nep-law New Economics Papers
on Law and Economics
Issue of 2019‒06‒24
fifteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Online Platform Operators as Sovereigns over the Ecommerce Sellers Selected by the German Legislator By Brettschneider, Jörg
  2. Crime Time: How Ambient Light Affects Crime By Domínguez, Patricio; Asahi, Kenzo
  3. Happily ever after? Vertical and horizontal mergers in the U.S. media industry By Stöhr, Annika; Noskova, Victoriia; Kunz-Kaltenhäuser, Philipp; Gänßle, Sophia; Budzinski, Oliver
  4. Money laundering and corruption: birds of a feather flock together By Raffaella Barone; Donato Masciandaro; Friedrich Schneider
  5. The limits of laws: traffic law enforcement in South Africa By Sophia du Plessis; Ada Jansen; Krige Siebrits
  6. Constitutional Overperformance – An Empirical Study of De Facto Protection of Rights with No De Jure Equivalents By Katarzyna Metelska-Szaniawska; Anna Lewczuk
  7. The Human-Centred Business Model and Hybrid Business Forms: A Primer and a Roadmap By Diletta Lenzi; Andrea Zorzi
  8. Consumer-Lending Discrimination in the FinTech Era By Robert Bartlett; Adair Morse; Richard Stanton; Nancy Wallace
  9. Empirical Analysis of License Policy for Declared Standard-essential Patents in Setting Technology Standards By Dong HUO; Jiangwei DANG; MOTOHASHI Kazuyuki
  10. The Detrimental Effect of Job Protection on Employment: Evidence from France By Cahuc, Pierre; Malherbet, Franck; Prat, Julien
  11. On the Competitive Effects of Screening in Procurement By Seres, G.; Pigon, Adam
  12. Smart products: liability, timing of market introduction, and investments in product safety By Herbert Dawid; Gerd Muehlheusser
  13. How to Improve Tax Compliance? Evidence from Population-wide Experiments in Belgium By Jan-Emmanuel De Neve; Clement Imbert; Maarten Luts; Johannes Spinnewijn; Teodora Tsankova
  14. The Impact of Country-by-Country Reporting on Corporate Tax Avoidance By Felix Hugger
  15. Facilitating Artificial Intelligence and block chain systems, partnerships and technologies: emerging global actors and players in Sustainable Development By Ojo, Marianne

  1. By: Brettschneider, Jörg
    Abstract: The German law to combat VAT fraud and other tax regulations went into force recently. The German legislator aims to enforce German VAT law via a liability of platform operators (like Amazon and eBay). The consequences of this regulatory approach are a) that platform operators enforce the law more strictly in relation to the ecommerce sellers than required by the law, b) that legal uncertainty occurs and c) that the legal protection of ecommerce sellers is not clear. Background of the more strict enforcement is that platform operators want to avoid liability risks. The situation from the ecommerce sellers’ perspective is described and discussed.
    Keywords: VAT,VAT fraud,Umsatzsteuer,ecommerce,online-Handel,Amazon,ebay,Steuerbetrug,Mehrwertsteuer,Gesetz zur Vermeidung von Umsatzsteuerausfällen beim Handel mit Waren im Internet,China,Germany,Haftung,Liability,UStG,Umsatzsteuergesetz,Finanzamt Neukölln,legal enforcement,electronic marketplace,Fulfillment by Amazon,Value Added Tax,Fulfillment,e-commerce,Marktplatzhaftung
    JEL: K34 H25 H26
    Date: 2019
  2. By: Domínguez, Patricio; Asahi, Kenzo
    Abstract: This paper studies the effect of ambient light on crime, taking advantage of the daylight saving time (DST) policy, which imposes exogenous variations in daylight exposure at specific hours of the day. The paper uses a rich administrative database managed by Chile’s national police, a centralized agency that collects detailed information regarding each crime incident. A 20% decrease (increase) in crimes is found when the DST transition increases (decreases) the amount of sunlight by one hour during the 7-9 p.m. period. Importantly, no significant response is detected induced by DST associated with a plausible demand-side response such as the population’s commuting time pattern, and no substantial short-term displacement is found. Most of the changes in property crime due to the DST policy are driven by robbery in residential areas.
    Keywords: Economics of crime; Daylight Saving Time; Rational choice
    JEL: R41 K42 D01
    Date: 2019–06
  3. By: Stöhr, Annika; Noskova, Victoriia; Kunz-Kaltenhäuser, Philipp; Gänßle, Sophia; Budzinski, Oliver
    Abstract: This paper provides an economic analysis of recent vertical and horizontal mergers in the U.S. industry for audiovisual media content, including the AT&T-Time Warner and the Disney-Fox mergers. Using a theory-driven approach, we examine economic effects of these types of mergers on market competition, focusing on digital media content distribution. In doing so, we address three research questions: (i) Is the current development of analyzing industry with its recent merger activity concerning? (ii) Would vertical or horizontal integration be more preferable for overall welfare and competition in this industry? (iii) What are implications for antitrust policy? We conclude from our analysis that in the already highly horizontally concentrated U.S. market for audiovisual content the process of further vertical integration creates concerns from a competition policy perspective. Moreover, even though horizontal concentration on some of the market stages may be anticompetitive as well, vertical integration is likely to be more harmful. As a consequence, we recommend a stricter approach to vertical merger control in this industry, as well as a more active abuse control against already vertically-integrated media companies.
    Keywords: competition policy,antitrust,industrial economics,digitization,media economics,institutional economics,industrial organization,mergers,vertical integration,horizontal integration
    JEL: L42 L41 K21 K23 L82 L86 L13 D43 L51 L96
    Date: 2019
  4. By: Raffaella Barone; Donato Masciandaro; Friedrich Schneider
    Abstract: This paper is the first to analyse the three-way relationship among money laundering, anti-money-laundering efforts and corruption. On the one hand, if we assume that the goal of criminals involved in corruption is to minimize the probability of being detected, then corruption represents a demand for money laundering (trigger effect), while money laundering can serve as an effective way to clean the revenue from corruption for re-investment (multiplier effect). On the other hand, criminals can try to maximize the likelihood that anti-money-laundering activities will be ineffective. Corruption can be an effective device for maximizing this likelihood, as organized crime may corrupt financial institutions – both regulators and regulated firms – in order to prevent crime detection (accelerator effect). The paper proposes a novel theoretical framework for these interconnections, which is then used to simulate the three effects in 101 countries for the period 1990 to 2040.
    Keywords: money laundering, corruption, calibration
    JEL: D73 K14 K20 K42
    Date: 2019
  5. By: Sophia du Plessis (Department of Economics, Stellenbosch University); Ada Jansen (Department of Economics, Stellenbosch University); Krige Siebrits (Department of Economics, Stellenbosch University)
    Abstract: The aim of many public policies is to change behaviour. Governments tend to rely on regulations, taxes and subsidies to effect such change. These measures, which affect agents' economic incentives, have a mixed record. A key insight of the New Institutional Economics is that the efficacy of such formal institutions depends on the strength of their enforcement and the extent to which they are compatible with prevailing informal institutions. This paper uses the road safety situation in South Africa as a case study to explore aspects of the relationships among formal institutions, law enforcement and informal institutions. South Africa has a strong suite of road safety laws but poor road safety outcomes. The paper argues that improved law enforcement cannot fully solve the problem; complementary changes to the informal institutions shaping the behaviour of road-users are essential. It points out that institutional economists have to take a greater interest in the insights of research in behavioural economics, behavioural and cognitive science and other disciplines in order to provide useful advice in settings where such change is an important policy objective.
    Keywords: Traffic laws, formal institutions, law enforcement, informal institutions, South Africa
    JEL: B52 D02 D04 D73 K42 L91 L98
    Date: 2019
  6. By: Katarzyna Metelska-Szaniawska (Faculty of Economic Sciences, University of Warsaw); Anna Lewczuk (Faculty of Economic Sciences, University of Warsaw)
    Abstract: In this paper we aim to contribute to the debate on successful enforcement of constitutional rules and its determinants by extending the focus to the phenomenon of constitutional overperformance, which arises when countries that do not include certain de jure rights in their constitutions, nevertheless de facto observe them. Firstly, we provide evidence that constitutional overperformance is a common phenomenon around the globe. Secondly, we identify factors which contribute to it, classifying them into three groups: (1) characteristics of a given country’s constitution (such as its comprehensiveness or age); (2) characteristics of the country itself, pertaining to its institutions (such as its democratization level, degree of judicial independence or legal origins) and socio-economic conditions (e.g. economic development, or presence of political conflict); as well as (3) spatial effects (diffusion of rights protection between neighboring countries). We base the conclusions on an empirical study conducted for a global sample of more than 100 countries.
    Keywords: : constitutional overperformance, constitutional enforcement, democracy, spatial regression models
    JEL: D02 H11 K19
    Date: 2019
  7. By: Diletta Lenzi; Andrea Zorzi
    Abstract: The paper was written as part of the preliminary research for the Human Centred Business Model Project, a project developed within the Global Forum on Law, Justice and Development and now supported by the OECD Development Centre. In a preliminary fashion, the paper skims the surface of ‘social’ businesses, in the broadest sense, around the world, identifying some general trends and commonalities and some differences. The paper covers jurisdictions from North and South America, Europe, Asia and Australia and describes the organisations that can be used to carry out social business.
    Keywords: corporate governance, corporate social responsibility, stakeholder value, social enterprise, benefit corporation, hybrid organization
    JEL: G30 G34 G38 K20 K22 L31 M14
    Date: 2019
  8. By: Robert Bartlett; Adair Morse; Richard Stanton; Nancy Wallace
    Abstract: Discrimination in lending can occur either in face-to-face decisions or in algorithmic scoring. We provide a workable interpretation of the courts’ legitimate-business-necessity defense of statistical discrimination. We then estimate the extent of racial/ethnic discrimination in the largest consumer-lending market using an identification afforded by the pricing of mortgage credit risk by Fannie Mae and Freddie Mac. We find that lenders charge Latinx/African-American borrowers 7.9 and 3.6 basis points more for purchase and refinance mortgages respectively, costing them $765M in aggregate per year in extra interest. FinTech algorithms also discriminate, but 40% less than face-to-face lenders. These results are consistent with both FinTech and non-FinTech lenders extracting monopoly rents in weaker competitive environments or profiling borrowers on low-shopping behavior. Such strategic pricing is not illegal per se, but under the law, it cannot result in discrimination. The lower levels of price discrimination by algorithms suggests that removing face-to-face interactions can reduce discrimination. Further silver linings emerge in the FinTech era: (1) Discrimination is declining; algorithmic lending may have increased competition or encouraged more shopping with the ease of platform applications. (2) We find that 0.74-1.3 million minority applications were rejected between 2009 and 2015 due to discrimination; however, FinTechs do not discriminate in loan approval.
    JEL: G21 G28 J15 K22 K23 R31
    Date: 2019–06
  9. By: Dong HUO; Jiangwei DANG; MOTOHASHI Kazuyuki
    Abstract: Standard-setting organizations (SSOs) generally request that their participants commit to offering licenses ex ante to implementers on fair, reasonable, and non-discriminatory (FRAND or RAND) terms. To adjust for the RAND context, court judges adopt modified Georgia-Pacific rules to determine patent damages ex post in infringement lawsuits involving standard essential patents (SEPs). In this paper, we review the literature on intellectual property rights policy in SSOs and modified Georgia-Pacific rules from court practices and explore the determinants of licensing terms in the RAND context from both technical and legal aspects in accordance with the review. By employing a novel dataset that consists of over a thousand declared SEPs in the Internet Engineering Task Force (IETF), we find that, in general, technical and legal characteristics are significantly associated with reciprocal licensing terms, despite most of their associations with royalty-free (or royalty-bearing) terms being nonetheless trivial.
    Date: 2019–03
  10. By: Cahuc, Pierre (Sciences Po, Paris); Malherbet, Franck (CREST (ENSAE)); Prat, Julien (CREST)
    Abstract: According to French law, employers have to pay at least six months salary to employees whose seniority exceeds two years in case of unfair dismissal. We show, relying on data, that this regulation entails a hike in severance payments at two-year seniority which induces a significant rise in the job separation rate before the two-year threshold and a drop just after. The layoff costs and its procedural component are evaluated thanks to the estimation of a search and matching model which reproduces the shape of the job separation rate. We find that total layoff costs increase with seniority and are about four times higher than the expected severance payments at two years of seniority. Counterfactual exercises show that the fragility of low-seniority jobs implies that layoff costs reduce the average job duration and increase unemployment for a wide set of empirically relevant parameters.
    Keywords: employment protection legislation, dismissal costs, unemployment
    JEL: J65 J63 J32
    Date: 2019–05
  11. By: Seres, G. (Tilburg University, Center For Economic Research); Pigon, Adam
    Abstract: Procuring authorities frequently use screening in order to mitigate risky bids. This study estimates the effect of bid screening and litigation on entry and bidding using a unique data set on highway construction procurement auctions in Poland. The market exhibits a screening method that ex post selects eligible offers. We demonstrate with an empirical model that this method disproportionately affects small firms and creates a barrier to entry. Our results suggest that screening increases bids by two channels. First, it directly inflates bids as well as decreasing entry. Second, in a competitive market, lower entry also inflates bids and prices.
    Keywords: procurement; auctions; market design; litigation
    JEL: H57 D44 L5
    Date: 2019
  12. By: Herbert Dawid; Gerd Muehlheusser
    Abstract: This paper addresses the role of product liability for the emergence and development of smart products such as autonomous vehicles (AVs). We analyze how the liability regime affects innovative activities, as well as the timing of market introduction and market penetration of such smart products. We develop a dynamic model in which at each point in time, a potential (monopolistic) innovator decides on how much to invest in the safety stock of the smart product and on the product price, once it has been launched. Calibrating the model to the U.S. car market, our analysis reveals policy-relevant trade-offs when shifting more liability on the producers of AVs. First, while this improves the safety of AVs in the long run, the safety stock is accumulated more slowly. Second, it delays the market introduction of AVs, and also slows down market penetration, which hampers the innovator’s incentives for safety investments in the short- and intermediate term. As a result, the safety level of AVs at a given point in time decreases as the liability regime becomes more stringent. Furthermore, there is a threshold for the innovator’s burden of liability beyond which she forgoes to develop the AV altogether. Finally, we find that direct AV safety regulation is welfare-superior compared to a stringent liability regime, as it induces higher levels of AV safety in the short and intermediate term.
    Keywords: product innovation, liability, digital economy, autonomous vehicles, smart products, optimal investment dynamics
    JEL: O31 K13 L11 L62
    Date: 2019
  13. By: Jan-Emmanuel De Neve; Clement Imbert; Maarten Luts; Johannes Spinnewijn; Teodora Tsankova
    Abstract: We study the impact of deterrence, tax morale, and simplifying information on tax compliance. We ran _ve experiments spanning the tax process which varied the communication of the tax administration with all income taxpayers in Belgium. A consistent picture emerges across experiments: (i) simplifying communication increases compliance, (ii) deterrence messages have an additional positive effect, (iii) invoking tax morale is not effective. Even tax morale messages that improve knowledge and appreciation of public services do not raise compliance. In fact, heterogeneity analysis with causal forests shows that tax morale treatments backfire for most taxpayers. In contrast, simplification has large positive effects on compliance, which diminish over time due to follow-up enforcement. A discontinuity in enforcement intensity, combined with the experimental variation, allows us to compare simplification with standard enforcement measures. Simplification is far more cost-effective, allowing for substantial savings on enforcement costs, and also improves compliance in the next tax cycle.
    Keywords: tax compliance, field experiments, simplification, enforcement
    JEL: C93 D91 H20
    Date: 2019–05
  14. By: Felix Hugger
    Abstract: Within the framework of its BEPS initiative, the OECD introduced a requirement for non-public country-by-country reporting (CbCR) applying to multinational companies with revenues above EUR 750m. The reports provide data on the global activities and financial structure of multinationals at a country level to tax authorities. This paper investigates the effectiveness of this measure against corporate tax avoidance using a difference-in-difference approach. The analysis is based on financial data both at the group and the subsidiary level. By testing several hypotheses, this paper provides limited support for the effectiveness of CbCR. While the effective tax rates of multinational groups with a reporting requirement increase by about 0.8 percentage points as compared to companies in the control group, the growth rate of total tax payments is unaffected. This seems to be due to a reduction of the tax base which is also due to a rise in leverage and resulting tax-deductible interest payments. At the same time, shifting of profits out of high tax jurisdictions is reduced by CbCR, but not at the expense of low tax OECD countries. CbCR therefore seems to primarily reduce profits located in tax haven affiliates of multinational groups. Lastly, there is little evidence for a distribution of profits closer aligned with frequently suggested apportionment factors.
    Keywords: Corporate tax avoidance, multinational firms, country-by-country reporting, profit shifting,
    JEL: H20 H26 F23 K34
    Date: 2019
  15. By: Ojo, Marianne
    Abstract: With ever expanding possibilities for innovative advances and technological breakthroughs, the need for facilitating techniques to ensure that economic and environmental sustainability measures can match or rather keep up with such pace of development, is becoming more evident. Artificial Intelligence (AI), vertical integration and block chain systems and technologies will have increasing roles to play, particularly in respect of areas which relate to global climate change, trade and energy, in facilitating transitional processes, complex transactions and changes which are consequential of such developments. The Seychelles “Debt Conversion for Marine Conservation and Climate Program” illustrates the complexity of transactions involved in the program – as well as the need for future and flexible provisional arrangements and technologies which will facilitate the achievement of the goals and objectives of the programs – in addition to the intended roles and engagements of stakeholders involved. Challenges presented with Artificial Intelligence and Block Chain Systems incorporate the need for greater certainty and tested (and proven) procedures with controls and governance in respect of bionic collaborations between humans and technology. In their publication “Harnessing Innovation to Lead the Bionic Lending Revolution (© 2019 PwC)”, Pollini, Hernandez, Prescher and Shipley highlight the following in respect of the “Bionic Revolution”: “With the onset of the fourth industrial revolution (4IR), consumer lending organizations are facing altogether new questions about the future. The lending environment has already experienced vast change; yet, we are quickly seeing a transition into a marketplace of end-to-end home ownership offerings and financial health ecosystems that are likely to trigger a revolution rather than the next stage of evolution.” As well as illustrating and addressing certain questions and challenges which Artificial Intelligence and Block chain technologies face, possible steps forward, and why Blockchain technology, particularly, still has quite a way to go, this paper highlights how such technologies can play vital roles in sustainable development – and with particular reference to complex lending and financing arrangements which embody such programs as those relating to the “Debt Conversion for Marine Conservation and Climate Program”. What possibilities also exist for wild life programs – particularly those aimed at preserving endangered species in environments not heavily affected by air or water pollution? Moreover, how can leading economies engage in programs more effectively to mitigate jurisdictional differences, facilitate disclosure and transparency in their collaborations – whilst also according appropriate considerations to increasingly topical matters as trade, climate change and sustainable development?
    Keywords: Artificial Intelligence; Vertical Integration; Block chain systems; Sustainable Development; energy; climate, environment; Fourth Industrial Revolution; The Bionic Revolution; patents; intellectual property; trade relationships; transparency; information disclosure
    JEL: D8 G2 G28 G3 K2 Q2 Q5 Q56
    Date: 2019–06

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.
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