in future cartel cases, is that for cartels in Ireland the criminal standard of proof remains, but the only sanction is a fine, what in many EU jurisdictions is regarded as a civil sanction. No gaol sentence was imposed and no justification provided. This is likely to undermine the effectiveness of the Cartel Immunity Programme, a vital tool for cartel detection and prosecution. Fines based on the cartel induced price rise are not only seriously underestimated by the Court, by a factor of around five, but imposed on the wrong target (i.e. the corporate officer not the undertaking). Ignorance as a defence has been revived. Victims are blamed. Bid-rigging cartels appear – unjustifiably - to be of lesser importance than other types of hard core cartels. Major arguments made by the Director of Public Prosecutions in the appeal were simply ignored by the Court with no explanation offered. The prospect for competition law enforcement in Ireland is grim, particularly with respect to bid-rigging cartels which the Competition and Consumer Protection Commission has made an enforcement priority.
    Keywords: Bid-rigging cartel; commercial flooring; Competition Act 2002; unduly lenient; sentencing competition law; cartels.
    JEL: D43 K21 L13 L41
    Date: 2018–11–01
  5. By: Dwenger, Nadja; Treber, Lukas
    Abstract: Can public shaming increase tax compliance through social pressure? Many tax authorities make ample use of public shaming. However, empirical evidence from outside the laboratory on how a new shaming law affects overall compliance is lacking. We provide the first evidence from the field, exploiting comprehensive administrative tax data and the introduction of a novel naming-and-shaming policy in Slovenia in 2012. The policy aims to reduce outstanding tax debt among the self-employed and corporations. Our empirical strategy exploits the variation across taxpayers in ex ante exposure to the shaming policy. We find that taxpayers reduce their tax debt by 8.5% to avoid shaming, particularly in industries where reputational concerns are likely to be important. The publication of the first naming-and-shaming list further reduces tax debt among shamed taxpayers because of social learning. This effect, however, is marginal in terms of revenue and tapers off quickly.
    Keywords: compliance; enforcement; penalty; shaming; social image concerns; tax debt
    JEL: D1 H26 K34 K42 Z13
    Date: 2018–09
  6. By: Sergey Polskoy (National Research University Higher School of Economics)
    Abstract: In this article, we attempt to trace the semantic changes two key concepts of the Modern period - fundamental law and constitution underwent at the 18th century and investigates how these European concepts were adapted and used in the Russian political language. The concept of the constitution and fundamental laws in eighteenth-century political discourse had differing connotations: while the constitution was used mainly to describe the form of government, the concept of fundamental laws referred to historically developing legal traditions which have been adopted as norms of political law. The most radical vision of constitution in the 18th century went further than identify it with the fundamental law, demanding that the latter should enshrine the principles of civil rights and liberties of the Nation, and the legal guarantees thereof. However, this radical view, arising at the end of the century, was far from universal, and the discussion around various understandings of this concept was still to continue for many years
    Keywords: constitution, fundamental laws, XVIIIth century, Enlightenment, Russia
    JEL: Z
    Date: 2018
  7. By: Panka Bencsik
    Abstract: I apply novel, extremely micro-level datasets to provide new evidence on crime's impact on mental health. I find that each reported violent and sexual crime significantly increases the stress levels of those in the vicinity for three days after the crime was committed. The temporal aspect of the effect is specifically driven by violent and sexual crimes committed two days earlier, a lag which suggests the presence of a mediator of the information--word of mouth or the media. To measure that, I scrape news data and observe significant increases in nationwide stress levels in response to the number of articles published on the topic of crime in the domestic news section of multiple daily newspapers. I measure crime's effect on stress by merging a unique daily response panel dataset that has over 75,000 responses from 2010 to 2017 in the Thames Valley region of England with secure access data containing every reported crime in the same region with exact location, time, and event characteristics. The result that violent and sexual crimes increase stress holds with extensive controls for individual fixed effects, circumstantial characteristics, and spatial fixed effects, including fixed effects for the smallest level of census geography in England that contain only an average of 250 people.
    JEL: I1 K4 H4
    Date: 2018–11–12
  8. By: Bruno S. Frey; Armin Steuernagel; Jonas Friedrich
    Abstract: A reasonable future for Europe can only be achieved if two essential elements are fulfilled: Firstly, newly established institutions must be democratic and have strong support from citizens rather than from national governments. Secondly, the large number of different ethnic, cultural, religious, and regional units existing on the European continent must be able to maintain their identity. This diversity must be institutionally supported rather than be undermined by standardization and centralization. We suggest political institutions, which are formed to meet these goals, following the example of Functional, Overlapping, Competing Jurisdictions (FOCJ). If these two goals are adequately reached, a future alliance raises the identification with the European project, and induces citizens to exhibit civic virtue in strengthening these goals.
    Keywords: europe, flexible institutions, identity, diversity, FOCJ, European Union
    JEL: H10 H40 K33 P40 P48 R10
    Date: 2018

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