nep-law New Economics Papers
on Law and Economics
Issue of 2019‒08‒19
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Collective Bargaining and Police Misconduct: Evidence from Florida By Dhammika Dharmapala; Richard H. McAdams; John Rappaport
  2. On Selecting the Right Agent By Andreas Engert
  3. Inferring Tax Compliance from Pass-through: Evidence from Airbnb Tax Enforcement Agreements By Andrew J. Bibler; Keith F. Teltser; Mark J. Tremblay
  4. Immigration and Crimes against Natives: The 2015 Refugee Crisis in Germany By Huang, Yue; Kvasnicka, Michael
  5. Crime and Economic Growth: A Case Study of Manaus, Brazil By Pedro Drugowick; Paula Pereda
  6. Insolvency Regimes and Economic Outcomes By Tatsiana Kliatskova; Loïc Baptiste Savatier
  7. The importance of Punishment Substitutability in Criminometric Studies By Eugene Braslavskiy; Firmin Doko Tchatoka; Virginie Masson
  8. Employers as personal data administrators – specifics and requirements in the context of the information society By Andreeva, Andriyana; Mateeva, Zhivka
  9. Impact of Regulating Non-Regular Employment on Firms' Employment Decisions By Park, Wooram; Park, Yoonsoo
  10. Compensation in Personal Injury Cases: Mean or Median Income? By Danziger, Leif; Katz, Eliakim
  11. The Influence of Misperceptions about Social Norms on Substance Use among School-age Adolescents By Amialchuk, Aliaksandr; Ajilore, Gbenga; Egan, Kevin
  12. Legal form determination for the development of clusters' activities By Raimonda Bublienė; Irina Vinogradova; Manuela Tvaronavičienė; Salvatore Monni
  13. Credit, Default, and Optimal Health Insurance By Jang, Youngsoo

  1. By: Dhammika Dharmapala; Richard H. McAdams; John Rappaport
    Abstract: Growing controversy surrounds the impact of labor unions on law enforcement behavior. Critics argue that unions impede organizational reform and insulate officers from discipline for misconduct. Yet collective bargaining tends to increase wages, which could improve officer behavior. We provide quasi-experimental empirical evidence on the effects of collective bargaining rights on violent incidents of misconduct. Our empirical strategy exploits a 2003 Florida Supreme Court decision (Williams), which conferred collective bargaining rights on sheriffs’ deputies, resulting in a substantial increase in unionization among these officers. Using a Florida state administrative database of “moral character” violations reported by local agencies between 1996 and 2015, we implement a difference-in-difference approach in which police departments (which were unaffected by Williams) serve as a control group for sheriffs’ offices (SOs). Our estimates imply that collective bargaining rights led to a substantial increase in violent incidents of misconduct among SOs, relative to police departments. The effect of collective bargaining rights is concentrated among SOs that subsequently adopted collective bargaining agreements, and the timing of the adoption of these agreements is associated with increases in violent misconduct. There is also some evidence consistent with a “bargaining in the shadow” effect among SOs that did not unionize.
    Keywords: collective bargaining rights, police unions, police misconduct, law enforcement
    JEL: J45 J50 K42
    Date: 2019
  2. By: Andreas Engert
    Abstract: Shareholder activism by hedge funds has taken hold in Germany in spite of large ownership concentration. This essay uses the example of Stada Arzneimittel AG to highlight features of activism, German style. It goes on to discuss the legal issues raised by activist campaigns at the two stages of acquiring a shareholding in the target company and, subsequently, of interacting with its management and pressuring for strategic or corporate governance changes. In light of the theory and evidence on the short-term and long-term effects of shareholder activism, the essay concludes that German and European law has rightly refrained from intervening in this most recent corporate governance development. The law lacks a reliable filter to sort desirable from undesirable forms of activism. The essay is forthcoming in Holger Fleischer, Hideki Kanda, Kon Sik Kim, and Peter O. Mülbert (eds.), German and East Asian Perspectives on Corporate and Capital Market Law: Investors versus Companies.
    Keywords: shareholder activism, hedge fund activism, major shareholdings disclosure, insider trading, company secrets
    JEL: G34 K22
    Date: 2019–08
  3. By: Andrew J. Bibler; Keith F. Teltser; Mark J. Tremblay
    Abstract: Tax enforcement can be prohibitively costly when market transactions and participants are difficult to observe. Evasion among market participants may reduce tax revenue and provide certain types of suppliers an undue competitive advantage. Whether efforts to fully enforce taxes are worthwhile depends on the rate of compliance in the absence of such efforts. In this paper, we show that an upper bound on pre-enforcement tax compliance can be obtained using market data on pre- and post-enforcement periods. To do this, we estimate the pass-through of tax enforcement agreements between Airbnb and state and local governments, which achieve full compliance at the point of sale. Using data on Airbnb listings across a number of U.S. metropolitan areas, as well as variation in enforcement agreements across time, location, and tax rate, we estimate that taxes are paid on no more than 24 percent of Airbnb transactions prior to enforcement. We also find that demand is inelastic, which drives several key insights: the economic burden of taxation disproportionately falls on renters, excess burden is very small, and tax enforcement is not an effective policy lever for interest groups seeking to reduce local Airbnb activity.
    Keywords: evasion, short-term housing rentals, sharing economy, voluntary collection agreements, online sales and use taxes
    JEL: H20 H22 H26 L10
    Date: 2019
  4. By: Huang, Yue (Otto-von-Guericke University Magdeburg); Kvasnicka, Michael (Otto-von-Guericke University Magdeburg)
    Abstract: In the 2015 refugee crisis, nearly one million refugees came to Germany, raising concern that crimes against natives would rise. Using novel county-level data, we study this question empirically in first-difference and 2SLS regressions. Our results do not support the view that Germans were victimized in greater numbers by refugees as measured by their rate of victimization in crimes with refugee suspects. Our findings are of great policy and public interest, and also of material relevance for the broader literature on immigration and crime which considers only crimes per capita or variants thereof, but never actual crimes by foreigners against natives. We show that this shortcoming can lead to biased inference.
    Keywords: immigration, refugees, crimes, crimes against natives
    JEL: F22 J15 K42
    Date: 2019–07
  5. By: Pedro Drugowick; Paula Pereda
    Abstract: Due to economic and social advances since the 1990s, Brazil became the 7th largest economy in the world in 2012. However, crime rates have not stopped rising since the beginning of the last decade, with Brazil having the 11th largest homicide rate on the planet in that year (UN). In this paper we estimate how much crime harms economic activity from a case study of the city of Manaus, where in 2007 the organized crime group known as “Família do Norte†was created. We analyzed the effects on Manaus’ GDP per capita using the synthetic control method. The comparison between Manaus and its synthetic control in the period after the creation of the criminal group showed that the presence of the criminal faction diminished the city’s GDP by 3% per year. Robustness checks confirmed this result, showing how organized crime can disrupt the country’s economic advances.
    Keywords: Crime and economic activity; Organized crime; Synthetic control method
    JEL: K32 O47 Z18
    Date: 2019–07–29
  6. By: Tatsiana Kliatskova; Loïc Baptiste Savatier
    Abstract: When in distress, a firm may need restructuring or liquidation; in either case, legal uncertainty compounds the difficulty. Sound and efficient insolvency regimes are important as these not just positively affect investment, innovation, and economic growth, but also the supply and cost of credit. The design of appropriate insolvency frameworks in Europe is, however, still controversial. The debate is especially relevant as the European Commission just set a new legal framework for insolvency proceedings. This article both summarizes the recent Directive of the European Commission on minimum standards for national insolvency regimes and provides a review of the literature on how insolvency regimes affect real and financial sectors.
    Date: 2019
  7. By: Eugene Braslavskiy (School of Economics, University of Adelaide); Firmin Doko Tchatoka (School of Economics, University of Adelaide); Virginie Masson (School of Economics, University of Adelaide)
    Abstract: This study investigates the role of punishment substitutability in the empirical estimation of the economic model of crime. Using a dynamic panel data model fitted to a panel of Local Government Areas in New South Wales, Australia, we evaluate the effects of financial penalties and imprisonment on the crime rate. Our results show that crime is clearly a dynamic phenomenon, and that failure to incorporate both financial penalties and imprisonment can lead to a misspecfied model. Furthermore, our results vary signifcantly for different crime categories, highlighting the importance of analysing specific crime categories separately.
    Keywords: crime, deterrence, punishment, panel data, aggregation bias
    JEL: K14 C23 C26 C51
    Date: 2019–02
  8. By: Andreeva, Andriyana; Mateeva, Zhivka
    Abstract: The paper explores the specifics of the personal data administrator in the information society and the new European regulations. On the basis of the correlation between the digitization in the economy and the impact of the process on the labor relation, the basic obligations of the employer as data administrator are analyzed. Finally, conclusions and recommendations on the application of the regulations are made in view of the employer‘s commitments regarding the employees’ personal data.
    Keywords: personal data, personal data administrator, employer, labor law
    JEL: K23 K31
    Date: 2018
  9. By: Park, Wooram; Park, Yoonsoo
    Abstract: - Regulations on the use of non-regular workers can encourage the conversion to regular workers and reduce firms' labor use. They can also increase the use of non-regular employment types that are not subject to the law. - An analysis on the impact of the non-regular employment protection law (2007) on firms' employment decisions found that regular employment increased and non-regular employment (fixed-term/agency workers who fall within the scope of the law) decreased. - However, total employment, including non-regular workers, dropped slightly and the use of nonregular workers (contract workers etc.) not subject to the law increased. - The impact of regulating the use of non-regular workers on firms' employment decisions can vary depending on the degree of rigidity in working conditions for regular employees. - Analysis on the effect of the non-regular employment protection law by firm characteristics showed that conversion to regular status was lower and the use of non-regular workers not subject to the law was higher among firms who believed that the working conditions for regular employees were highly rigid. - To fulfill the intended goals of the law, measures to ease the rigidity of working conditions for regular employees must be sought. - The conventional concept of labor flexibility needs to be extended to cover working conditions (wage, working hours) to evenly promote workers' demand for job security and employers' need for flexible labor management.
    Date: 2018
  10. By: Danziger, Leif (Ben Gurion University); Katz, Eliakim (E. Katz Economics Inc.)
    Abstract: Courts typically base compensation for loss of income in personal injury cases on either mean or median work income. Yet, quantatively, mean and median incomes are typically very different. For example, in the US median income is 65 percent of mean income. In this paper we use economic theory to determine the relation between the appropriate make-whole (full) compensation and mean and median work incomes. Given that consumption uncertainty associated with compensation generally exceeds that associated with work income, we show that the appropriate make-whole compensation exceeds mean (and therefore median) work income. Hence, if the compensation must be either the mean or the median work income, then mean work income should be selected.
    Keywords: compensation, personal injury, income loss, uncertainty, risk aversion
    JEL: K13
    Date: 2019–07
  11. By: Amialchuk, Aliaksandr; Ajilore, Gbenga; Egan, Kevin
    Abstract: Individuals often have biased perceptions about their peers' behavior. We use an economic equilibrium analysis to study the role social norms play in substance use decisions. Using a nationally representative dataset, we estimate the effect of misperception about friends' alcohol, smoking, and marijuana use on consumption of these substances by youths in grades 7–12. Overestimation of friend's substance use significantly increases adolescent's own use approximately 1 year later, and the estimated effect is robust across specifications including individual‐level fixed effects regression. The effect size is bigger for boys than for girls. The estimates for those who initially underestimated the norm suggest the possibility of a rebound/boomerang effect.
    Keywords: Substance use, Misperception, Social Norms, Adolescents, Add Health
    JEL: C23 I12 J13
    Date: 2019–02–12
  12. By: Raimonda Bublienė (Vilnius Gediminas Technical University); Irina Vinogradova (Vilnius Gediminas Technical University); Manuela Tvaronavičienė (Vilnius Gediminas Technical University); Salvatore Monni (Roma Tre University)
    Abstract: In this study, the authors have investigated the determination of the most suitable legal form for the development of the cluster management activities. In each particular case the developers of the cluster have to assess the objectives of the cluster, the principal aspects of the mutual partnership, the risks that could be provoked, and in accordance with the derived decisions. The choice of the cluster legal activity form depends on the objectives and on the branch in which the cluster is operating, on the number of the cluster participants, on the type of the activities of the cluster, on the openness or closeness to new members, type of the contributions of the partners and the other factors. The most reliable solution regarding the choice of the model of the functioning and management of the cluster has to be derived as well legal regulation of the legal form of the activity discussed. The advantages and disadvantages of two models of the cluster formation discussed. During experimental evaluation, the significance of criteria was determined and the expert evaluation on legal form for the 245 development of clusters activities was performed. Foundation and management of the clusters are determined firstly by the fact that in one case a new established legal person performs the functions of the cluster coordinator while in another case one of the cluster participants performs the functions and partners legal cooperation determined by Agreement on Partnership. Article analyses the multi-criteria decisions-making to establish the cluster with the certain type of juridical form of legal person or to develop cluster management activities by the Partnership Agreement. The recommendations presented by application of MCDM calculus methods with aspect of percentage.
    Keywords: MCDM,clusters,juridical form,TOPSIS,COPRAS,SAW
    Date: 2019–09–30
  13. By: Jang, Youngsoo
    Abstract: How do defaults and bankruptcies affect optimal health insurance policy? I answer this question using a life-cycle model of health investment with the option to default on emergency room (ER) bills and financial debts. I calibrate the model for the U.S. economy and compare the optimal health insurance in the baseline economy with that in an economy with no option to default. With no option to default, the optimal health insurance is similar to the health insurance system in the baseline economy. In contrast, with the option to default, the optimal health insurance system (i) expands the eligibility of Medicaid to 22 percent of the working-age population, (ii) replaces 72 percent of employer-based health insurance with a private individual health insurance plus a progressive subsidy, and (iii) reforms the private individual health insurance market by improving coverage rates and preventing price discrimination against people with pre-existing conditions. This result implies that with the option to default, households rely on bankruptcies and defaults on ER bills as implicit health insurance. More redistributive healthcare reforms can improve welfare by reducing the dependence on this implicit health insurance and changing households’ medical spending behavior to be more preventative.
    Keywords: Credit, Default, Bankruptcy, Optimal Health Insurance
    JEL: E21 H51 I13 K35
    Date: 2019–07

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