nep-law New Economics Papers
on Law and Economics
Issue of 2020‒03‒16
fourteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Economic Impact of Organized Crime Infiltration in the Legal Economy: Evidence from the Judicial Administration of Organized Crime Firms By Francesca Calamunci; Francesco Drago
  2. Bayesian Panel Quantile Regression for Binary Outcomes with Correlated Random Effects: An Application on Crime Recidivism in Canada By Bresson, Georges; Lacroix, Guy; Arshad Rahman, Mohammad
  3. Does Race Matter for Police Use of Force? Evidence from 911 Calls By Mark Hoekstra; CarlyWill Sloan
  4. The Formalistic Pattern Of Soviet Civil Codification As A Chapter In European Legal History By Dmitry Poldnikov
  5. Auction Length and Prices : Evidence from Random Auction Closing in Brazil By Oliveira,Alexandre Borges De; Fabregas Masllovet,Abdoulaye; Fazekas,Mihaly
  6. Do Immigrants Make Us Safer? Crime, Immigration, and the Labor Market By Thomas Bassetti; Luca Corazzini; Darwin Cortes; Luca Nunziata
  7. Drinking and Driving By Frank A. Sloan
  8. Cigarette Taxes and Teen Marijuana Use By D. Mark Anderson; Kyutaro Matsuzawa; Joseph J. Sabia
  9. Do better prisons reduce recidivism? Evidence from a prison construction program By Santiago Tobón Zapata
  10. Firms'and States'Responses to Laxer Environmental Standards By Cordella,Tito; Devarajan,Shantayanan
  11. A Window to the World: The long-term effect of Television on Hate Crime By Endrich, Marek
  12. WhoÕs Responsible Here? Establishing Legal Responsibility in the Fissured Workplace By Tanya Goldman; David Weil
  13. When the Law Distinguishes Between the Enterprise and the Corporation: The Case of the New French Law on Corporate Purpose By Blanche Segrestin; Armand Hatchuel; Kevin Levillain
  14. The Impact of Consumer Protection in the Digital Age: Evidence from the European Union By Anja Rösner; Justus Haucap; Ulrich Heimeshoff

  1. By: Francesca Calamunci (Università di Messina); Francesco Drago (Università di Catania, CSEFand CEPR)
    Abstract: We analyze the economic consequences on firm profitability, performance, and investments of having another firm in the same market affiliated with a criminal organization. We do so by evaluating the spillover effects of a law providing the judicial administration of organized crime firms through the imposition of external managers in order to remove the connection to the criminal organization, and at the same time guarantee the continuity of production. By using detailed information on more than 180,000 companies, we exploit the firms’ yearly variation in the exposure to criminal firms’ judicial administration in their market (in the same province and industry). The empirical design allows us to control for confounding effects at the firm, market, and year levels. The results show that there is a large, positive spillover from the enforcement law, suggesting that the burden the organized crime firms impose on other firms is very large. Firms’ performance and turnover increases by 2.2 and 0.7 percent, respectively, in the first four years after an organized crime firm enters the status of judicial administration. Investments measured by tangible and intangible assets increase with the number of firms entering into judicial administration by 0.75 percent. These results suggest that intensifying confiscation measures against criminal organizations has a strong positive effect on the economy.
    Keywords: Organized crime; firm level data; policy evaluation
    Date: 2020–03–10
  2. By: Bresson, Georges (University of Paris 2); Lacroix, Guy (Université Laval); Arshad Rahman, Mohammad (Indian Institute of Technology Kanpur)
    Abstract: This article develops a Bayesian approach for estimating panel quantile regression with binary outcomes in the presence of correlated random effects. We construct a working likelihood using an asymmetric Laplace (AL) error distribution and combine it with suitable prior distributions to obtain the complete joint posterior distribution. For posterior inference, we propose two Markov chain Monte Carlo (MCMC) algorithms but prefer the algorithm that exploits the blocking procedure to produce lower autocorrelation in the MCMC draws. We also explain how to use the MCMC draws to calculate the marginal effects, relative risk and odds ratio. The performance of our preferred algorithm is demonstrated in multiple simulation studies and shown to perform extremely well. Furthermore, we implement the proposed framework to study crime recidivism in Quebec, a Canadian Province, using a novel data from the administrative correctional files. Our results suggest that the recently implemented "tough-on-crime" policy of the Canadian government has been largely successful in reducing the probability of repeat offenses in the post-policy period. Besides, our results support existing findings on crime recidivism and offer new insights at various quantiles.
    Keywords: Bayesian inference, correlated random effects, crime, panel data, quantile regression, recidivism
    JEL: C11 C31 C33 C35 K14 K42
    Date: 2020–01
  3. By: Mark Hoekstra; CarlyWill Sloan
    Abstract: While there is much concern about the role of race in police use of force, identifying causal effects is difficult. This is in part because of selection, and in part because researchers often observe only interactions that end in use of force, necessitating nontrivial benchmarking assumptions. This paper addresses these problems by using data on officers dispatched to over 2 million 911 calls in two cities, neither of which allows for discretion in the dispatch process. Using a location-by-time fixed effects approach that isolates the random variation in officer race, we show white officers use force 60 percent more than black officers, and use gun force twice as often. To examine how civilian race affects use of force, we compare how white officers increase use of force as they are dispatched to more minority neighborhoods, compared to minority officers. Perhaps most strikingly, we show that while white and black officers use gun force at similar rates in white and racially mixed neighborhoods, white officers are five times as likely to use gun force in predominantly black neighborhoods. Similarly, white officers increase use of any force much more than minority officers when dispatched to more minority neighborhoods. Consequently, difference-in-differences estimates from individual officer fixed effect models indicate black (Hispanic) civilians are 30 - 60 (75 - 120) percent more likely to experience any use of force, and five times as likely to experience gun use of force, compared to if white officers scaled up force similarly to minority officers. These findings highlight race as an important determinant of police use of force, including and especially lethal force.
    JEL: J15 K42
    Date: 2020–02
  4. By: Dmitry Poldnikov (National Research University Higher School of Economics)
    Abstract: Many European and even some Russian academics consider Russian legal history to be a series of ruptures. There is some truth to this, and yet the law in east of Eastern Europe is not devoid of continuities which link it with European legal trajectories. This paper examines the pattern of the codification of civil law as one of those links. Russian experience with drafting civil codes goes back to the ‘age of codifications’ and culminates with the ‘normal’ draft Civil Code of the Russian Empire of 1882–1913. After the Bolshevik revolution of 1917, Soviet civil legislation claimed to break away from all continuity with the bourgeois legacy, domestic and foreign. However, even the codification of ‘real socialism’ in the early 1960s reveals notable similarities with the ‘bourgeois’ legal experience. The theoretical concept of the Civil Code of 1964 overlapped with the modern notion of the code during the ‘age of codification’. This similarity was backed up by the positivistic legal scholarship that conceptualized Soviet law as a hierarchical and gapless system of binding norms. This part of the Soviet legal legacy still marks the Russian Civil Code of 1994-2006. Hence, the formalistic pattern of codification remains one of the Soviet relics in contemporary Russian legal style and allows a comparison with other civil law jurisdictions in Europe.
    Keywords: codification; Soviet law; civil code; legal formalism, legal style
    JEL: K10 K11 K12
    Date: 2020
  5. By: Oliveira,Alexandre Borges De; Fabregas Masllovet,Abdoulaye; Fazekas,Mihaly
    Abstract: Electronic reverse auctions are the most used competitive method for procurement of goods and non-consulting services by the Federal Government of Brazil. These auctions are closed randomly, which perfectly satisfies fairness considerations but may be suboptimal from an efficiency perspective. There are concerns that tenders are closed too early and randomness favors bidders with algorithmic bidding software, leading to high prices. Hence, this paper investigates what would happen if the random closing rule was replaced by another rule. The paper uses the complete data set of completed electronic actions in 2015?17 comprising 112 million bids for 0.9 million items purchased. Exploiting the random closing rule, simple OLS models are run with a wide set of fixed effects as well as covariates capturing competition. The findings point at alternative strategies to optimize auction design: simple actions such as increasing the average and minimum length of the random phase can result in 2.8 and 0.6 percent price savings, respectively, or R$540 million and R$116 million per year; or more complex designs such as setting the length to the maximum for the random phase if there are 15 bidders or more can yield 2.6 percent or R$ 500 million a year in price savings, or doing the same if a large discount is placed within three minutes to closing can yield 1.1 percent lower prices or R$ 210 million a year in savings.
    Keywords: Regulatory Regimes,Judicial System Reform,Legal Reform,Legislation,Public Sector Economics,Social Policy,Public Finance Decentralization and Poverty Reduction,Legal Products,International Trade and Trade Rules,Telecommunications Infrastructure,Health Care Services Industry,ICT Applications
    Date: 2019–04–22
  6. By: Thomas Bassetti (Department of Economics and Management, University of Padova and CICSE); Luca Corazzini (Department of Economic Sciences, University of Venice); Darwin Cortes (Facultad de Economia, Universidad del Rosario); Luca Nunziata (DSEA, University of Padova and IZA)
    Abstract: We present a two-country labor matching model to account for the existing, inconclusive empirical evidence on the relationship between immigration and crime. According to our model, inflows of relatively un- skilled immigrants negatively affect the labor market equilibrium and, therefore, sharpen criminal activities. On the other hand, inflows of relatively skilled immigrants boost economic activity and reduce the crime rate. Given this preliminary result, we endogenize the migration decision, showing that the host country’ s labor-market characteristics are crucial in determining the impact of migrants on crime rate. Countries characterized by low unemployment rates attract both skilled and unskilled immigrants, making the direction of the relationship between immigration and crime unclear. Countries with high unemployment rates attract only unskilled workers, thus favoring the emergence of a positive relationship between immigration and crime. We test the theoretical predictions of our model on a panel of 97 regions located in 12 European host countries built by combining the European Social Survey and the Eurostat Labor Force Survey. We identify a threshold level of unemployment rate above which the crime rate positively responds to immigration.
    Keywords: Immigration, Crime, Labor Market, Frictional Unemployment
    JEL: F22 J61 J64 K42
    Date: 2020–02
  7. By: Frank A. Sloan
    Abstract: Driving while intoxicated causes many traffic accidents and deaths. Two decisions are closely related, whether to engage in heavy drinking, and to drive, conditional on heavy drinking. This paper reviews the extensive literature on heavy drinking, addiction, and driving after heavy drinking. Relevant public policies involve a combination of deterrence, incapacitation, and treatment. While there is empirical support for the rational addiction model applied to heavy drinking, some attributes of drinker-drivers differ from others (e.g., impulsivity in domains other than alcohol consumption, hyperbolic discounting). Policies most effective in reducing drinking and driving are alcohol excise taxes, minimum drinking age and zero tolerance laws for underage persons, dram shop and social host liability, and criminal sanctions overall. Empirical studies have not determined which specific criminal sanctions are most effective. A major impediment to criminal sanctions as a deterrent is that the probability of being stopped/arrested when driving while intoxicated is extremely low,
    JEL: I12 K14
    Date: 2020–02
  8. By: D. Mark Anderson; Kyutaro Matsuzawa; Joseph J. Sabia
    Abstract: The spillover effect of cigarette taxes on youth marijuana use has been the subject of intense public debate. Opponents of cigarette taxes warn that tax hikes will cause youths to substitute toward marijuana. On the other hand, public health experts often claim that because tobacco is a “gateway” drug, higher cigarette taxes will deter youth marijuana use. Using data from the National and State Youth Risk Behavior Surveys (YRBS) for the period 1991-2017, we explore the relationship between state excise taxes on cigarettes and teen marijuana use. In general, our results fail to support either of the above hypotheses. Rather, we find little evidence to suggest that teen marijuana use is sensitive to changes in the state cigarette tax. This null result holds for the sample period where cigarette taxes are observed to have the largest effect on teen cigarette use and across a number of demographic groups in the data. Finally, we find preliminary evidence that the recent adoption of state e-cigarette taxes is associated with a reduction in youth marijuana use.
    JEL: I12 I18 K42
    Date: 2020–02
  9. By: Santiago Tobón Zapata
    JEL: D04 H41 J24 K14 K42
    Date: 2020–02–26
  10. By: Cordella,Tito; Devarajan,Shantayanan
    Abstract: On June 1, 2017, President Trump announced the United States'withdrawal from the Paris agreement on climate change. Despite this decision, American firms continued investing in low-carbon technologies and some states committed to tougher environmental standards. To understand this apparent paradox, this paper studies how a weakening of environmental standards affects the behavior of profit-maximizing firms. It finds that a relaxation of emission standards (i) may increase firms'incentives to adopt clean technologies, but not to pollute less; (ii) may negatively affect industry profitability if it is perceived as temporary; and, when this is the case, (iii) the unilateral adoption of stricter standards by large states may increase the expected profitability of every firm.
    Keywords: Global Environment,Private Sector Economics,Climate Change and Health,Science of Climate Change,Climate Change and Environment,Energy and Mining,Energy Demand,Energy and Environment,Regulatory Regimes,Environmental Strategy,Environmental&Natural Resources Law,Judicial System Reform,Legal Reform,Legal Products,Social Policy,Legislation,Environmental Management
    Date: 2019–03–14
  11. By: Endrich, Marek
    Abstract: This paper analyzes the long-term impact of television on hate crimes in Germany. In the German Democratic Republic (GDR) foreign television served as a window to the world and exposed viewers to foreign influences. But certain parts of the GDR were excluded from receiving Western television due to geographical features. I argue that this resulted in long-lasting differences in the attitude towards foreigners. Using the spatial variation in signal strength as a natural experiment, the paper tests the effect of Western broadcasts on the rate of hate crimes. Municipalities with no access to foreign broadcasts exhibit a higher degree of xenophobic violence in the period of the migration crisis in Germany between 2014 to 2017. It shows that media can lead to preference changes that persist for a long time after the exposure.
    Keywords: hate crimes,refugees,natural experiment,media
    JEL: J15 K42
    Date: 2020
  12. By: Tanya Goldman (Center for Law and Social Policy); David Weil (Heller School for Social Policy and Management, Brandeis University)
    Abstract: The nature of work is changing, with workers enduring increasingly precarious working conditions without any safety net. In response, this article proposes a new ÒConcentric Circle frameworkÓ which would improve workersÕ access to civil, labor, and employment rights. Many businesses, including app-based platforms, have restructured toward Òfissured workplaceÓ business models. They treat workers like employees (specifying behaviors and closely monitoring outcomes) but they classify workers as independent contractors (engaging them at an arms-length and cutting them off from rights and benefits tied to employment). These arrangements confound legal classifications of ÒemploymentÓ and expose deficiencies with existing workplace protections, which are based on Òemployment relationships.Ó As a result, a growing number of workers lack both bargaining power and critical workplace rights and benefits. We propose a Concentric Circle framework to better govern workersÕ rights in the modern era. At the core, we maintain that certain rights and protections should not be tethered to an employment relationship, but to work itself. Thus, the right to be compensated for work and paid a minimum wage; freedom from discrimination and retaliation; access to a safe working environment, and the right to associate and engage in concerted activity should belong to all workers, not just employees. Second, as a middle circle, we argue for a rebuttable presumption of employment to address those rights that remain exclusive to employees (and not independent contractors), and we propose an updated legal test of employment. Finally, at the outer ring of the framework, we suggest policies that could enhance workersÕ access to benefits that promote worker mobility and social welfare. Other scholarship has focused exclusively on either independent contractors or employees, or it has proposed a new category of worker altogether. We contend that this comprehensive framework better assigns rights, responsibilities, and protections in the modern workplace than do current legal doctrines or alternative proposals.
    Keywords: Employment, independent contractor; employee classification; fissured workplace
    JEL: J8 J38 J58 J78
    Date: 2020–02
  13. By: Blanche Segrestin (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Armand Hatchuel (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Kevin Levillain (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)
    Abstract: A recent French reform has revised the legal definition of the corporation. In essence, the law stipulates that the corporation must be run with due regard to the social and environmental impacts of its activity. It also introduces the notion of raison d'être and affords the possibility for any corporation to assign social or environmental purposes to itself, defined in its by-laws. This reform is similar to recent reforms in the UK and the US, but is based on an original and distinctive theoretical argument. The aim of our article is to analyze the fundamental tenets of this reform and their implications for the theory of the corporation. It shows that the new law is based on a new positive definition of the enterprise as not only an economic organization or a productive entity, but more fundamentally a space for innovative collective action. We argue that this view of the enterprise challenges our conceptualization of the corporation in two important ways. First, it shows that the traditional theories overlook the activities of the enterprise and their related impacts, and that the corporation is not necessarily the appropriate legal vehicle for the innovative enterprise. Second, it suggests that the stipulation of the enterprise's purpose or raison d'être in the corporate by-laws can provide new promising legal foundations for corporate responsibility.
    Date: 2020
  14. By: Anja Rösner; Justus Haucap; Ulrich Heimeshoff
    Abstract: We investigate the effect of an EU-wide consumer protection regulation on consumer trust as well as consumer behavior. The Unfair Commercial Practice Directive (UCPD) was implemented by EU member states between 2007 and 2010. We utilize data from the Special and Flash Eurobarometer for the years between 2006 and 2014 and experts’ evaluation on consumer protection levels before the introduction of the regulation. This rich data set allows us to apply a difference-in-difference estimator with multiple time periods. We find a significant relationship between the introduction of the UCPD and consumer trust and cross-border purchases for countries with a low consumer protection level before the introduction of the UCPD. The relationship increases over time and stays then relatively constant.
    Keywords: consumer protection, UCPD, B2C, e-commerce, consumer trust, cross-border purchase
    JEL: D18 K20 L50 L51
    Date: 2020

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