nep-law New Economics Papers
on Law and Economics
Issue of 2019‒09‒02
seventeen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Deterrence and the Adjustment of Sentences During Imprisonment By A. Mitchell Polinsky; Steven Shavell
  2. The impact of EU cartel policy reforms on the timing of settlements in private follow-on damages disputes: An empirical assessment of cases from 2001 to 2015 By Hans W. Friederiszick,; Linda Gratz,; Michael Rauber,
  3. The Impact of Abortion on Crime and Crime-Related Behavior By Hjalmarsson, Randi; Mitrut, Andreea; Pop-Eleches, Cristian
  4. Labor Conflict at the Workplace: Do Dismissal Regulations Matter? By Filippo Belloc
  5. Crime and Networks: 10 Policy Lessons By Lindquist, Matthew; Zenou, Yves
  6. Defeating Crime? An Economic Analysis of Cannabis Legalization Policies By Auriol, Emmanuelle; Mesnard, Alice; Perrault, Tiffanie
  7. Corruption and social rights accountability By Engelbert, Annika; Kaltenborn, Markus
  8. Cannabis Prices on the Dark Web By Cerveny, Jakub; van Ours, Jan C.
  9. Extreme Temperature and Extreme Violence across Age and Gender: Evidence from Russia By Popova, Olga; Otrachshenko, Vladimir; Tavares, José
  10. Limited impact of UPPs over criminality By Matheus Sérgio Custódio de Almeida; Paula Carvalho Pereda
  11. Regulatory options for conflicts of law and jurisdictional issues in the on-demand economy By Cherry, Miriam A.
  12. Are Syringe Exchange Programs Helpful or Harmful? New Evidence in the Wake of the Opioid Epidemic By Analisa Packham
  13. The role of political instability and corruption on foreign direct investment in the MENA region By Aloui, Zouhaier
  14. Corruption and Economic Growth: New Empirical Evidence By Klaus Gründler; Niklas Potrafke
  15. The impact of data access regimes on artificial intelligence and machine learning By Bertin Martens
  16. Homicide and Social Media: Global Empirical Evidence By Simplice A. Asongu; Joseph I. Uduji; Elda N. Okolo-Obasi
  17. Credit, Default, and Optimal Health Insurance By Jang, Youngsoo

  1. By: A. Mitchell Polinsky; Steven Shavell
    Abstract: The prison time actually served by a convicted criminal depends to a significant degree on decisions made by the state during the course of imprisonment—on whether to grant parole or other forms of sentence reduction. In this article we study a model of the adjustment of sentences assuming that the state’s objective is the optimal deterrence of crime. In the model, the state can lower or raise the sentence based on deterrence-relevant information that it obtains about a criminal during imprisonment. Our focus on sentence adjustment as a means of promoting deterrence stands in contrast to the usual emphasis in sentence adjustment policy on reducing recidivism.
    JEL: K14 K42
    Date: 2019–07
  2. By: Hans W. Friederiszick, (ESMT European School of Management and Technology and E.CA Economics); Linda Gratz, (E.CA Economics); Michael Rauber, (E.CA Economics)
    Abstract: Private cartel damages litigation is on the rise in Europe since early 2000. This development has been initiated by the European courts and was supported by various policy initiatives of the European Commission, which found its culmination in the implementation of the EU Directive on Antitrust Damages end of 2016. This paper explores the impact of this reform process on effective compensation of damaged parties of cartel infringements. For that purpose we analyse all European cartel cases with a decision date between 2001 and 2015, for which we analyse litigation activity and speed. Overall, we find a substantial reduction of the time until first settlement (increase in litigation speed) together with a persisting high share of cases being litigated (high litigation activity). This supports the view that the reform not only increased the claimant’s expectation about the amount of damages being awarded, but also resulted in an alignment in the expectations of claimants and defendants in the final damages amount, i.e. the European Commission succeeded in reaching its objective to clarify and harmonize legal concepts across Europe.
    Keywords: Cartels, private damages, competition law
    Date: 2019–08–26
  3. By: Hjalmarsson, Randi; Mitrut, Andreea; Pop-Eleches, Cristian
    Abstract: The 1966 abolition and 1989 legalization of abortion in Romania immediately doubled and decreased by about a third the number of births per month, respectively. To isolate the link between abortion access and crime while abstracting from cohort and general equilibrium effects, we compare birth month cohorts on either side of the abortion regime. For both the abolition and legalization of abortion, we find large and significant effects on the level of crime and risky-behavior related hospitalization, but an insignificant effect on crime and hospitalization rates (i.e. when normalizing by the size of the birth month cohort). In other words, the Romanian abortion reforms did affect crime, but all of the effect appears to be driven by cohort size effects rather than selection or unwantedness effects.
    Keywords: Abortion; crime; Risky behavior
    JEL: I18 J13 J18 K42
    Date: 2019–06
  4. By: Filippo Belloc
    Abstract: Using data on more than 13000 European establishments over the 2009-2013 period, I analyze the relationship between discharge regulation and industrial actions. I introduce a simple theoretical framework allowing for both positive and negative effects of dismissal constraints on the occurrence of labor disputes, and empirically answer the question as whether stricter dismissal laws make EU establishments experience more frequent and intense industrial actions (work-to-rule, strikes and occupation). I find that a change from employment at-will to a regime with very strict dismissal constraints is associated with an increase in the likelihood of observing an industrial action at the establishment-level ranging between 10.5 and 14.8 percentage points, and that this effect reduces to around 6.7 percentage points when only company-specific industrial actions are considered. Discharge constraints effects on industrial actions are then confirmed through a difference-in-differences analysis, by exploiting quasi-experimental variations in national dismissal regulations. My findings show that less strict discharge regulations moderate labor conflicts in EU establishments, by disciplining workers and restraining unions' activism.
    Keywords: industrial action, dismissal regulation, unions, European Company Survey
    JEL: J52 J58 K31
    Date: 2019–07
  5. By: Lindquist, Matthew; Zenou, Yves
    Abstract: In this article, we argue that social network analysis can be used in a meaningful way to help us understand more about the root causes of delinquent behavior and crime and also to provide practical guidance for the design of crime prevention policies.
    Keywords: Co-offending; crime; Criminal networks; key player; peer effects; Social Networks
    JEL: A14 K42 Z13
    Date: 2019–06
  6. By: Auriol, Emmanuelle; Mesnard, Alice; Perrault, Tiffanie
    Abstract: Can legalization of cannabis eliminate related organized crime? We model consumer choices for cannabis in a risky environment and determine the provision of cannabis, under prohibition and legalization. Although a legalization policy may crumble the profits from illegal providers driving them out of business, it also increases cannabis use. In contrast, repression decreases cannabis consumption but strengthens the cartelization of criminal networks. Combining legalization with repression can strangle the black market while controlling the demand for cannabis. Based on evidence from the US, policy simulations are used to compute the price of legal cannabis that would achieve this dual objective and highlight the complementarities between repression and legalization. For example, with a 1% probability of arrest and a USD 2000 fine for illegal purchase, a legal price around USD 439 per ounce would evict illegal suppliers and increase the consumption by less that 25%. If the probability of arrest reaches 2%, the eviction price can go up to USD 622 and overall consumption increases by no more than 5:5%.
    Keywords: Cannabis; crime; legalization; policy; regulation
    JEL: I18 K32 K42 L51
    Date: 2019–06
  7. By: Engelbert, Annika; Kaltenborn, Markus
    Abstract: Transnational criminal law treaties traditionally dominate the international anticorruption regime; yet, corruption has not considerably decreased since their coming into force. It therefore seems appropriate to broaden the legal perspective: Corruption as a threat to welfare, safety, and physical integrity of the individual can be conceptualized as a human rights violation. This paper argues that it is possible indeed to establish causal links between the misallocation of public funds, including budget distortions and underfunding of anti-corruption institutions, and a structural infringement of social human rights. We present several human rights instruments suitable to combat corruption with regard to social rights realization. In particular, we assess the capacity of public interest litigation, as well as related contextual legal and political conditions for the case of Kenya. With its new Bill of Rights, Kenya has great potential to spearhead a progressive impact litigation strategy targeting corruption-induced social rights infringements.
    Date: 2019
  8. By: Cerveny, Jakub; van Ours, Jan C.
    Abstract: This paper examines prices of cannabis sold over the anonymous internet marketplace AlphaBay. We analyze cannabis prices of 500 listings from about 140 sellers, originating from 18 countries. We find that both listing characteristics and country characteristics matter. Cannabis prices are lower if sold in larger quantities, so there is a clear quantity discount. Cannabis prices increase with perceived quality. Cannabis prices are also higher when the seller is from a country with a higher GDP per capita or higher electricity prices. The internet based cannabis market seems to be characterized by monopolistic competition where many sellers offer differentiated products with quality variation causing a dispersion of cannabis prices and sellers have some control over the cannabis prices.
    Keywords: Cannabis prices; Dark web
    JEL: D43 K42
    Date: 2019–08
  9. By: Popova, Olga; Otrachshenko, Vladimir; Tavares, José
    Abstract: We examine the relationship between extreme temperatures and violent mortality across Russian regions, with implications for the social costs of climate change. We assess the unequal impact of temperature shocks across gender and age groups by exploring a dataset on temperature and violence in Russia, between the years 1989 and 2015. Hot days lead to an increase in both female and male victims, one hot day resulting in the loss of 1,579 person-years of life for men, and 642 for women. However, the likelihood of victimization during weekends rises noticeably for women, with women between 25 and 59 more victimized on weekends. Our results suggest that female victimization on hot days would be mitigated by increases in regional income and job opportunities, and on cold days, by decreasing the consumption of spirits.
    Keywords: Violence,Gender Homicide,Extreme Temperatures,Russia
    JEL: I14 K42 P52 Q54
    Date: 2019
  10. By: Matheus Sérgio Custódio de Almeida; Paula Carvalho Pereda
    Abstract: The effects of the implementation of UPPs have not yet been evaluated for its entire period. This paper aims to evaluate the impact on crime rates in the city of Rio de Janeiro using as control group districts of the city of São Paulo. Then, a difference-in-difference model is combined with a propensity score analysis. The results indicate that the UPPs were successful only in the initial years. The cost-effectiveness analysis of the program indicates an economic benefit of R$460 million, but net benefits are expected to vanish due to the limited effects of the policy.
    Keywords: Public Security; UPPs; Differences-in-Differences; Panel Data.
    JEL: Z18 K42 C21
    Date: 2019–08–21
  11. By: Cherry, Miriam A.
    Abstract: On demand platforms are changing and reshaping our conceptions of both the firm and the work relationship in far-reaching and critical ways, allowing companies to hire workers and to seek customers across national boundaries. While some commentators believe existing forms of labour and employment regulations can stretch to cover on-demand work, others have called for new legal initiatives specifically crafted for online platforms. Confronted with low pay and problematic working conditions, gig workers around the world have turned to the courts, attempting to invoke the protections of traditional labour and employment law. The goal of this paper is to provide a global framework for thinking about the on-demand business model and these assorted conflicts of law and jurisdictional issues. Throughout, the paper emphasizes the need for further coordinated multilateral study, discussion, and regulatory action to assist both crowdworkers and businesses as they navigate the on-demand model of production.
    Date: 2019
  12. By: Analisa Packham
    Abstract: In light of the recent opioid crisis, many public health entities have called for an expansion in syringe exchange programs (SEPs), which provide access to sterile syringes and facilitate safe needle disposal for injection drug users. This paper investigates the effects of recent SEP openings on HIV diagnoses and drug-related overdoses in the wake of the opioid crisis. I find that SEP openings decrease HIV diagnoses by up to 18.2 percent. However, I present new evidence that SEPs increase rates of opioid-related mortality and hospitalizations, suggesting that needle exchanges alone may be less effective than other interventions at stimulating recovery.
    JEL: I10 I18 K42
    Date: 2019–07
  13. By: Aloui, Zouhaier
    Abstract: The interest of this paper is to show the influence of political instability and corruption on foreign direct investment and its different effects among MENA countries. Political instability and corruption are highlighted as a risk factor for the foreign investor who generates several costs for economic activity and remains a major determinant of FDI. The combination of political instability and corruption contributes to the revolution in these countries such as Tunisia, Egypt, Libya and weak economic integrations in general explain the low attractiveness of MENA countries for foreign investors. It is widely argued that good governance is an important factor of FDI. With the exception of studies of corruption, however, empirical research on the link between governance and FDI is limited, particularly in the context of MENA countries. Corruption and political instability are the governance indicators that seem to have the greatest impact on foreign direct investment (FDI). An increase in FDI has the greatest effect on development in politically stable regimes. Studies of corruption and its relation to foreign direct investment (FDI) have yielded mixed results; some have found that corruption discourages FDI, but others have found the opposite. The study covers the MENA region for the period 1996-2016. Using the panel data technique and the results obtained indicate a negative relationship between political instability and foreign direct investment and between corruption and FDI.
    Keywords: political instability, corruption, foreign direct investment, MENA countries.
    JEL: F21 K23 K42
    Date: 2019–08–26
  14. By: Klaus Gründler; Niklas Potrafke
    Abstract: The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International’s Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012-2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation.
    Keywords: Perceived corruption, economic growth, panel data
    JEL: C23 H11 K40 O11
    Date: 2019
  15. By: Bertin Martens (European Commission – JRC)
    Abstract: Digitization triggered a steep drop in the cost of information. The resulting data glut created a bottleneck because human cognitive capacity is unable to cope with large amounts of information. Artificial intelligence and machine learning (AI/ML) triggered a similar drop in the cost of machine-based decision-making and helps in overcoming this bottleneck. Substantial change in the relative price of resources puts pressure on ownership and access rights to these resources. This explains pressure on access rights to data. ML thrives on access to big and varied datasets. We discuss the implications of access regimes for the development of AI in its current form of ML. The economic characteristics of data (non-rivalry, economies of scale and scope) favour data aggregation in big datasets. Non-rivalry implies the need for exclusive rights in order to incentivise data production when it is costly. The balance between access and exclusion is at the centre of the debate on data regimes. We explore the economic implications of several modalities for access to data, ranging from exclusive monopolistic control to monopolistic competition and free access. Regulatory intervention may push the market beyond voluntary exchanges, either towards more openness or reduced access. This may generate private costs for firms and individuals. Society can choose to do so if the social benefits of this intervention outweigh the private costs. We briefly discuss the main EU legal instruments that are relevant for data access and ownership, including the General Data Protection Regulation (GDPR) that defines the rights of data subjects with respect to their personal data and the Database Directive (DBD) that grants ownership rights to database producers. These two instruments leave a wide legal no-man's land where data access is ruled by bilateral contracts and Technical Protection Measures that give exclusive control to de facto data holders, and by market forces that drive access, trade and pricing of data. The absence of exclusive rights might facilitate data sharing and access or it may result in a segmented data landscape where data aggregation for ML purposes is hard to achieve. It is unclear if incompletely specified ownership and access rights maximize the welfare of society and facilitate the development of AI/ML.
    Keywords: digital data, ownership and access rights, trade in data, machine learning, artificial intelligence
    JEL: L00
    Date: 2018–09
  16. By: Simplice A. Asongu (Yaoundé/Cameroon); Joseph I. Uduji (University of Nigeria, Nsukka, Nigeria); Elda N. Okolo-Obasi (University of Nigeria, Nsukka, Nigeria)
    Abstract: This study investigates the relationship between social media and homicide in a cross section of 148 countries for the year 2012. The empirical evidence is based on Ordinary Least Squares, Tobit and Quantile regressions. The findings from Ordinary Least Squares and Tobit regressions show a negative relationship between Facebook penetration and the homicide rate. The negative relationship is driven by the 75th quantile of the conditional distribution of the homicide rate. The negative nexus is also driven by upper middle income countries and “Europe and Central Asia”. Three main implications are apparent when the findings are compared and contrasted. First, established findings from OLS and Tobit regressions are driven by countries with above-median levels of homicide. Second, such above-median countries are largely associated with upper middle income countries and nations in “Europe and Central Asia”. Third, modelling the relationship between Facebook penetration and homicide at the conditional mean of homicide may be misleading unless it is contingent on initial levels of homicide and tailored differently across income levels and regions of the world.
    Keywords: Homicide; Social media
    JEL: K42 D83 O30 D74 D83
    Date: 2019–01
  17. 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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