nep-law New Economics Papers
on Law and Economics
Issue of 2019‒11‒25
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Whistleblowers, The False Claims Act, and the Behavior of Healthcare Providers By Jetson Leder-Luis
  2. Slavery, Corruption, and Institutions By Michael Rauscher; Bianca Willert
  3. Sequential bankruptcy problems By Arantza Estévez-Fernández; José Manuel Giménez-Gómez; María José Solís-Baltadano
  4. How Do NYPD Officers Respond to Terror Threats? By Steven F. Lehrer; Louis Pierre Lepage
  5. Dispute Settlement with Second-Order Uncertainty By Mostafa Beshkar; Jee-Hyeong Park
  6. Effects of Mandatory Energy Efficiency Disclosure in Housing Markets By Erica Myers; Steven L. Puller; Jeremy D. West
  7. Clarity, Surprises, and Further Questions in the Article 29 Working Party Draft Guidance on Automated Decision-Making and Profiling By Veale, Michael; Edwards, Lilian
  8. Superstars in two-sided markets: exclusives or not? By Leonardo Madio; Carroni, Elias; Shekhar, Shiva
  9. Credence Goods Markets and the Informational Value of New Media: A Natural Field Experiment By Rudolf Kerschbamer; Daniel Neururer; Matthias Sutter
  10. The benefit of the doubt: Willful ignorance and altruistic punishment By Stüber, Robert
  11. Waiting for the Prince Charming: Fixed-Term Contracts as Stopgaps By Normann Rion
  12. Law and Macroeconomics: The Global Evolution of Macroprudential Regulation : a speech at the “Law and Macroeconomics,” a conference at Georgetown University Law Center, Washington, D.C., September 27, 2019. By Quarles, Randal K.

  1. By: Jetson Leder-Luis
    Abstract: This paper studies the effects of litigation by whistleblowers against healthcare providers for misreporting claims for payment to the Medicare program. Under the U.S. False Claims Act, whistleblowers bring lawsuits on behalf of the government in exchange for a share of recovered payments. I combine a new dataset on whistleblower cases from the Department of Justice with the universe of Medicare Fee- for-Service claims from 1999-2016. First, I measure the deterrence effects of successful whistleblowing lawsuits using a synthetic control design. I find that whistleblower settlements totaling to $1.9 billion in recovery generated future cost savings of more than $18 billion over 5 years. Next, I examine how whistleblowing impacts care decisions by providers. Using a case study of spine procedures for osteoporotic patients, I find that after a whistleblower settlement, care shifted from inpatient to less-expensive outpatient treatment and towards patients with the greatest expected benefit.
    JEL: H51 D73 M48
    Date: 2019–11–08
  2. By: Michael Rauscher; Bianca Willert
    Abstract: We develop a model where firms profit from coercing workers into employment under conditions violating national law and international conventions and where bureaucrats benefit from accepting bribes from detected perpetrators. Firms and bureaucrats are heterogeneous. Employers differ in their unscrupulousness regarding the use of slave labour whereas bureaucrats have differing intrinsic motivations to behave honestly. Moreover, there is a socially determined warm-glow effect: honest bureaucrats feel better if their colleagues are honest too. The determination of bribes is modelled via Nash bargaining between the firm and the corrupt civil servant. It is shown that multiple equilibria and hysteresis are possible. Depending on history, an economy may be trapped in a locally stable high-corruption, high-slavery equilibrium and major changes in government policies may be necessary to move the economy out of this equilibrium. Moreover, we show that trade bans that are effective in reducing slavery in the export industry tend to raise slavery in the remainder of the economy. It is possible that this leakage effect dominates the reduction of slavery in the export sector.
    Keywords: coerced labour, modern slavery, corruption, social norms, trade-related process standards
    JEL: D73 F16 J47
    Date: 2019
  3. By: Arantza Estévez-Fernández (VU Amsterdam); José Manuel Giménez-Gómez (Universitat Rovira i Virgili); María José Solís-Baltadano (Universitat Rovira i Virgili)
    Abstract: In this paper, we analyze sequential bankruptcy problems, which generalize bankruptcy problems. They contain the problems of sharing water in a transboundary river and of allocating expedition rewards in projects. We provide three mechanisms for generalizing rules for bankruptcy problems to rules for sequential bankruptcy problems: the upwards, the downwards, and the two-steps mechanisms. Further, we characterize the upwards constrained equal awards, the upwards constrained equal losses, and the upwards proportional rules on the basis of upwards composition and upwards path independence. Moreover, we compare the three mechanisms based on inheritance of well-established properties for bankruptcy rules to the setting of sequential bankruptcy rules.
    Keywords: Sequential bankruptcy, upwards mechanism, downwards mechanism, twosteps mechanism, constrained equal awards rule, constrained equal losses rule, proportional rule
    JEL: D74 C79 D63
    Date: 2019–11–16
  4. By: Steven F. Lehrer; Louis Pierre Lepage
    Abstract: Using data from the New York City Police Department's Stop-and-Frisk program, we evaluate the impact of a specific terrorist attack threat from Al Qaeda on policing behavior in New York City. We find that after the Department of Homeland Security raised the alert level in response to this threat, people categorized as "Other" by the NYPD, including Arabs, were significantly more likely to be frisked and have force used against them yet no more likely to be arrested. These individuals were in turn less likely to be frisked or have force used against them immediately after the alert level returned to its baseline level. Further, evidence suggests that these impacts were larger in magnitude in police precincts that have a higher concentration of mosques. Our results are consistent with profiling by police officers leading to low-productivity stops, but we cannot rule out that it constitutes efficient policing given important differences between deterrence of terrorism versus other crimes.
    JEL: C33 J15 K42
    Date: 2019–11
  5. By: Mostafa Beshkar; Jee-Hyeong Park
    Abstract: The literature on pretrial dispute settlement has studied the effect of first- order uncertainty on pre-trial settlement bargaining while assuming common knowledge about higher-order beliefs. We study the effect of uncertainty regarding higher-order beliefs and show that ignorance about higher-order beliefs improves the ef?ciency of settlement bargaining. We introduce uncertainty about higher-order beliefs by assuming that one player receives a private and noisy signal of another player ¡¯s private type. We show that such signals could improve the efficiency of settlement bargaining only if they are privately observed: the informational value associated with the signal com- pletely disappears if it is publicly observable.
    Date: 2017–12
  6. By: Erica Myers; Steven L. Puller; Jeremy D. West
    Abstract: Mandatory disclosure policies are increasingly prevalent despite sparse evidence that they improve market outcomes. We study the effects of requiring home sellers to provide buyers with certified audits of residential energy efficiency. Using similar nearby homes as a comparison group, we find this requirement increases price capitalization of energy efficiency and encourages energy-saving residential investments. We present additional evidence characterizing the market failure as symmetrically incomplete information, which is ameliorated by government intervention. More generally, we formalize and provide empirical support for seller ignorance as a motivation for disclosure policies in markets with bilaterally incomplete information about quality.
    JEL: D83 K32 L15 Q48 R31
    Date: 2019–11
  7. By: Veale, Michael; Edwards, Lilian
    Abstract: Cite as: Michael Veale and Lilian Edwards, 'Clarity, Surprises, and Further Questions in the Article 29 Working Party Draft Guidance on Automated Decision-Making and Profiling' (forthcoming) Computer Law and Security Review The new Article 29 Data Protection Working Party’s draft guidance on automated decision-making and profiling seeks to clarify the European data protection (DP) law’s little-used right to prevent automated decision-making, as well as the provisions around profiling more broadly, in the run-up to the General Data Protection Regulation. In this paper, we analyse these new guidelines in the context of recent scholarly debates and technological concerns. They foray into the less-trodden areas of bias and non-discrimination, the significance of advertising, the nature of “solely” automated decisions, impacts upon groups and the inference of special categories of data — at times, appearing more to be making or extending rules than to be interpreting them. At the same time, they provide only partial clarity — and perhaps even some extra confusion — around both the much discussed “right to an explanation” and the apparent prohibition on significant automated decisions concerning children. The Working Party appear to feel less mandated to adjudicate in these conflicts between the recitals and the enacting articles than to explore altogether new avenues. Nevertheless, the directions they choose to explore are particularly important ones for the future governance of machine learning and artificial intelligence in Europe and beyond.
    Date: 2017–11–18
  8. By: Leonardo Madio; Carroni, Elias; Shekhar, Shiva
    Abstract: This article studies incentives for a premium provider (Superstar) to offer exclusive contracts to competing platforms mediating the interactions between consumers and firms. When platform competition is intense, more consumers affiliate with the platform favored by Superstar exclusivity. This mechanism is self-reinforcing as firms follow consumer decisions and some join the favored platform only. Exclusivity always benefits firms and might eventually benefit consumers. A vertical merger (platform-Superstar) makes non-exclusivity more likely than if the Superstar was independent. The analysis provides novel insights for managers and policymakers and it is robust to several variations and extensions.
    JEL: L13 L22 L86 K21
    Date: 2019–10–10
  9. By: Rudolf Kerschbamer; Daniel Neururer; Matthias Sutter
    Abstract: Credence goods markets are characterized by pronounced informational asymmetries between consumers and expert sellers. As a consequence, consumers are often exploited and market efficiency is threatened. However, in the digital age, it has become easy and cheap for consumers to self-diagnose their needs using specialized webpages or to access other consumers’ reviews on social media platforms in search for trustworthy sellers. We present a natural field experiment that examines the causal effect of information acquisition from new media on the level of sellers’ price charges for computer repairs. We find that even a correct self-diagnosis of a consumer about the appropriate repair does not reduce prices, and that an incorrect diagnosis more than doubles them. Internet ratings of repair shops are a good predictor of prices. However, the predictive valued of reviews depends on whether they are judged as reliable or not. For reviews recommended by the platform Yelp we find that good ratings are associated with lower prices and bad ratings with higher prices, while non-recommended reviews have a clearly misleading effect, because non-recommended positive ratings increase the price.
    Keywords: credence goods, fraud, information acquisition, internet, field experiment
    JEL: C93 D82
    Date: 2019
  10. By: Stüber, Robert
    Abstract: Altruistic punishment is often thought to be a major enforcement mechanism of social norms. I present experimental results from a modified version of the dictator game with third-party punishment, in which third parties can remain ignorant about the choice of the dictator. I find that a substantial fraction of subjects choose not to reveal the dictator's choice and not to punish the dictator. I show that this behavior is in line with the social norms that prevail in a situation of initial ignorance. Remaining ignorant and choosing not to punish is not inappropriate. As a result, altruistic punishment is significantly lower when the dictator's choice is initially hidden. The decrease in altruistic punishment leads to more selfish dictator behavior only if dictators are explicitly informed about the effect of willful ignorance on punishment rates. Hence, in scenarios in which third parties can ignore information and dictators know what this implies, third-party punishment may only ineffectively enforce social norms.
    Keywords: Third-party punishment,Willful ignorance,Sorting,Social preference
    JEL: C91 D01 D63 D83
    Date: 2019
  11. By: Normann Rion (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper, I build a simple Mortensen-Pissarides model embedding a dual labor market. I derive conditions for the existence of an equilibrium with coexisting strongly protected open-ended contracts and exogeneously short fixed-term contracts. I also study dynamics after a reform on employment protection legislation. Temporary contracts play the role of fillers while permanent contracts are used to lock up high-productivity matches. High firing costs favor the emergence of a dual equilibrium. Employment protection legislation encourages the resort to temporary employment in job creation. This scheme is intertwined with a general-equilibrium e_ect: permanent contracts represent the bulk of employed workers and a more stringent employment protection reduces aggregate job destruction. This pushes down unemployment and in turn reduces job creation ows through temporary contracts. The model is calibrated to match the French labor market. Policy experiments demonstrate that there is no joint gain in employment and social welfare through reforms on firing costs around the baseline economy. The optimal policy consists in implementing a unique open-ended contract with a strong cut in firing costs. Increases in firing costs within a dual labor market lead to a sluggish adjustment, while large cuts in firing costs lead to a quick one. The adjustment time of the labor market is highly non-monotonous between these two extremes. Policy-related uncertainty significantly strengthens fixed-term employment on behalf of open-ended employment. Considering extensions, I draw conclusions on the inability of a large class of random-matching models to mimic the distribution of temporary contracts' duration while maintaining possible the expiring temporary contracts' conversion into permanent contracts.
    Keywords: Fixed-term Contracts,Unemployment,Employment Protection,Policy,Dynamics
    Date: 2019–10
  12. By: Quarles, Randal K. (Board of Governors of the Federal Reserve System (U.S.))
    Date: 2019–09–27

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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