nep-law New Economics Papers
on Law and Economics
Issue of 2019‒04‒22
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Lessons from Voluntary Compliance Window (VCW): Malawi's tax amnesty programme By Michael Masiya
  2. The Logic of Fear: Populism and Media Coverage of Immigrant Crimes By Mathieu Couttenier; Sophie Hatte; Mathias Thoenig; Stephanos Vlachos
  3. The Impact of Parental Involvement Laws on Minor Abortion By Theodore J. Joyce; Robert Kaestner; Jason Ward
  4. Australia's ice epidemic and the detrimental mental health effects of recent use By Thomas Massey; George Verikios
  5. Securing personal freedom through institutions – the role of electoral democracy and judicial independence By Berggren, Niclas; Gutmann, Jerg
  6. EU Merger Policy Predictability Using Random Forests By Pauline Affeldt
  7. Corporate Investment Under the Cloud of Litigation By Bennett, Benjamin; Milbourn, Todd; Wang, Zexi
  8. Tax Professionals: Tax-Evasion Facilitators or Information Hubs? By Marco Battaglini; Luigi Guiso; Chiara Lacava; Eleonora Patacchini
  9. International Trade Finance From the Origins to the Present: Market Structures, Regulation, and Governance By Accominotti, Olivier; Ugolini, Stefano
  10. Political settlements, women’s representation and gender equality: The 2008 gender-based violence law and gender parity in primary and secondary education in Rwanda By Jennie E. Burnet; Jeanne d’Arc Kanakuze

  1. By: Michael Masiya
    Abstract: The Malawi Revenue Authority (MRA) implemented the Voluntary Compliance Window (VCW) in 2013/2014 fiscal year as a means of bringing non-compliant taxpayers into the tax net. The programme was a huge success in terms of revenue and the cost of collection at 0.8% was by far below the 3% benchmark for the gross tax revenues of the Authority. However, the long-term compliance impact of the programme was not evaluated. Hence, the paper intends to bridge knowledge gap. Firstly, observing trends in debts and penalty payments covering and extending beyond the amnesty period, the paper finds that debts substantially declined after amnesty period while penalties rose sharply after VCW. Secondly, by constructing a counterfactual for large taxpayers, the paper finds that tax payments of participants significantly improved after the programme. Thirdly, the paper examines tax payment patterns by VCW participants one year after the programme. About 75 percent of amending filers subsequently paid their taxes one year after VCW with a higher mean income than the non-subsequent taxpayers. Lastly, the paper finds that smuggling remains high after observing variations in customs offences during VCW and a year later, in FY2015/16. The question remains “Should Malawi reconsider another Voluntary Compliance Window after 3 years?” The paper agrees with most previous studies by strongly discouraging another amnesty while encouraging post-amnesty enforcement efforts.
    Keywords: Malawi, voluntary compliance, tax amnesty
    JEL: H26
    Date: 2019
  2. By: Mathieu Couttenier (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Sophie Hatte (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Mathias Thoenig (UNIL - Université de Lausanne, CEPR - Center for Economic Policy Research - CEPR); Stephanos Vlachos (University of Vienna [Vienna])
    Abstract: We study how news coverage of immigrant criminality impacted municipality-level votes in the November 2009 "minaret ban" referendum in Switzerland. The campaign, successfully led by the populist Swiss People's Party, played aggressively on fears of Muslim immigration and linked Islam with terrorism and violence. We combine an exhaustive violent crime detection dataset with detailed information on crime coverage from 12 newspapers. The data allow us to quantify the extent of pre-vote media bias in the coverage of migrant criminality. We then estimate a theory-based voting equation in the cross-section of municipalities. Exploiting random variations in crime occurrences, we find a first-order, positive effect of news coverage on political support for the minaret ban. Counterfactual simulations show that, under a law forbidding newspapers to disclose a perpetrator's nationality, the vote in favor of the ban would have decreased by 5 percentage points (from 57.6% to 52.6%).
    Keywords: Media,Violent crime,Immigration,Vote,Populism
    Date: 2019
  3. By: Theodore J. Joyce; Robert Kaestner; Jason Ward
    Abstract: In this article, we conduct a comprehensive analysis of the effect of parental involvement (PI) laws on the incidence of abortions to minors across a span of nearly three decades. We contribute to the extant literature on this topic in several ways. First, we explore differences in estimates of the effect of PI laws across time that may result from changes in contraception, the composition of pregnant minors, access to confidential abortions in nearby states, or through judicial bypass, and the degree to which these laws are enforced. We find that, on average, PI laws enacted before the mid-1990s are associated with a 15% to 20% reduction in minor abortions. PI laws enacted after this time are not, on average, associated with declines in abortions to minors. Second, we assess the role of out-of-state travel by minors, estimating models that allow the effect of PI laws to differ by the distance to the nearest state without a PI law. We find that out-of-state travel is not a substantive moderating factor of the effect of PI laws. Third, we use a synthetic control approach to explore state-level heterogeneity in the effect of PI laws and find large differences in the impact of PI laws on minor abortions by state. These differences are unrelated to the type of law (consent versus notification) or whether contiguous states have enacted PI laws. Finally, we show that estimates of the effect of PI laws using data from either the Centers for Disease Control or the Alan Guttmacher Institute do not differ qualitatively once differences in coverage by state and year across these data are harmonized.
    JEL: I12 I18 I31
    Date: 2019–04
  4. By: Thomas Massey; George Verikios
    Keywords: Harm reduction, mental health, methamphetamine, and propensity score matching
    JEL: I18 I12 K42
    Date: 2019–01
  5. By: Berggren, Niclas; Gutmann, Jerg
    Abstract: Personal freedom is highly valued by many and a central element of liberal political philosophy. Although personal freedom is frequently associated with electoral democracy, developments in countries such as Hungary, Poland, Turkey and Russia, where elected populist leaders with authoritarian tendencies rule, suggest that electoral democracy may not be the envisaged unequivocal guarantor of freedom. Instead, an independent judicial system, insulated from everyday politics, might provide a firmer foundation. We investigate empirically how electoral democracy and judicial independence relate to personal freedom, as quantified by the new Human Freedom Index. Our findings reveal that while judicial independence is positively and robustly related to personal freedom in all its forms, electoral democracy displays a robust relationship with two out of seven types of personal freedom only (freedom of association, assembly and civil society as well as freedom of expression and information). These are types of freedom associated with democracy itself, but democracy seems unable to protect freedom in other dimensions. When we study interaction effects and make use of more refined indicators of the political system in place, we find that countries without elections or with only one political party benefit more from judicial independence than both democracies and multi-party systems without free elections. A number of robustness checks confirm these findings. Hence, it seems as if personal freedom has institutional correlates in the form of both democracy and judicial independence, with the latter safeguarding freedom more consistently and more strongly.
    Keywords: Freedom,democracy,judicial independence,political economy,institutions
    JEL: D63 D72 D78 K36 P48
    Date: 2019
  6. By: Pauline Affeldt
    Abstract: I study the predictability of the EC’s merger decision procedure before and after the 2004 merger policy reform based on a dataset covering all affected markets of mergers with an official decision documented by DG Comp between 1990 and 2014. Using the highly flexible, non-parametric random forest algorithm to predict DG Comp’s assessment of competitive concerns in markets affected by a merger, I find that the predictive performance of the random forests is much better than the performance of simple linear models. In particular, the random forests do much better in predicting the rare event of competitive concerns. Secondly, postreform, DG Comp seems to base its assessment on a more complex interaction of merger and market characteristics than pre-reform. The highly flexible random forest algorithm is able to detect these potentially complex interactions and, therefore, still allows for high prediction precision.
    Keywords: Merger policy reform, DG Competition, Prediction, Random Forests
    JEL: K21 L40
    Date: 2019
  7. By: Bennett, Benjamin (Ohio State University (OSU) - Department of Finance); Milbourn, Todd (Washington University in Saint Louis - Olin Business School); Wang, Zexi (University of Bern)
    Abstract: We study the effect of legal risk on firms’ investment. Using legal risk measures based on the number of litigious words in SEC 10-K filings, we find legal risk reduces investment. Underlying mechanisms include both i) a financing channel, whereby legal risk reduces credit ratings, increases bank loan costs, and decreases borrowing, and ii) an attention channel, whereby legal risk consumes top-management’s attention. Accordingly, we find legal risk has negative effects on firms’ investment efficiency and stock performance. We address endogeneity concerns through a DiD analysis utilizing staggered adoptions of universal demand laws across states.
    JEL: G30 G31 K20
    Date: 2018–09
  8. By: Marco Battaglini; Luigi Guiso; Chiara Lacava; Eleonora Patacchini
    Abstract: To study the role of tax professionals, we merge tax records of 2.5 million taxpayers in Italy with the respective audit files from the tax revenue agency. Our data covers the entire population of sole proprietorship taxpayers in seven regions, followed over seven fiscal years. We first document that tax evasion is systematically correlated with the average evasion of other customers of the same tax professional. We then exploit the unique structure of our dataset to study the channels through which these social spillover effects are generated. Guided by an equilibrium model of tax compliance with tax professionals and auditing, we highlight two mechanisms that may be behind this phenomenon: self-selection of taxpayers who sort themselves into professionals of heterogeneous tolerance for tax evasion; and informational externalities generated by the tax professional activities. We provide evidence supporting the simultaneous presence of both mechanisms.
    JEL: H26 K34
    Date: 2019–04
  9. By: Accominotti, Olivier; Ugolini, Stefano
    Abstract: We describe how the structure and governance of international trade finance - the oldest domain of international finance- evolved from the Middle Ages until today. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing of international trade then became increasingly centralized and credit instruments were standardized through the diffusion of the local standards of consecutive leading trading centers (Antwerp, Amsterdam, London). This process of market centralization/product standardization culminated in the nineteenth century when London became the global center for international trade finance and the sterling bill of exchange emerged as the most widely used trade finance instrument. The structure of the trade finance market then evolved considerably following the First World War and disintegrated during the interwar de-globalization and Bretton Woods period. The reconstruction of global trade finance in the post-1970 period gave way to the decentralized market structure that prevails nowadays.
    Keywords: bill of exchange; letter of credit; market structure; Trade Finance
    JEL: F1 F3 K12 N2 N7
    Date: 2019–04
  10. By: Jennie E. Burnet; Jeanne d’Arc Kanakuze
    Abstract: This paper explores the ways in which power and politics shape the realisation of women’s rights and gender equity in Rwanda. In the past decade, Rwanda has become a global leader in increasing women’s inclusion in politics and in promoting and securing women’s rights. This paper considers legislative reform, policy formulation and policy implementation in two areas: gender-based violence and gender parity in education. The paper injects a gender analysis into the political settlement theoretical framework and seeks to answer two questions: (1) how do women and other actors (including formal and information institutions, powerbrokers and other key decision-makers) negotiate within Rwanda’s dominant-party form of political settlement? And (2) how does Rwanda’s political settlement shape gender equity policy outcomes? This study found that Rwanda’s success in terms of women’s rights is the result of its vibrant women’s movement, the political will of the dominant party, the expertise of professional technocrats in the government administration, and a system of performance contracts, which shapes bureaucratic behaviour through to the frontline of service delivery. These findings are significant because they highlight the importance of a highly qualified, professional cadre in government and of accountability within government administration for securing women’s rights.
    Date: 2018

This nep-law issue is ©2019 by Eve-Angeline Lambert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.