nep-law New Economics Papers
on Law and Economics
Issue of 2018‒12‒03
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Puzzling Long-Term Relationship Between De Jure and De Facto Judicial Independence By Hayo, Bernd; Voigt, Stefan
  2. The Effect of Horizontal Mergers, When Firms compete in Prices and Investments By Massimo Motta; Emanuele Tarantino
  3. Expropriations, Property Confiscations and New Offshore Entities: Evidence from the Panama Papers By Ralph-C. Bayer; Roland Hodler; Paul A. Raschky; Anthony Strittmatter
  4. Information Production, Misconduct Effort, and the Duration of Financial Misrepresentation By Black, Jonathan; Nilsson, Mattias; Pinheiro, Roberto; da Silva, Maximiliano
  5. Competition policy reform in Europe and Germany - Institutional change in the light of digitization By Budzinski, Oliver; Stöhr, Annika
  6. Article 101 TFEU and market integration By Ibáñez Colomo, Pablo
  7. Patent Pools, Vertical Integration, and Downstream Competition By Markus Reisinger; Emanuele Tarantino
  8. Civil society in times of change: Shrinking, changing and expanding spaces and the need for new regulatory approaches By Anheier, Helmut K.; Lang, Markus; Toepler, Stefan
  9. Social networks and tax avoidance. Evidence from a well-defined Norwegian tax shelter By Annette Alstadsæter; Wojciech Kopczuk; Kjetil Telle
  10. The recent challenges for the European system of fundamental rights: Protocol No. 16 to the ECHR and its role facing constitutional and European Union level of protection By Zampetti, Giovanni
  11. The new media economics of video-on-demand markets: Lessons for competition policy By Budzinski, Oliver; Lindstädt-Dreusicke, Nadine
  12. Measuring the Implementation of the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions in the European Union By Nicholas Coleman; Andromachi Georgosouli; Tara Rice

  1. By: Hayo, Bernd; Voigt, Stefan
    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: Massimo Motta; Emanuele Tarantino
    Abstract: We study the effects of mergers when firms offer differentiated products and compete in prices and investments. Since it is in principle ambiguous, we use aggregative game theory to sign the net effect of the merger: We find that only if it entailed sufficient efficiency gains, could the merger raise total investments and consumer surplus. We also prove there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments. Finally, we show that, from the consumer welfare point of view, a R&D cooperative agreement is superior to any consumer-welfare reducing merger.
    Keywords: horizontal mergers, innovation, investments, research joint ventures, competition
    JEL: K22 D43 L13 L41
    Date: 2018–11
  3. By: Ralph-C. Bayer (School of Economics, University of Adelaide); Roland Hodler (Department of Economics, University of St. Gallen); Paul A. Raschky (Department of Economics, Monash University); Anthony Strittmatter (Department of Economics, University of St. Gallen)
    Abstract: Using the Panama Papers, we show that the beginning of media reporting on expropriations and property confiscations in a country increases the probability that offshore entities are incorporated by agents from the same country in the same month. This result is robust to the use of country-year fixed effects and the exclusion of tax havens. Further analysis shows that the effect is driven by countries with non-corrupt and effective governments, which supports the notion that offshore entities are incorporated when reasonably well-intended and well-functioning governments become more serious about fighting organized crime by confiscating proceeds of crime.
    Keywords: Expropriations and confiscations, offshore entities, tax havens, Panama Papers
    JEL: H26 K42
    Date: 2018–09
  4. By: Black, Jonathan (Purdue University); Nilsson, Mattias (US Securities and Exchange Commission); Pinheiro, Roberto (Federal Reserve Bank of Cleveland); da Silva, Maximiliano (Federal University of ABC)
    Abstract: We examine the link between information produced by auditors and analysts and fraud duration. Using a hazard model, we analyze misstatement periods related to SEC accounting and auditing enforcement releases (AAERs) between 1982 and 2012. Results suggest that misconduct is more likely to end just after firms announce an auditor switch or issue audited financial statements, particularly when the audit report contains explanatory language. Analyst following increases the fraud termination hazard. However, increases (decreases) in analyst coverage have a negative (positive) marginal impact on the termination hazard, suggesting that analysts signal whistleblowers with their choice to add or drop coverage. Finally, our results suggest that misconduct lasts longer when it is well planned, more complex, or involves more accrual manipulation. Taken together, our findings are consistent with auditors and analysts playing a key informational role in fraud detection, while managerial effort to conceal misconduct significantly extends its duration.
    Keywords: Fraud duration; Information production; Fraud effort; Auditing; Hazard models;
    JEL: G34 G38 K22 K42 L51 M41
    Date: 2018–06–27
  5. By: Budzinski, Oliver; Stöhr, Annika
    Abstract: The ubiquitous process of digitization changes economic competition on markets in several ways and leads to the emergence of new business models. The increasing roles of digital platforms as well as data-driven markets represent two relevant examples. These developments challenge competition policy, which must consider the special economic characteristics of digital goods and markets. In Germany, national competition law was amended in 2017 in order to accommodate for digitization-driven changes in the economy and plans for further changes are already discussed. We review this institutional change from an economics perspective and argue that most of the reform's elements point into the right direction. However, some upcoming challenges may have been overlooked so far. Furthermore, we discuss whether European competition policy should follow the paragon of the German reform and amend its institutional framework accordingly. We find scope for reform particularly regarding data-driven markets, whereas platform economics appear to be already well-established.
    Keywords: competition policy,antitrust,industrial economics,digitization,media economics,institutional economics,industrial organization,big data,algorithms,platform economics,two-sided markets,personalized data,privacy,internet economics,consumer protection
    JEL: L40 K21 L86 L82 L81 L10 L15 D80
    Date: 2018
  6. By: Ibáñez Colomo, Pablo
    Abstract: Market integration is an objective of Article 101 TFEU. As a result, agreements aimed at partitioning national markets are in principle restrictive of competition by object. The case law on this point has been consistent since Consten-Grundig. Making sense of it, however, remains a challenge. The purpose of this piece is to show, first, how the methodological approach followed by the Court of Justice changes when market integration considerations are at stake. Secondly, it explains why and when restrictions on cross-border trade have been found not to restrict competition by object within the meaning of Article 101(1) TFEU. An agreement aimed at partitioning national markets is not as such contrary to Article 101(1) TFEU if the analysis of the counterfactual reveals that it does not restrict inter-brand and/or intra-brand competition that would have existed in its absence. It is possible to think of three scenarios in this regard: (i) an agreement may be objectively necessary to achieve the aims sought by the parties; (ii) a clause may be objectively necessary for an agreement and (iii) competition is precluded by the underlying regulatory context (as is the case, in particular, when the exercise of intellectual property rights is at stake).
    JEL: K21 L42 L82 L86 O34
    Date: 2016–12–13
  7. By: Markus Reisinger; Emanuele Tarantino
    Abstract: Patent pools are commonly used to license technologies to manufacturers. Whereas previous studies focused on manufacturers active in independent markets, we analyze pools licensing to competing manufacturers, allowing for multiple licensors and non-linear tariffs. We find that the impact of pools on welfare depends on the industry structure: Whereas they are procompetitive when no manufacturer is integrated with a licensor, the presence of vertically integrated manufacturers triggers a novel trade-off between horizontal and vertical price coordination. Specifically, pools are anticompetitive if the share of integrated firms is large, procompetitive otherwise. We then formulate information-free policies to screen anticompetitive pools.
    Keywords: patent pools and horizontal pricing agreements, complementary patents, vertical integration and restraints, antitrust policy
    JEL: K11 L41 L42 O34
    Date: 2018–11
  8. By: Anheier, Helmut K.; Lang, Markus; Toepler, Stefan
    Abstract: The relationship between many G20 governments and organized civil society has become more complex, laden with tensions, and such that both have to find more optimal modes of engagement. In some instances, state-civil society relations have worsened, leading some experts and activists to speak of a "shrinking space" for civil society. How wide- spread is this phenomenon? Are these more isolated occurrences or indeed part of a more general development? How can countries achieve and maintain an enabling environment for civil society? The authors suggest that much of the current impasse results foremost from outdated and increasingly ill-suited regulatory frameworks that fail to accommodate a much more diverse and expanded set of civil society organizations (CSO). In response, they propose a differentiated model for a regulatory framework based on functional roles. Based on quantitative profiling and expert surveys, moreover, the paper also derives initial recommendations on how governments and civil society could find ways to relate to each other in both national and multilateral contexts.
    Keywords: civil society,NGOs,Closing Civic Space,nonprofit regulation,G20
    JEL: F5 L31 H7 K33
    Date: 2018
  9. By: Annette Alstadsæter; Wojciech Kopczuk; Kjetil Telle (Statistics Norway)
    Abstract: In 2005, over 8% of Norwegian shareholders transferred their shares to new (legal) tax shelters intended to defer taxation of capital gains and dividends that would otherwise be taxable in the aftermath of 2006 reform. Using detailed administrative data we identify family networks and describe how take up of tax avoidance progresses within a network. A feature of the reform was that the ability to set up a tax shelter changed discontinuously with individual shareholding of a firm and we use this fact to estimate the causal effect of availability of tax avoidance for a taxpayer on tax avoidance by others in the network. We find that take up in a social network increases the likelihood that others will take up. This suggests that taxpayers affect each other's decisions about tax avoidance, highlighting the importance of accounting for social interactions in understanding enforcement and tax avoidance behavior, and providing a concrete example of “optimization frictions” in the context of behavioral responses to taxation.
    Keywords: Tax avoidance; social interaction; networks
    JEL: H26 H25 H32 L14
    Date: 2018–10
  10. By: Zampetti, Giovanni
    Abstract: This paper focuses on the problematic consequences related to the introduction of an advisory opinions procedure to the European Court of Human Rights as outlined by Protocol No. 16 to the European Convention on Human Rights. In particular, moving from the characteristics and the rationale underlying this new procedural mechanism of judicial protection, its possible interferences with other judicial instruments of rights protection involving national judges at the supranational (EU) and national level are examined, namely those with the reference for a preliminary ruling to the Court of Justice of the European Union, and the constitutional review of legislation (the incidental control of constitutionality in the Italian system of Constitutional Justice is taken into account). In this framework, examining the critical issues potentially arising from this innovation in view of the current balance concerning the three systems considered (national, supranational and regional international), the analysis seeks to answer the question of whether the latter may increase or, conversely, decrease an "overall" effectiveness of protection.
    Keywords: Protocol No. 16,advisory opinions procedure,reference for a preliminary ruling,question of constitutionality,European system of fundamental rights,overall effectiveness of protection
    Date: 2018
  11. By: Budzinski, Oliver; Lindstädt-Dreusicke, Nadine
    Abstract: The markets for audiovisual content are subject to dynamic change. Where once "traditional" (free-to-air, cable, satellite) television was dominating, i.e. linear audiovisual media services, markets display nowadays strong growth of different types of video-on-demand (VoD), i.e. nonlinear audiovisual media services, including both Paid-for VoD like Amazon Prime and Netflix and Advertised-financed VoD like YouTube. Competition policy decisions in such dynamic markets are always particularly challenging. The German competition authority was presented such a challenge when, at the beginning of the 2010s, German television providers sought to enter online VoD markets with the help of cooperative platforms. We review the antitrust concerns that were raised back then in an ex post analysis. In doing so, we first discuss the dynamic development of the German VoD markets during the last decade. In the second part of this paper, we derive four aspects, in which the previous antitrust analysis cannot be upheld from today's perspective. First, relevant implications of modern platform economics were neglected. Second, some inconsistencies in the assessment of the two projects appear to be inappropriate. Third, the emerging competitive pressure of international VoD providers was strongly underestimated. Fourth, the question of market power in online advertising markets looks very different at the end of the decade.
    Keywords: video-on-demand,media economics,two-sided markets,competition,platform economics,commercial television,public service broadcasters,antitrust policy,YouTube,Amazon,Netflix
    JEL: L40 L82 K21 L13 D40
    Date: 2018
  12. By: Nicholas Coleman; Andromachi Georgosouli; Tara Rice
    Abstract: There are lingering concerns about the health of European banks and extensive market commentary about whether post-crisis regulatory reforms in Europe have adequately addressed these concerns. In June 2012, European policymakers released the broad outlines of a proposal for a "European banking union" to strengthen the banking sector and help assuage concerns of investors and depositors, however, uncertainty remains regarding how the new EU bank resolution regime, the Bank Recovery and Resolution Directive (BRRD), will work in practice. This paper addresses whether the BRRD has fulfilled the requirements of the FSB Key Attributes for Resolution Regimes, which many take to be the gold standard bank resolution framework. We find that the BRRD diverges from the FSB Key Attributes or allows variation at the Member State level in multiple areas. The majority of these variations point to slight inconsistencies with the FSB recommendations. That said, some variations may have a larger impact than others.
    Keywords: FSB Key Attributes ; BRRD ; European Banks
    JEL: G20 G28 K23
    Date: 2018–11
  13. By: Romela Manukyan (Yerevan State UNiversity)
    Abstract: In case of deployment of a foreign military base in the territory of any State, a number of problematic issues arise concerning the legal status of the military base and its personnel; in particular, what privileges and immunity they have with respect to the legal system of the host country. In this article, an attempt has been made to present the main approaches to the problem in international legal practice and determine the legal nature of the immunity granted to military bases and their personnel in the framework of modern international law. Given that the study of these matters first of all need to understand what the foreign military base represents, within the framework of the article also an attempt has been made to define the concept of foreign military base.
    Keywords: foreign military base, state immunity, functional immunity, jurisdiction, sending State, host State
    JEL: K33
    Date: 2018–11

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