nep-law New Economics Papers
on Law and Economics
Issue of 2019‒02‒18
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Dynamic Determinants of Access to Weapons: Global Evidence By Simplice A. Asongu; Joseph Nnanna
  2. Effects of Photo ID Laws on Registration and Turnout: Evidence from Rhode Island By Francesco Maria Esposito; Diego Focanti; Justine S. Hastings
  3. Credence Goods Markets with Heterogeneous Experts By Joachim Heinzel
  4. Discrimination In The Age Of Algorithms By Jon Kleinberg; Jens Ludwig; Sendhil Mullainathan; Cass R. Sunstein
  5. Equity finance: matching liability to power By Goodhart, C. A. E.; Lastra, Rosa M.
  6. Institutional Ownership and Private Equity Placements: Evidence from Chinese Listed Firms By He, Qing; Li, Dongxu; Lu, Liping; Chong, Terence Tai Leung
  7. Who Understands The French Income Tax? Bunching Where Tax Liabilities Start By R. LARDEUX
  8. Contract Enforcement and Productive Efficiency: Evidence from the Bidding and Renegotiation of Power Contracts in India By Nicholas Ryan
  10. Judging Judge Fixed Effects By Brigham R. Frandsen; Lars J. Lefgren; Emily C. Leslie
  11. A Panel-based Proxy for Gun Prevalence in the US By Daniel Cerqueira; Danilo Santa Cruz Coelho; John J. Donohue; Marcelo Fernandes; Jony Arrais Pinto Jr.

  1. By: Simplice A. Asongu (Yaoundé/Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria)
    Abstract: This study investigates the determinants of and persistence in access to weapons using a global sample of 163 countries for the period 2010 to 2015. The empirical evidence is based on Generalised Method of Moments (GMM). Hysteresis in access to weapons is consistently more apparent in countries with below-median levels in access to weapons, compared to their counterparts with above-median levels in access to weapons. The hysteresis hypothesis within this context is the propensity of past values of access to weapons to influence future values of access to weapons. Factors that consistently drive access to weapons are: perceptions of crime; criminality; conflict intensity; political instability; military expenditure, violent demonstrations and terrorism. The effects of these drivers are contingent on initial levels of access to weapons. Policy recommendations for managing access to weapons are discussed.
    Keywords: Access to weapons; Global evidence; Persistence; Arms; Security
    JEL: H56 L64 K42 P50
    Date: 2019–01
  2. By: Francesco Maria Esposito; Diego Focanti; Justine S. Hastings
    Abstract: We study the effect of photo ID laws on voting using a difference-in-differences estimation approach around Rhode Island’s implementation of a photo ID law. We employ anonymized administrative data to measure the law’s impact by comparing voting behavior among those with drivers’ licenses versus those without, before versus after the law. Turnout, registration, and voting conditional on registration fell for those without licenses after the law passed. We do not find evidence that people proactively obtained licenses in anticipation of the law, nor do we find that they substituted towards mail ballots which do not require a photo ID.
    JEL: D72 P16
    Date: 2019–01
  3. By: Joachim Heinzel (Paderborn University)
    Abstract: In this paper, we analyze a credence goods model adjusted to the health care market with regulated prices and heterogeneous experts. Experts are physicians and are assumed to differ in their cost of treating a small problem. We investigate the effects of this heterogeneity on the physicians’ level of fraud and on the patients’ search for second opinions. We find that introducing a fraction of more efficient low-cost physicians always increases social welfare, but in some cases only because of the raised physicians’ surplus. When the low-cost physicians’ cost advantage is small, imposing a share of low-cost physicians does not change the equilibrium fraud level. When the cost advantage is large, however, different changes in the fraud level occur depending on the share of generated low-cost physicians, the search rate and the initial level of fraud.
    Keywords: credence goods, treatment efficiency, heterogeneous experts, overcharging
    JEL: D82 I11 L15
    Date: 2019–01
  4. By: Jon Kleinberg; Jens Ludwig; Sendhil Mullainathan; Cass R. Sunstein
    Abstract: The law forbids discrimination. But the ambiguity of human decision-making often makes it extraordinarily hard for the legal system to know whether anyone has actually discriminated. To understand how algorithms affect discrimination, we must therefore also understand how they affect the problem of detecting discrimination. By one measure, algorithms are fundamentally opaque, not just cognitively but even mathematically. Yet for the task of proving discrimination, processes involving algorithms can provide crucial forms of transparency that are otherwise unavailable. These benefits do not happen automatically. But with appropriate requirements in place, the use of algorithms will make it possible to more easily examine and interrogate the entire decision process, thereby making it far easier to know whether discrimination has occurred. By forcing a new level of specificity, the use of algorithms also highlights, and makes transparent, central tradeoffs among competing values. Algorithms are not only a threat to be regulated; with the right safeguards in place, they have the potential to be a positive force for equity.
    JEL: H0 I0 K0
    Date: 2019–02
  5. By: Goodhart, C. A. E.; Lastra, Rosa M.
    Abstract: There is widespread concern that the bonus culture for senior managers in limited liability companies is having adverse effects, e.g. on risk-taking, leverage and lower longer-term investment. The moral hazard of limited liability was appreciated in the 19th century, when unlimited or multiple liability, especially for bankers, was widely adopted. Whereas outside, notably retail, investors still need the protection of limited liability, we advocate moving towards a two-tier equity system, primarily for banks, with insiders, senior managers and others with influence over corporate decisions, becoming subject to multiple liability. But the transition costs of doing so suddenly would be great, so our proposal is to start by applying this initially just to Systemically Important Financial Intermediaries.
    Keywords: banking; banks; corporate governance; institutional investors; limited liabiltiy; Senior Management Regime; Tow Tier Equity
    JEL: G30 G32 G39 K20 K22 L14 M14 N20 N22 N23 P10
    Date: 2019–01
  6. By: He, Qing; Li, Dongxu; Lu, Liping; Chong, Terence Tai Leung
    Abstract: This paper examines the impact of institutional ownership on the performance of private equity placements (PEPs) for listed firms in China. We find that the presence of institutional investors can alleviate the information asymmetries between listed firms and the market. The market reaction to PEP announcements is significantly smaller if there is a higher portion of institutional shareholdings. Long-term firm operational performance after PEPs is positively correlated with institutional shareholdings. Moreover, we find that the relationship between institutional shareholdings and PEP performance is mainly driven by non-listed corporate investors and mutual funds. Finally, the relationship between PEP performance and institutional shareholdings is stronger in smaller PEP issuers.
    Keywords: Institutional ownership; Private equity placements (PEPs); Information asymmetry; Strategic investor; Liquidity investor
    JEL: G23 G32 G38 K22
    Date: 2017–12–14
  7. By: R. LARDEUX (Insee)
    Abstract: Lack of tax transparency may strongly impact taxpayers' behavior. This paper disentangles responses to incentives from attention to taxes at the level where French income tax liabilities start. When reporting their earnings, tax filers may be confused between two potential thresholds: the true Tax Collection Threshold (TCT), a notch, and a wrong Taxation Threshold (TT), which is a kink. Using a comprehensive dataset on individual income tax returns from 2008 to 2015, I highlight significant bunching in the taxable income distribution at both thresholds. Within a model of tax misperception, I estimate that taxpayers are far from paying full attention to the income tax system, yet display strong reactions to the marginal tax rate they perceive. This framework can account for behavioral responses to a rise in the virtual marginal tax rate at the wrong threshold and may prove useful to detect policies improving attention to taxes. Contrasting hard-copy and online tax filers, the misperception model reveals a better understanding of the tax system by the latter.
    Keywords: Income tax, bunching, attention, misperception, Internet
    JEL: D83 H24 H31 K34
    Date: 2018
  8. By: Nicholas Ryan
    Abstract: Weak contract enforcement may reduce the efficiency of investment in developing countries. I study how contract enforcement affects efficiency in procurement auctions for the largest power projects in India. I gather data on bidding and ex post contract renegotiation and find that the renegotiation of contracts in response to cost shocks is widespread, despite that bidders are allowed to index their bids to future costs like the price of coal. Connected firms choose to index less of the value of their bids to coal prices and, through this strategy, expose themselves to cost shocks to induce renegotiation. I use a structural model of bidding in a scoring auction to characterize equilibrium bidding when bidders are heterogeneous both in cost and in the payments they expect after renegotiation. The model estimates show that bidders offer power below cost due to the expected value of later renegotiation. The model is used to simulate bidding and efficiency with strict contract enforcement. Contract enforcement is found to be pro-competitive. With no renegotiation, equilibrium bids would rise to cover cost, but markups relative to total contract value fall sharply. Production costs decline, due to projects being allocated to lower-cost bidders over those who expect larger payments in renegotiation.
    JEL: D44 K12 L94 O14 Q41
    Date: 2019–02
  9. By: suhardi, suhardi
    Abstract: This study aims to examine the effect of the knowledge of government internal supervisors through the intuition of government internal supervisors to detect irregularities. The sample in this study was the auditor who served at the Regency and municipal Inspectorates in Bangka Belitung totaling 122 respondents. This study uses path analysis to examine the relationship between hypothesized variables. The results of the study concluded that the experience and knowledge of government internal supervisors had a significant effect on deviation detection. In addition to the knowledge of government internal supervisors through government intuition, internal supervisors influence the detection of irregularities. This research needs to be further developed, to get stronger empirical results, such as by adding other variables from deviation detection, further research can also expand the object of research, and use the experimental method.
    Keywords: Experience, Knowledge, Intuition, Fraud detection.
    JEL: M40
    Date: 2018–12
  10. By: Brigham R. Frandsen; Lars J. Lefgren; Emily C. Leslie
    Abstract: We propose a test for the identifying assumptions invoked in designs based on random assignment to one of many "judges.'' We show that standard identifying assumptions imply that the conditional expectation of the outcome given judge assignment is a continuous function with bounded slope of the judge propensity to treat. The implication leads to a two-part test that generalizes the Sargan-Hansen overidentification test and assesses whether implied treatment effects across the range of judge propensities are possible given the domain of the outcome. We show the asymptotic validity of the testing procedure, demonstrate its finite-sample performance in simulations, and apply the test in an empirical setting examining the effects of pre-trial release on defendant outcomes in Miami. When the assumptions are not satisfied, we propose a weaker average monotonicity assumption under which IV still converges to a proper weighted average of treatment effects.
    JEL: C26 K14
    Date: 2019–02
  11. By: Daniel Cerqueira; Danilo Santa Cruz Coelho; John J. Donohue; Marcelo Fernandes; Jony Arrais Pinto Jr.
    Abstract: There is a consensus that the proportion of suicides committed with a firearm is the best proxy for gun ownership prevalence. Cerqueira et al. (2108) exploit the socioeconomic characteristics of suicide victims in order to develop a new and more refined proxy. It is based on the fixed effects of the victim's place of residence estimated from a discrete choice model for the likelihood of committing suicide with gun. We empirically assess this new indicator using gun ownership data from the Behavioral Risk Factor Surveillance System (BRFSS) and suicide registers of the US National Center for Health Statistics (NCHS) from 1995 through 2004. We demonstrate that this new gun proxy provides significant gains in correlation with the percentage of households with firearms.
    JEL: K14
    Date: 2019–02

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