nep-law New Economics Papers
on Law and Economics
Issue of 2020‒06‒08
thirteen papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Balancing employment protection and what’s good for the company - Intended and un-intended consequences of a semi-coercive institution By Stern, Charlotta; Weidenstedt, Linda
  2. Protecting Investors in Equity Crowdfunding: An Empirical Analysis of the Small Investor Protection Act By Maximilian Goethner; Lars Hornuf; Tobias Regner
  3. Why do businesses incorporate in other EU Member States? An empirical analysis of the role of conflict of laws rules By Gerner-Beuerle, Carsten; Mucciarelli, Frederico M.; Schuster, Edmund-Philipp; Siems, Mathias
  4. The Myths and Facts of Patent Troll and Excessive Payment: Have Non-Practicing Entities (NPEs) Been Overcompensated? - A Commentary By Blogg, Jonathan
  5. ClearCorrect: Intellectual Property, 3D Printing, and the Future of Trade By Rimmer, Matthew
  6. Optimal Patent Policy for Pharmaceutical Industry By Izhak, Olena; Saxell, Tanja; Takalo, Tuomas
  7. You go First! Coordination Problems and the Standard of Proof in Inquisitorial Prosecution By Christmann, Robin; Kirstein, Roland
  8. Title: Fees equalization and Appropriate Health Care By Barili, E;; Bertoli, P;; Grembi, V;
  9. Gendered laws and women in the workforce By Marie Hyland; Simeon Djankov; Pinelopi Koujianou Goldberg
  10. Sharing sequentially triggered losses By Jens Gudmundsson; Jens Leth Hougaard; Chiu Yu Ko
  11. Experimental effects of institutionalizing co-determination by a procedurally fair bidding rule By Federica Alberti; Werner Güth; Kei Tsutsui
  12. A Monitoring Policy Framework for the United States Endangered Species Act By Evansen, Meg; Malcom, Jacob; Carter, Andrew
  13. Banning the purchase of prostitution increases rape: evidence from Sweden By Ciacci, Riccardo

  1. By: Stern, Charlotta (The Ratio Institute); Weidenstedt, Linda (The Ratio Institute)
    Abstract: Like most developed countries, Sweden has institutionalized employment protection legislation, called LAS. LAS is interesting theoretically because parts of it are semi-coercive. The semi-coerciveness makes it possible for firms and unions under collective agreements to negotiate departures from the law, for instance regarding seniority rules and terminations due to employees' fit and/or misconduct. In this sense, the law is more flexible than the legal text suggests. The present study explores how the semi-coercive institution of employment protection is perceived and implemented by managers of smaller manufacturing companies. The results suggest that managers support the idea of employment protection rules in principle but face a difficult balancing act in dealing with LAS. Thus, the institutional legitimacy of the law is low. LAS ends up producing local cultures of hypocrisy and pretense. The paper gives insights into how institutions aimed at producing good moral behavior sometimes end up producing the opposite.
    Keywords: un-intended consequences; institutional semi-coerciveness; employment protection; local knowledge
    JEL: D02 J50 Z13
    Date: 2020–05–20
  2. By: Maximilian Goethner (Friedrich Schiller University Jena); Lars Hornuf (University of Bremen, and Max Planck Institute for Innovation and Competition, Munich); Tobias Regner (Friedrich Schiller University Jena)
    Abstract: During the past decade, equity crowdfunding (ECF) has emerged as an alternative funding channel for startup firms. In Germany, the Small Investor Protection Act became binding in July 2015, with the legislative goal to protect investors engaging in this new asset class. Since then, investors pledging more than 1,000 EUR now must self-report their income and wealth. Investing more than 10,000 EUR in a single ECF issuer is only possible through a corporate entity. We examine how the Small Investor Protection Act has affected investor behavior at Companisto, Germany’s largest ECF portal for startup firms. The results show that after the new law became binding, sophisticated investors invest less on average while casual investors invest more. Moreover, the signaling capacity of large investments has disappeared.
    Keywords: Equity crowdfunding, Crowdinvesting, Investor protection
    JEL: E22 G18 G38 K22 L26
    Date: 2020–05–29
  3. By: Gerner-Beuerle, Carsten; Mucciarelli, Frederico M.; Schuster, Edmund-Philipp; Siems, Mathias
    Abstract: Research in law, political science and economics has taken a strong interest in the way companies strategically incorporate in foreign jurisdictions. However, the empirical research about corporate mobility in the EU has so far been limited in two respects: it has focused on the analysis of foreign companies in the UK and it has mainly been concerned with differences in the costs of incorporation such as minimum capital requirements. This paper aims to fill these gaps. It is the first paper that presents data on incorporations of foreign businesses in the commercial registers of each EU Member State. It is also the first one to assess the impact of differences in the conflict of laws rules applicable to companies as they reflect the case law of the Court of Justice on the freedom of establishment. It finds that countries which have a clear-cut version of the ‘incorporation theory’ attract more incorporations than countries which have retained elements of the ‘real seat theory’. The paper also discusses the policy implications from these findings for EU harmonisation in this field.
    Keywords: Freedom of establishment; Market for incorporations; Corporate mobility; Conflict of laws; Private international law
    JEL: G38 K22 K34 L29 M13
    Date: 2018–12–01
  4. By: Blogg, Jonathan
    Abstract: The much-cited article ‘the Myths and Facts of Patent Troll and Excessive Payment: Have Non-Practicing Entities (NPEs) Been Overcompensated ’ by Jack J. Lu is fundamentally flawed and based on data which cannot be retrieved. The key error results from poorly defined samples, selected to substantiate the statement that hold-up does not exist and that Non-Practicing Entities are not overcompensated. Even if the article had succeeded in adequately selecting the samples subject to the analysis, the document would still fall short of determining what constitutes a comparable licensing agreement. Also, the findings cannot be verified as the article does not disclose the underlying data that leads to the conclusion that NPEs are not overpaid. Hence, the paper falls short of meeting three fundamental requirements of empirical research. There is no adequate selection of the two samples that are compared (the NPE sample and a vaguely defined sample of ‘other companies’), there is also no adequate selection of comparable rates and last but not least, the data cannot be retrieved. Other than that, the research paper suffers from the application of concepts which are not defined and lacks adequate references to the academic literature. These aspects taken together mean that it is not possible to draw any sorts of conclusions on the grounds of the analysis presented and render the article obsolete.
    Keywords: hold-up, Non Producing Entities, NPEs, licensing rate, valuation, Patents, unfair excessive pricing
    JEL: K1 K21 K3 O3 O34
    Date: 2020–04
  5. By: Rimmer, Matthew (Queensland University of Technology)
    Abstract: This paper considers the relationship between intellectual property and trade in the context of 3D printing. Modern 3D printing has not only disrupted the discipline of intellectual property, but it has also provided profound challenges for the regulation of trade and globalization. Part II provides a case study of the patent dispute between ClearCorrect and Align Technology. The ruling of the Court of Appeals for the Federal Circuit will have larger ramifications regarding the jurisdiction of the International Trade Commission in respect of the digital economy. Part II further considers subsequent patent disputes between the parties before the United States Patent and Trademark Office. Part III considers how the trade dispute between the United States and China will affect 3D printing and examines whether 3D printing will reverse the United States’ pattern of manufacturing offshore. Part III further notes the collateral impact of tariffs upon 3D printing and considers the adoption of 3D printing in China and the issues that may arise in terms of intellectual property ownership, intellectual property infringement, and intellectual property licensing. Part IV considers larger contextual issues raised by international organizations with respect to intellectual property, trade, and 3D printing.
    Date: 2018–12–31
  6. By: Izhak, Olena; Saxell, Tanja; Takalo, Tuomas
    Abstract: We show how characterizing optimal patent policy for the pharmaceutical industry only requires information about generic producers’ responses to changes in the effective duration and scope of new drug patents. To estimate these responses, we use data on Paragraph IV patent challenges, and two quasi-experimental approaches: one based on changes in patent laws and another on the allocation of patent applications to examiners. We find that extending effective patent duration increases generic entry via Paragraph IV patent challenges whereas broadening protection reduces it. Our results imply that pharmaceutical patents should be made shorter but broader.
    Keywords: patent policy, pharmaceuticals, generic entry, innovation, imitation, Business regulation and international economics, I18, K20, L13, O34, O31,
    Date: 2020
  7. By: Christmann, Robin; Kirstein, Roland
    Abstract: The prosecution of criminals is costly, and subject to errors. In contrast to adversarial court procedures, the prosecutor is regarded as an impartial investigator and aide to the judge in inquisitorial justice systems. We show in a sequential prosecution game of a Bayesian court that a strategic interaction between these two benevolent enforcement agents exists where each player hopes to freeride on the other one´s investigative effort. This gives rise to inefficient equilibria with excessive operating and error costs. Moreover, we will demonstrate that our results are sensitive to the applied standard of proof and that, more disturbingly, the inefficient outcome becomes more probable when the conviction threshold is raised. Applying the concept of ‘beyond reasonable doubt’, we analyze the impact of the standard of proof and other legal policy instruments on type I and type II errors and operating costs.
    Keywords: criminal justice, reasonable doubt, litigation, court errors
    JEL: K14 K41
    Date: 2020–04–16
  8. By: Barili, E;; Bertoli, P;; Grembi, V;
    Abstract: Fees equalization in health care brings under a unique tariff several medical treatments, coded under different Diagnosis Related Groups (DRGs). The aim is to improve healthcare quality and efficiency by discouraging unnecessary, but better-paid,treatments. We evaluate its effectiveness on childbirth procedures to reduce c-section overuse by equalizing the DRGs for vaginal and cesarean deliveries. Using Italian data and a difference-in-differences approach, we show that setting an equal reimbursement decreased c-sections by 2.5%. This improved the appropriateness of medical decisions with more low-risk mothers delivering naturally and no significant changes in the incidence of complications for vaginal deliveries. Our analysis supports the effectiveness of fees equalization in averting c-sections, but highlights the marginal role of financial incentives in driving c-section overuse which went back to normal in the short run. We found a stronger reduction in low-quality, and more capacity constrained hospitals. Moreover, the effect is driven by districts where the availability of Ob-Gyn specialists is higher and where women are predominant in the gender composition of the specialty group.
    Keywords: Fees equalization; Cesarean Sections; Difference in Differences;
    JEL: K13 K32 I13
    Date: 2020–05
  9. By: Marie Hyland (World Bank); Simeon Djankov (Peterson Institute for International Economics); Pinelopi Koujianou Goldberg (Peterson Institute for International Economics)
    Abstract: This paper provides the first global look at how gender discrimination by the law affects women’s economic opportunity and charts the evolution of legal inequalities over five decades. Using the World Bank’s newly constructed Women, Business and the Law database, it documents large and persistent gender inequalities, especially with regard to pay and treatment of parenthood. The paper finds positive correlations between more equal laws pertaining to women in the workforce and more equal labor market outcomes, such as higher female labor force participation and a smaller wage gap between men and women.
    Keywords: Law, gender, discrimination
    JEL: J16 N40
    Date: 2020–05
  10. By: Jens Gudmundsson (Department of Food and Resource Economics, University of Copenhagen); Jens Leth Hougaard (NYU-Shanghai, China; Department of Food and Resource Economics, University of Copenhagen); Chiu Yu Ko (Department of Economics, National University of Singapore)
    Abstract: We examine a chain of sequential losses: an agent causes a loss to another, which triggers a loss to a third, and so forth. Our objective is to devise a fair distribution of liability, taking into account that the chain turns “victim” to “injurer” in its subsequent step. This opens up for many interpretations of the notion of strict liability: should agents merely be responsible for the direct loss they cause or also bear some of the indirect losses they trigger? Through an axiomatic approach, we characterize the parametric class of fixed-fraction rules. These hold each agent accountable for a fixed fraction of the direct harm she causes while the initiator — the root cause of the loss chain — is liable for the residual. We then explore the case in which individual losses are contested while agreement remains on the total loss and the order of liability. We extend the principle of equalizing losses to equalizing distances to ideal allocations. In particular, we find that liability always can be distributed equidistant to every agent’s ideal allocation. Interestingly, this fair allocation coincides with the intermediate fixed-fraction rule when individual losses are identical.
    Keywords: Sequential losses, Strict liability, Ordered liability, Fair allocation, Cost allocation
    JEL: K12 C7 D6
    Date: 2020–05
  11. By: Federica Alberti (University of Portsmouth); Werner Güth (LUISS Guido Carli and Max Planck Institute for Research on Collective Goods); Kei Tsutsui (University of Bath)
    Abstract: We experimentally investigate corporate governance of a co-determined firm. The experimental setup confronts the firm’s manager with three employees as stakeholders. There are two investment opportunities, each of which could affect the stakeholders either positively or negatively. First, the manager states his or her demand of the total value of each investment. Then the three stakeholders, knowing the manager’s demands, state their claims via bidding. The bidding rule is procedurally fair by treating all three stakeholders equally as long as stakeholders truthfully state their own values, but offers underbidding incentives. We find that most stakeholder-participants do underbid. The total bids are not significantly different from the managers’ claims. Contrary to game theoretical prediction, manager-participants demand a fair share of the value rather than almost the entire investment value.
    Keywords: corporate management, co-determination, procedural fairness, laboratory experiments
    JEL: J52 J54 C92
    Date: 2020–05–29
  12. By: Evansen, Meg (Defenders of Wildlife); Malcom, Jacob (Defenders of Wildlife); Carter, Andrew
    Abstract: Biodiversity is deteriorating at a global level as human actions like development, overexploitation, climate change, pollution, and other factors have led to a dramatic increase in the rate of extinction. The U.S. Endangered Species Act is considered one of the strongest laws in the world for protecting wildlife, but its effectiveness depends on proper implementation. Despite the importance of ensuring such proper implementation, the agencies that implement the Act, the U.S. Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (FWS and NMFS; Collectively, the Services) have no systematic monitoring policy to allow such evaluation. This lack of monitoring means the Services cannot accurately evaluate the success of recovery actions, make effective listing, delisting, and downlisting decisions, which can not only put species at risk for further decline, but also result in the misallocation of oftentimes scarce conservation funding. We posit that the absence of a monitoring policy has led to the lack of comprehensive systems to monitor and report on: a) compliance with the law, b) the effectiveness of conservation actions, or c) the state of listed species populations or the status of their threats. To help address this gap, we drafted a monitoring policy that covers (1) biological monitoring; (2) threats monitoring; (3) compliance monitoring; (4) effectiveness monitoring; and (5) investment analysis. The need for increased transparency within and outside the Services; accommodating emerging technologies; and addressing the need for detailed qualitative and quantitative data are considered in this proposal. This blueprint provides a starting point for more detailed monitoring policy and guidance that can help ensure efficient and effective implementation of the ESA and lead to better conservation outcomes for imperiled species.
    Date: 2020–05–05
  13. By: Ciacci, Riccardo
    Abstract: In this paper I exploit IV techniques to study the effect of banning the purchase of prostitution on rape using Swedish regional data from 1997 to 2014. Recent economic literature reported evidence on the effect of decriminalizing prostitution on rape. Yet, little is known on the effect of criminalizing prostitution on rape. This paper exploits plausibly exogenous within and across regions variation in access to sex tourism to assess the impact of banning the purchase of prostitution on rape. I find that this regulation raises rape temporarily. In particular, this regulation increased reported rape by 47% between 1999 and 2014. Moreover, my findings show that this regulation also changes the composition of rapes committed: increasing completed and outdoor rapes, and reducing attempted rapes. This empirical evidence suggests that the increment in rapes is due to a shift of the demand of prostitution, while I find no evidence supporting that such an increment is supply driven.
    Keywords: Rape, sex crimes, prostitution, prostitution law, prostitution regulation, criminalizing purchase of prostitution, Nordic model, instrumental variables estimation
    JEL: C26 J16 J47 K14
    Date: 2018–12–12

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