nep-law New Economics Papers
on Law and Economics
Issue of 2019‒02‒04
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Toward a coherent policy on cartel damages By Jens-Uwe Franck; Martin peitz
  2. Lawyer Fee Arrangements and Litigation Outcomes: An Auction-Theoretic Perspective. By Yannick Gabuthy; Pierre-Henri Morand
  3. Why does education reduce crime? By Bell, Brian; Costa, Rui; Machin, Stephen
  4. Fighting Mobile Crime By Rosario Crinò; Giovanni Immordino; Salvatore Piccolo
  5. Income Inequality, Poverty, and the Rule of Law: Latin America vs the Rest of the World1 By Sonora, Robert
  6. Revisiting the efficiency and institutions debate: The interaction of legal origins and ethnic heterogeneity By Bournakis, Ioannis; Christopoulos, Dimitris; Rizov, Marian
  7. Stigmatization, Liability and Public Enforcement of Law By Alberto Palermo; Clemens Buchen; Bruno Deffains
  8. Criminalising clients: some evidence from the UK By Della Giusta, Marina; Di Tommaso, Maria Laura; Bettio, Francesca; Jewell, Sarah
  9. The Fine Print in Smart Contracts By Joshua S. Gans
  10. The unprotecting effects of employment protection: the impact of the 2001 labor reform in Peru By Jaramillo, Miguel

  1. By: Jens-Uwe Franck; Martin peitz
    Abstract: The focus of cartel damages law is on the recovery of the cartel overcharge. Parties other than purchasers are often neglected, not only as a matter of judicial practice, but also due to legal restrictions. We argue that a narrow concept of standing—which excludes parties that supply either the cartel or the firms that purchase from the cartel with complementary product components—falls short of achieving effective antitrust enforcement and corrective justice in the best possible way. We provide a framework with two complementary products and show that under neither competition nor cartelization do the allocation and the distribution of surpluses depend on whether producers of complements purchase from the cartel or supply the cartel or the cartel’s customers. Thus, we argue that prima facie producers of complements should be treated alike, regardless of their position in the supply chain. Moreover, based on various factors that determine the enforcement effect of antitrust damages claims and their role as an instrument to achieve corrective justice, we show that a broad concept of standing is, indeed, the preferable legal solution. While its implementation would require a change in position by the U.S. federal courts, we submit that it would amount to a consistent completion of the legal framework within the E.U.
    Keywords: Cartel damages, antitrust standing, pass-on, suppliers, complementary goods
    JEL: K21
    Date: 2018–03
  2. By: Yannick Gabuthy; Pierre-Henri Morand
    Abstract: Many jurisdictions in Europe foresee the opportunity to allow the use of pay-forperformance (outcome-based) contracts in lawyer-client relationships, via the socalled contingent/conditional fees. In this article, we analyze the welfare implications of such fee regimes – regarding their effects on litigation outcomes – by modeling the lawsuit as an auction. The criteria for regime comparison are litigation costs, lawyers’ profits, and parties’ incentives to reach a pre-trial settlement. The main result shows that switching from hourly to outcome-based fees may increase the trial costs and the lawyers’ profits, and enhance the likelihood of settlement (by decreasing the litigants’ expected utilities at trial). This last effect may challenge an important argument in favor of pay-for-performance contracts, that is the objective of promoting access to justice, which is an overriding public policy motivation behind the introduction of these remuneration systems.
    Keywords: Litigation expenditures, Pre-trial settlement, Legal fees.
    JEL: D44 K40 K41
    Date: 2019
  3. 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: crime age profiles; school dropout; compulsory schooling laws
    JEL: I2 K42
    Date: 2018–08
  4. By: Rosario Crinò; Giovanni Immordino; Salvatore Piccolo
    Abstract: Two countries set their enforcement non-cooperatively to deter native and foreign individuals from committing crime in their territory. Crime is mobile, ex ante (migration) and ex post (fleeing), and criminals hiding abroad after having com- mitted a crime in a country must be extradited back. When extradition is not too costly, countries overinvest in enforcement: insourcing foreign criminals is more costly than paying the extradition cost. When extradition is sufficiently costly, in- stead, a large enforcement may induce criminals to flee the country whose law they infringed. The fear of paying the extradition cost enables the countries coordinating on the efficient outcome.
    Keywords: crime, enforcement, extradition, fleeing, migration
    JEL: K14 K42
    Date: 2019
  5. By: Sonora, Robert
    Abstract: This paper investigates the relationship between the rule of law and income inequality and poverty in twenty Latin American countries using an unbalanced panel over the period 1995 - 2014. These results are then compared to estimates for non-Latin American counties. Using feasible GLS panel methods, we finnd that in many cases, improvements to legal systems reduce inequality and poverty in Latin America while having the opposite effect in the rest of the world. Results are robust to different definitions of inequality and rule of law. Protection of property rights is the most significant rule of law indicator for Latin America economies.
    Keywords: Income Inequality, Poverty Growth, Rule of law, Panel data, Institutions
    JEL: D63 E02 I32 K42 O43 O54
    Date: 2019–01–05
  6. By: Bournakis, Ioannis; Christopoulos, Dimitris; Rizov, Marian
    Abstract: We analyse the interaction between legal origins and ethnic heterogeneity and their combined impact on national efficiency. We hypothesise that in the presence of high ethnic heterogeneity common-law system performs worse than civil-law one in terms of economic efficiency. Our empirical tests on the sample of African countries support our hypothesis.
    Keywords: national efficiency,institutions,legal origins,ethnic heterogeneity
    JEL: K40 O10 O43 O47
    Date: 2018
  7. By: Alberto Palermo (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Clemens Buchen (EBS University, Wiesbaden); Bruno Deffains (University Paris 2 and Institut Universitaire de France)
    Abstract: In the theory of public enforcement of law the choice of the liability rules is between strict liability and fault-based liability. In this paper, we study the determinants of compliance when in addition to standard economic incentives wrongdoers take into account stigmatization costs. In this context, this cost is not simply a transfer of resources. We show that a non-guiltiness standard — the fault standard equal to the deterrence level — is never optimal. In this scenario, we show how the optimal policy choice depends on the interplay between the magnitude of the harm and the stigmatization cost.
    Keywords: Stigmatization, Regulatory Offenses, Law Enforcement, Strict Liability, Negligence, Legal Standard, Compliance, Deterrence
    JEL: K13 K42
    Date: 2018–11
  8. By: Della Giusta, Marina; Di Tommaso, Maria Laura; Bettio, Francesca; Jewell, Sarah
    Abstract: We discuss the role of stigma in the sale of sexual services and the effect that policies increasing stigma have on sex markets and the welfare of the actors therein, presenting the different sides to the debate and the evidence in their support. We then examine changes in legislation in the United Kingdom, which ended the relatively permissive regime established with the Wolfenden Report of 1960, to a much harder line aiming to crack down on prostitution with the Prostitution (Public Places) Scotland Act 2007 and the Policing and Crime Act of 2009 in England and Wales. We make use of two waves of the British National Survey of Sexual Attitudes and Lifestyles, a representative sample of the British population (Natsal2, conducted in 2000-2001 and Natsal3, conducted in 2010-2012) to investigate changes in both the amount and composition of demand for paid sexual services between the two waves, and draw some implications on the likely welfare effects of considering prostitution a form of crime.
    Keywords: sex work, criminalisation, stigma, clients
    JEL: C35 J16 J22 K42
    Date: 2018–07
  9. By: Joshua S. Gans
    Abstract: One of the purported benefits of blockchain technologies is the ability to house what have been termed ‘smart’ contracts. Such contracts are potentially self-executing depending on the state of information recorded on a blockchain ledger. This paper examines the capabilities of smart contracts from an economic perspective. It is demonstrated that by improving observability and reducing the costs of verification of contract obligation performance, the space of feasible contracts can be enlarged. Moreover, by providing commitments to various monetary payments, a blockchain can potentially create a foundation to house certain mechanisms that have been shown to overcome difficulties of contractual incompleteness. This is demonstrated using a simple international trade environment. Thus, even though smart contracts must respect the incentives of decision-makers in their obligations, they have the potential to use easily verifiable elements to create incentives to reduce hold-up and other contractual difficulties.
    JEL: D86 K12
    Date: 2019–01
  10. By: Jaramillo, Miguel
    Abstract: According to the National Household Survey (ENAHO), approximately three out of four employment relationships within the formal sector of the Peruvian economy are based on temporary contracts. This percentage is larger than that of any OECD country and also considerably larger to that of any other country of the Latin American region. This study aims to elucidate the role that the 2001 labor reform played on these results and the effect this has had on variables associated to Peruvian workers’ well-being. To this end, we exploit the information on contract type and start date (identified by the employment duration), which are reported on the household surveys, to analyze the decision between using fixed-term contracts or indefinite-term contracts. The average impact obtained from a differences-in-differences estimation with matching, having workers with contract but with no health insurance as a control group, is a reduction of 41 percent in the probability of having contracts of indefinite duration in the short term (up to five years after the reform), whereas the long-term impact has been a drop by 70 percent. These results are consistent, and similarly large, as those found in a model of simple differences controlling for workers’ characteristics, firms and economic context. The results are robust to placebo tests and estimations by activity sectors and firm size. These results mean that, due to the reform, by 2015 over 900,000 jobs that could have been of indefinite-term were fixed-term contracts instead. Estimates based on Mincer equations suggest that this meant a loss of around 1.5 billion dollars in workers' labor income in 2015. Also, 36,000 workers would have affiliated to a union, had such reform not been implemented. These figures suggest than, instead of increasing workers’ protection, the reform implemented by the Constitutional Court left a large portion of them unprotected.
    Keywords: employment protection,labor reform,impact evaluation
    JEL: K31 J63 C52
    Date: 2019

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