nep-law New Economics Papers
on Law and Economics
Issue of 2019‒05‒06
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Renegotiations and corruption in infrastructure: The Odebrecht case By Nicolas Campos; Eduardo Engel; Ronald D. Fischer; Alexander Galetovic
  2. Preventing criminal minds: early education access and adult offending behavior By Zelda Brutti; Daniel Montolio
  3. Limited Liability and Investment: Evidence from Changes in Marital Property Laws in the U.S. South, 1840-1850 By Koudijs, Peter A. E.; Salisbury, Laura
  4. The role of institutions in private participation in infrastructure revisited By Taguchi, Hiroyuki
  5. Access to Justice and Economic Development: Evidence from an International Panel Dataset By Arnaud Deseau; Adam Levai; Michèle Schmiegelow
  6. Land Valuations, Market Practices, Pregnancy, Insanity: There's a Jury for That By Niamh Howlin
  7. Legal Responsibility in Investment Decisions Using Algorithms and AI By Makoto Chiba; Mikari Kashima; Kenta Sekiguchi
  8. Vote Influence in Group Decision-Making: The Changing Role of Justices' Peers on the Supreme Court By Mindock, Maxwell R.; Waddell, Glen R.
  9. Dynamic Determinants of Access to Weapons: Global Evidence By Asongu, Simplice; Nnanna, Joseph
  10. Violence and Human Capital Investments By Martin F. Koppensteiner; Lívia Menezes
  11. Corruption beyond the glass ceiling: do women entrepreneurs perceive corruption differently? By Rajeev K. Goel; Michael A. Nelson

  1. By: Nicolas Campos (Espacio Público); Eduardo Engel (Department of Economics, University of Chile); Ronald D. Fischer (Department of Industrial Engineering, University of Chile); Alexander Galetovic (Universidad de los Andes (Santiago) and Hoover Institution and Research Associate, CRIEP)
    Abstract: In 2016, Brazilian construction firm Odebrecht was fined $2.6 billion by the US Department of Justice (DOJ). According to the plea agreement, between 2001 and 2016 Odebrecht paid $788 million in bribes in 10 Latin American and two African countries in more than 100 large projects. The DOJ estimated that bribe payments increased Odebrecht’s profits by $2.4 billion. Judicial documents and press reports on the Odebrecht case reveal detailed information on the workings of corruption in the infrastructure sector. Based on these sources we establish five facts. First, for projects where Odebrecht paid bribes, renegotiations amounted to 71.3 percent of initial investment estimates, compared with 6.5 percent for projects where Odebrecht paid no bribes. Second, Odebrecht’s bribes were of the order of one percent of a project’s final investment. Third, the profits Odebrecht obtained from bribes as well as its overall profits were small, somewhere between 1 and 4 percent of its sales. Fourth, the creation of the Division of Structured Operations (DSO) by Odebrecht in 2006 led to major reductions in the firm’s costs of paying bribes and recipients’ costs of hiding the illegal proceeds. Fifth, following the creation of the DSO, Odebrecht’s sales increased more than three-fold while its profits remained small. We build a model where firms compete for a project, anticipating a bilateral renegotiation at which their bargaining power is larger if they pay a bribe. Conditional on paying a bribe and cost dispersion among firms being small, firms’ profits are small in equilibrium. When one firm unilaterally innovates by reducing the cost of paying bribes, its market share increases substantially while profits, which are proportional both to the cost advantage and to the magnitude of bribes, remain small. A parametrization with the DOJ’s data suggests that Odebrecht enjoyed a substantial cost advantage in bribing, of the order of 70 percent.
    Keywords: Corruption, infrastructure, bribes, auctions, renegotiations, lowballing, fundamental transformation
    JEL: H54 H57 K42
    Date: 2019–04
  2. By: Zelda Brutti (Universitat de Barcelona & Institut d’Economia de Barcelona (IEB)); Daniel Montolio (Universitat de Barcelona & Institut d’Economia de Barcelona (IEB))
    Abstract: In this paper we estimate the impact of a nationwide public preschool expansion that took place in Spain over the 1990s on criminal behavior later in time. We exploit variation in enrollment rates across Spanish regions and birth-cohorts, and we link education data to a unique administrative crime dataset recording offenses committed in the region of Catalonia over the period 2009-2014. We find that for the average birth cohort, Catalan municipality and year, a 1 percentage point increase in preschool exposure at age 3 yields 1.6% fewer crime actions during youth and young adulthood. We are able to account for region of origin, birth cohort, time and local fixed effects, as well as several region and time-specific controls. Leveraging detailed information on types of crime committed, we propose a categorization of offenses into those likely to have been rationally planned and driven by economic motives, and those in which emotional factors and lack of self-control play a significant role. On average, we find the benefits of preschool to be larger and more robust on crimes belonging to the latter category, suggesting that non-cognitive skills play an important role in explaining the overall effect.
    Keywords: Universal child care, adult crime, education reform
    JEL: I28 K42 J13
    Date: 2019
  3. By: Koudijs, Peter A. E. (Stanford University and NBER); Salisbury, Laura (York University and NBER)
    Abstract: We study the impact of marital property legislation passed in the U.S. South in the 1840s on household investment. These laws protected the assets of newly married women from creditors in a world of virtually unlimited liability. We compare couples married after the passage of a law with couples from the same state who were married before. Consistent with a simple model of household borrowing that trades off agency costs against risk sharing, the effect on household asset holdings was heterogeneous: if most household property came from the husband (wife), the law led to an increase (decrease) in total assets.
    JEL: D14 G33 N21
    Date: 2018–11
  4. By: Taguchi, Hiroyuki
    Abstract: This paper aims to examine institutional effects on the private participation in infrastructure (PPI) projects during the recent period for 2002-2017 with 117 sample economies, by using the PPI and the Worldwide Governance Indicators database of the World Bank. The study contributes to enriching the evidence by updating the sample time-horizon and by widening the coverage of sample economies. The main findings of this study are summarized as follow: the institutional role in promoting the PPI projects are clearly identified in terms of government governance indicators such as government effectiveness, regulatory quality, rule of law and control of corruption; in particular, the control of corruption, which is the controversial issue in the previous studies, is confirmed to be one of the important factors to boost the PPI projects; and the macroeconomic stability is also a significant contributor for the PPI projects.
    Keywords: Private Participation in Infrastructure, Institution, Worldwide Governance Indicator, Control of Corruption, and Multicollinearity
    JEL: H54 K20 O43
    Date: 2019–04
  5. By: Arnaud Deseau (Université Saint-Louis - Bruxelles, CEREC); Adam Levai (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Michèle Schmiegelow (UCLouvain, CRIDES)
    Abstract: We empirically investigate the impact of access to justice (ATJ) on GDP per capita growth in a panel of 83 countries from 1970 to 2014. Our analysis relies on a new database documenting the number of judges per capita as a proxy for capturing the cross-country evolution of ATJ. The proxy measures the extent to which disputes between economic actors can be resolved at a relatively low cost, without dysfunctional delay and discrimination. In a dynamic panel setting using internal instruments, we find that increasing ATJ by 1% increases the five-year growth rate of GDP per capita by 0.86 p.p. (0.17 p.p. annually) with diminishing marginal returns. In line with the diminishing marginal returns argument, we find that the effect of ATJ is two times smaller in Europe compared to other regions due to higher levels of ATJ. We find no evidence of a differential effect of ATJ across other regions, income levels, legal origins, democracy, corruption of the judicial system or human capital levels.
    Keywords: Access to Justice, Legal development, Economic Development, Growth, Institution
    JEL: E02 K00 O11 O43 O47
    Date: 2019–04
  6. By: Niamh Howlin
    Abstract: Contemporary legal practitioners and academics are familiar with the use of juries in criminal trials. To a lesser extent, the use of juries in civil actions, although a rarity in 21st century Ireland, is recognised as having been the norm in the past, and continues to be an essential part of the administration of justice in other common law systems, notably the United States. Juries also continue to be used at coroners’ inquests, delivering verdicts on the causes of death. What might be less widely appreciated, however, was that in the past, juries were used in a much wider range of situations, ranging from the determination of pregnancy or insanity, to the regulation of market practices and the conducting of land valuations. The term ‘jury’ in these scenarios is to be given a wide interpretation, generally meaning a panel of laypersons with no judicial or other specialised training. In this paper, I propose to explore some of these ways in which panels of laypersons were used in 18th and 19th century Ireland as an essential aspect of law, order and the regulation of society. Why were juries used in such diverse contexts? What were the advantages or disadvantages of doing so? Were there alternatives?
    Keywords: Legal history; Juries; Laypersons; 18th 19th Century; Regulation of Society; Administration of Justice
    Date: 2017–11
  7. By: Makoto Chiba (Bank of Japan); Mikari Kashima (Bank of Japan); Kenta Sekiguchi (Bank of Japan)
    Abstract: This article provides an overview of the report released by a study group on legal issues regarding financial investments using algorithms/artificial intelligence (AI). The report focuses on legal issues regarding the automated or black-boxed financial investment decisions by using algorithms/AI. Specifically, the report discusses the points for consideration in applying laws regarding (1) regulations and civil liability issues surrounding business operators for investment management or investment advisory activities, and (2) regulations on market misconduct. The report shows that the application of some existing laws requires the presence of a certain mental state (such as purpose and intent), which is unlikely to be given in the case of investment decisions using algorithms/AI. To deal with this problem, the report considers the necessity of introducing new legislation.
    Keywords: algorithm; artificial intelligence; AI; investment decision; duty to explain; duty of due care of a prudent manager; market manipulation; insider trading
    JEL: K22
    Date: 2019–04–26
  8. By: Mindock, Maxwell R. (University of Oregon); Waddell, Glen R. (University of Oregon)
    Abstract: We consider the voting behavior of Supreme Court Justices, finding evidence of co-dependencies in their votes. Coincident with changes in the party imbalance of the Court over time, sharp discontinuities in these dependencies are evident. Overall, the patterns suggest a tradeoff between co-dependencies around political affiliations and individual ideologies, with more-equal party representation on the Court encouraging greater party awareness in Justice voting, and less-equal party representation allowing Justices across party lines but with similar ideologies to inform each other's votes.
    Keywords: Supreme Court, voting, judicial behavior, spatial econometrics
    JEL: D7 K41 C21
    Date: 2019–04
  9. By: Asongu, Simplice; Nnanna, Joseph
    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 K42 L64 P50
    Date: 2019–01
  10. By: Martin F. Koppensteiner (University of Surrey); Lívia Menezes (University of Leicester)
    Abstract: In this paper, we investigate the effect of exposure to homicides on the educational performance and human capital investments of students in Brazil. We combine extremely granular information on the location and timing of homicides with a number of very large administrative educational datasets, to estimate the effect of exposure to homicides around schools, students' residence, and on their way to school on these outcomes. We show that violence has a detrimental effect on school attendance, on standardised test scores in math and Portuguese language and increases dropout rates of students substantially. The effects are particularly pronounced for boys, indicating important heterogeneous effects of violence. We use exceptionally rich information from student- and parent-background questionnaires to investigate the effect of violence on the aspirations and attitudes towards education. In line with the effects on dropout and the longer-term human capital accumulation of students, we find that boys systematically report lower educational aspiration towards education. Making use of the very rich information from the homicides and education data, we explore a number of underlying transmission channels, including mechanisms related to school supply, bereavement and incentives for human capital investments.
    JEL: I25 K42 O12
    Date: 2019–04
  11. By: Rajeev K. Goel; Michael A. Nelson
    Abstract: Adding to the corruption-gender nexus, this paper contributes across several dimensions: (a) measurement of corruption by studying whether female managers and female owners of firms perceived corruption differently; (b) using survey information at the firm level; and (c) employing a large sample of more than 100 countries. Results show that both female managers and female owners perceived corruption to be lower relative to men. Furthermore, older firms perceived corruption to be a more server obstacle, while sole proprietorships generally had the opposite view. The advantages of piercing the glass ceiling were undermined in nations with severe gender inequality.
    Keywords: corruption perceptions, entrepreneurship, gender, managers, owners
    JEL: K40 L20
    Date: 2019

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