nep-law New Economics Papers
on Law and Economics
Issue of 2019‒03‒04
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Labour Courts and Firing Costs: The Labour Market Effects of Trial Delays By Giuseppina Gianfreda; Giovanna Vallanti
  2. When stealing, go for millions? Quantitative analysis of white-collar crime sentencing in Poland. By Czarnocki, Kazimierz; Janulek, Dawid; Olejnik, Łukasz
  3. CORRUPT RESERVE PRICES By Sümeyra Atmaca; Koen Schoors
  4. Peer Effects on the United States Supreme Court By Richard Holden; Michael Keane; Matthew Lilley
  5. Divorced in a Flash: The Effect of the Administrative Divorce Option on Marital Stability in the Netherlands By Kabátek, Jan
  6. Market Power and Income Taxation By Louis Kaplow
  7. Norms, Enforcement, and Tax Evasion By Timothy Besley; Anders Jensen; Torsten Persson
  8. Tax Evasion on a Social Network By Duccio Gamannossi degl’Innocenti; Matthew D. Rablen
  9. Paying for Kidneys? A Randomized Survey and Choice Experiment By Julio J. Elias; Nicola Lacetera; Mario Macis

  1. By: Giuseppina Gianfreda (Università della Tuscia); Giovanna Vallanti (Università LUISS "Guido Carli")
    Abstract: Employment protection is the result of labour laws as well as of institutional factors which are not encompassed in official legislation. Courts' delays in settling labour disputes are among those factors. Using individual data from the Italian Labour Force Survey for the period 2008-2010 and exploiting the territorial heterogeneity in the duration of labour trials across Italian regions, we investigate the effect of dismissal costs on the composition of employment. We find that labour courts' delays reduce the employment rate and increase inactivity of specific categories of workers, i.e. women, young and low skilled individuals. Furthermore, lengthy trials reduce the likelihood of accessing a permanent occupation and increase the incidence of long term unemployment for the same groups of workers. These results also imply that trials length and, more generally, courts activity have an impact on labour market outcomes which goes in the same direction as explicitly written rules.
    Keywords: Labour courts, EPL, institutions, employment rate, inactivity rate, temporary jobs
    JEL: K31 K41 J21 J23 J63
    Date: 2018
  2. By: Czarnocki, Kazimierz; Janulek, Dawid; Olejnik, Łukasz
    Abstract: The aim of this article is to analyse the length of custodial sentences for white-collar crimes in the context of Polish criminal policy. The analyses, based on the new and original data set obtained from case files, showed the non-linear dependency between the custodial sentence and the damage caused by a given fraud. From the perspective of the criminal law and economics, such a non-linearity may generate incentives for committing frauds on a bigger scale, because as the scale increases the relative severity of punishment decreases. Moreover, the gender bias in sentencing for the white-collar crimes in Poland was proven and in such cases women not only did receive lower custodial sentences, but also those ruled by female judges were lower.
    Keywords: court decisions; white-collar crime; bias in sentencing
    JEL: K42
    Date: 2019–02–23
  3. By: Sümeyra Atmaca; Koen Schoors (-)
    Abstract: We develop a new methodology to identify corruption in public procure- ment auctions with reserve prices and apply it to Russian public procure- ment auctions of gasoline in 2011-2013. We identify corrupt procurer-seller pairs by exploiting the variation in reserve prices. Since auction reserve prices are set by the procurer before the auction, they should be indepen- dent from the identity of the winning seller. We estimate reserve prices as a function of the local market price, contract, procurer and time controls, and procurer-seller fixed effects. A procurer-seller pair is labeled as poten- tially corrupt if its pair fixed effect is significantly larger than the average procurer fixed effect. Despite their reserve price overpricing, corrupt sell- ers face less competition in auctions organized by procurers with whom they form a corrupt pair and have a higher probability of wining these auc- tions. Auctions won by corrupt pairs exhibit higher final contract prices, leading to considerable welfare losses. The detrimental effect of reserve price manipulation on final prices is mitigated by higher competition and fully offset by electronic auctions with sufficient competition.
    Keywords: public procurement, corruption, regulation
    JEL: H57 H83 K42
    Date: 2019–02
  4. By: Richard Holden (UNSW Business School); Michael Keane (UNSW Business School); Matthew Lilley (Harvard University)
    Abstract: Using data on essentially every US Supreme Court decision since 1946, we estimate a model of peer effects on the Court. We consider both the impact of justice ideology and justice votes on the votes of their peers. To identify these peer effects we use two instruments that generate plausibly exogenous variation in the peer group itself, or in the votes of peers. The first instrument utilizes the fact that the composition of the Court varies from case to case due to recusals or absences for health reasons. The second utilizes the fact that many justices previously sat on Federal Circuit Courts. Those who served on the Circuit Courts for short (long) periods of time are empirically much more (less) likely to affirm decisions from their “home” court. We find large peer effects. Replacing a single justice with one who votes in a conservative direction 10 percentage points more frequently increases the probability that each other justice votes conservative by 1.6 percentage points. Further, a 10% increase in the probability that a given justice votes conservative leads to a 1.1 percentage point increase in the probability that each other justice votes conservative. This indirect effect increases the share of cases with a conservative outcome by 3.6 percentage points (excluding the direct effect of the new justice). In general, we find indirect effects are large relative to the direct mechanical effect of a justice’s own vote.
    Keywords: Supreme Court, Peer Effects, Recusal
    JEL: K00
    Date: 2019–02
  5. By: Kabátek, Jan (University of Melbourne)
    Abstract: Administrative divorce is an optional divorce procedure which allows couples to bypass the court system and dissolve their marriages in a streamlined, uncontested process. The lack of court involvement renders the administrative divorce faster and less expensive than the conventional divorce. In this paper, I investigate whether the administrative divorce option affected the stability of marriages in the Netherlands. Leveraging the ban of the procedure in 2009, I show that the divorce risks were 11.6% higher under the legal regime which allowed for administrative divorce. This effect is causal, and it exhibits considerable heterogeneity, being stronger among dual-earner couples, native couples, and couples living in rural regions.
    Keywords: marital stability, divorce, administrative divorce, divorce costs
    JEL: J12 J18 K36
    Date: 2019–02
  6. By: Louis Kaplow
    Abstract: Does significant market power or the presence of large rents affect optimal income taxation, calling for greater redistribution due to tainted gains? Or perhaps less because of an additional wedge that distorts labor effort? Do concerns about inequality have implications for antitrust, regulation, trade, and other policies that influence market power, which contributes to inequality? This article addresses these questions in a model with heterogeneous abilities and hence a concern for distribution, markups, multiple sectors, ownership that is a function of income, allowance for any share of profits to be recoveries of investments (including rent-seeking efforts), endogenous labor supply, and a nonlinear income tax. In this model, proportional markups with no profit dissipation have no effect on the economy, and a policy that reduces a nonproportional markup raises (lowers) welfare when it is higher (lower) than a weighted average of other markups. With proportional (partial or full) profit dissipation, proportional markups are equivalent to a downward shift of the distribution of abilities, and the welfare effect of correcting nonproportional markups associated with nonproportional profit dissipation now depends also on the degree of dissipation and how that is affected by the policy. In all cases, optimal policies maximize consumer plus producer surplus, without regard to a policy’s distributive effects on consumers and profits or how markups and income taxation distort labor effort.
    JEL: D42 D61 H21 H23 K21 L12 L40
    Date: 2019–02
  7. By: Timothy Besley; Anders Jensen; Torsten Persson
    Abstract: This paper studies individual and social motives in tax evasion. We build a simple dynamic model that incorporates these motives and their interaction. The social motives underpin the role of norms and is the source of the dynamics that we study. Our empirical analysis exploits the adoption in 1990 of a poll tax to fund local government in the UK, which led to widespread evasion. The evidence is consistent with the model's main predictions on the dynamics of evasion.
    JEL: H26 H3
    Date: 2019–02
  8. By: Duccio Gamannossi degl’Innocenti (University of Exeter, UK); Matthew D. Rablen (University of Sheffield, UK)
    Abstract: We relate tax evasion behavior to a substantial literature on social comparison in judgements. Taxpayers engage in tax evasion as a means to boost their expected consumption relative to others in their social network. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpayers evade more. Given that tax authorities are now investing heavily in big-data tools that aim to construct social networks, we investigate the value of acquiring network information. We do this using networks that allow for celebrity taxpayers, whose consumption is widely seen, and who are systematically of higher wealth. We show that there are pronounced returns to the initial acquisition of network information, albeit targeting audits with highly incomplete knowledge of social networks may be counterproductive.
    Keywords: Tax Evasion; Social Networks; Network centrality; Optimal Auditing; Social Comparison; Relative Consumption
    JEL: H26 D85 K42
    Date: 2019–02
  9. By: Julio J. Elias; Nicola Lacetera; Mario Macis
    Abstract: Legislation and public policies are often the result of competition and compromise between different views and interests. In several cases, strongly held moral beliefs voiced by societal groups lead lawmakers to prohibit certain transactions or to prevent them from occurring through markets. However, there is limited evidence about the specific nature of the general population’s opposition to using prices in such contentious transactions. We conducted a randomized survey with 2,666 American residents to study preferences for legalizing payments to kidney donors. We found strong polarization, with many participants supporting or opposing payments regardless of potential transplant gains. However, about 18 percent of respondents would switch to favoring payments for sufficiently large increases in transplants. Preferences for compensation have strong moral foundations; participants especially reject direct payments by patients, which they find would violate principles of fairness. We corroborate the interpretation of our findings with a choice experiment of a costly decision to donate money to a foundation that supports donor compensation.
    JEL: D01 D63 D64 I11
    Date: 2019–02

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